Staying Small, Giving Large: The Latest Big Bet by a Top Lean Foundation

We've written in the past about the new lean foundations that have come on the scene in recent years. In fact, we've suggested that most of the top living donors of our time who do have foundations (many don't) tend to keep these institutions small and nimble. A closer look at the data backs up that perception: in 2014, the vast majority of the 50 biggest U.S. foundations overseen by living donors, as measured by annual giving, had administrative expenses well below the average for all foundations.

Maybe these newer foundations will staff up over time, as some have predicted. Or maybe leaner foundations will become the new norm, making more top heavy models of grantmaking look increasingly archaic. (Which is our hunch.) Regardless, right now staying lean is standard operating practice among most top living donors.

Home Depot co-founder Bernard Marcus is a case in point. In 2014, his Marcus Foundation, based in Atlanta, gave out $68 million in grants. Its operating and administrative expenses, not counting interest payments, were under 7 percent.

How does the foundation move so much money with so little capacity? Well, as background, it's worth keeping in mind that Marcus made his fortune with a retail chain that's all about doing stuff yourself and keeping costs low, so you can see how that ethos might color his giving. More concretely, part of the answer lies in the size of the Marcus Foundation's grants. Nearly twenty of its 2014 grants were over $1 million, with the biggest clocking in at over $7 million. In other years, the top grants have been even bigger, and Marcus is known as an ambitious funder. For example, he put $250 million into financing the Georgia Aquarium, the bulk of its cost. Marcus also gave $25 million to launch Autism Speaks, which is now a top nonprofit working on this disorder. Some of his gifts for medical research and health have been in the eight figures, like a $75 million gift for heart and vascular care in Atlanta earlier this year or a $30 million gift in 2014 for emergency care or a $15 million gift for research on how umbilical cord blood cells can be used to treat brain disorders.

Medical research is expensive and it's not hard for philanthropists in this game to part with a lot of money pretty quickly. Which is a reminder that how much staff capacity you need as a funder depends on what you're doing. At the same time, though, the Marcus Foundation's list of grants in 2014 runs for 26 pages in its 990, with most of those actually under $500,000, and quite a few under $50,000. So this is a funder that's both making big bets and spreading grants far and wide—while still staying lean.

When you look at top living donors with a giving profile like Bernie Marcus has—retired rich business guys pushing out boatloads of money—it's tempting to suspect that they're less sophisticated or effective in their giving than the well-credentialed executives who run places like Ford or Rockefeller or the Robert Wood Johnson Foundation. That's a wrong assumption. According to reports from top grantees, Marcus is similar to mega-givers like Eli Broad or Herb Sandler or Michael Bloomberg: philanthropists who made their fortunes as entrepreneurs by being extremely detailed and demanding, and now are bringing that same tough rigor to their giving.

Many of these donors also set very ambitious goals in the kind of change they want to see, easily on par with the grand plans often espoused by professionalized foundations.

Which brings us to the Marcus Foundation's latest big bet. It recently announced that it would donate $38 million over five years to Hillel International, which was founded to nurture Jewish college students’ commitment to Judaism and Israel. This is the largest gift ever given to the largest Jewish student organization in the world. According to Eric Fingerhut, a former Democratic Ohio congressman who is now Hillel’s president and CEO, the infusion will "transform the Jewish world" by launching Hillel’s new "Talent Grant" initiative to hire, retain and train Hillel leaders.

That may sound like typical press release hyperbole. Or maybe not. Hillel is on 550 college campuses in North America and 56 campuses abroad. It's a huge developer of leadership talent for Jewish organizations of every kind—people who often go on to take leadership positions in synagogues and civic groups.

The Marcus Foundation's gift will allow professionals with specific skills to stay and grow within the Hillel movement and the broader Jewish community. This professional community includes Hillel U, a cutting-edge professional continuing education program and the Springboard Fellowship, which recruits and trains young Jewish professionals in new skills including design, digital strategy and social media, and place them on local Hillel campuses.

Add it all up and Hillel Talent Grants will award more than 500 grants per year. Marcus has made big bets on institutions, like the Georgia Aquarium and on research, with his medical giving. Now he's making a big bet on human capital.

Followers of Marcus' giving, of course, won't be surprised by the Jewish focus here. As we've reported, Marcus is a top funder of Jewish causes, including the Israel Democracy Institute, the Jewish Institute For National Security Affairs, Birthright Israel, Friends of Israel Defense Forces, Israel Education Resource Center, and Israel on Campus Coalition.

Related: Jewish Funding Guide