Major “Transformation” Underway at OSF—Temporary Limits on Spending, Freeze on New Initiatives

Financier and OSF founder George Soros. Antonio Scorza/shutterstock

Open Society Foundations is undergoing a major “transformation,” with most program areas facing a freeze on new initiatives and budgets temporarily limited to 25% of pre-pandemic 2020 levels while a new course is charted, according to an internal memo obtained by Inside Philanthropy and information provided by OSF.

Under discussion for more than a year, but formally started only in the last six months, these shifts come to light as the grantmaker welcomes a new president, Mark Malloch-Brown, and amid growing questions about who will eventually take the reins of the sprawling philanthropic institution from founder George Soros, who is now 90. 

“There is no doubt that this process will be painful in the short term. We will have to make difficult choices, but that is the only way forward,” wrote former OSF President Patrick Gaspard in the memo, which was sent December 9, five days after he announced he would step down as president. 

Reductions to OSF’s overall budget are not planned, according to Laura Silber, chief communications officer. The 25% allocation is for the first quarter and further budget decisions will be determined in the months ahead, Silber said, but the grantmaker’s 2021 funding is still expected to roughly match last year’s level, which was $1.2 billion. There are no long-term plans to reduce overall spending, though program structures will shift, Silber said. OSF will honor all existing grant commitments during this process, which is expected to last approximately 18 months.

Whether these shifts will lead to program downsizing or consolidation is unclear. One OSF staffer, who requested anonymity out of concern for their employment, said such moves are expected, but senior leaders have made no final decisions. Silber did not comment on possible program downsizing, but did note that some program mergers are completed or underway, such as joining OSF’s information and digital rights program with its project on journalism; others are under consideration.

“The process is still underway and the contours of the change are being worked out. The transformation is not about cost cutting—the foundations’ overall funding level is not expected to change significantly—but rather how we use that funding more effectively to maximize impact,” Silber said in a statement. “We are taking great care to ensure that the decisions we make in the coming months are judicious, fair, and sensitive to the needs of our staff and grantees. We are confident that we will emerge from our transformation better equipped to protect, defend and advance open society.”

A significant shift in OSF’s funding could have a major impact on some of the hundreds of its grantees working in democracy, education, economic justice, human rights and more. 

What will change at OSF in the short term

The memo puts a halt on new initiatives within the OSF’s thematic, advocacy and geographic programs. Each program will, for now, receive only 25% of their pre-pandemic 2020 grant budgets and those funds are only to be used to wrap up areas of work that will end this year or to support lines of work that will continue beyond 2021, according to the memo. 

Silber emphasized that those budget levels are for the first quarter and do not represent cuts or allocations for the entire year, but based on several conversations during our reporting, that appears to be a source of confusion, and the memo did not indicate the lower figures are limited to the first quarter.

The same program areas are also under a hiring freeze, which started on January 1, with an exception for critical positions, according to the memo. Current staff and related overhead for the departments will be fully funded for 2021, though travel budgets—already limited by COVID—will be cut to 25% of last year’s levels, the memo states. 

Some parts of OSF’s extensive operations do not face budget uncertainty. OSF maintains foundations in places like South Africa and Albania, and those national and regional foundations will be funded at 2020 levels; the operations department will be funded at requested 2021 levels. The foundations’ budgets were not adjusted because they had already been fixed for 2021, according to Silber.

Why this transformation—and why now 

Born in Hungary in 1930, Soros survived the Nazi occupation of his homeland before leaving for London and later settling in the United States, where he launched one of the most successful hedge funds in history. He began setting up what would become the Open Society Foundations in the 1980s, a decade that concluded with the fall of the Berlin Wall, among other democratic milestones. It’s become the largest civil society funder in the world. But recent events have pushed Soros and foundation leaders to reconsider how the institution pursues its goals.

“The world has changed a great deal since George Soros founded Open Society three decades ago. It was a time when democracy was on the march. In the past decade, we have seen a rise of authoritarianism and an assault on human rights and justice, the pandemic and a profound global racial justice reckoning. More than a year ago, we began thinking about how to reimagine and transform the organization so that we could better meet the challenges of today,” Silber said in a statement. 

President Mark Malloch-Brown, who has been meeting with program officers and regional directors, will comment on OSF’s transformation at a later date, but declined to be interviewed for this article because the process is still underway.

Whether these developments are connected to Gaspard’s departure, which came after a relatively short tenure, is an open question. The former OSF president was rumored to be a leading candidate for secretary of labor, but Biden has since named Boston Mayor Marty Walsh as his candidate. 

These shifts appear also to be a continuation of longtime efforts to bring order to OSF. The philanthropy maintains offices in 37 countries and works in more than 120 countries, and includes a variety of standalone foundations, institutes and educational facilities. It used to be said that no one, including the foundation’s global board, knew exactly how much was being spent or where. Yet successive presidents—first Chris Stone, who we once dubbed an “octopus wrestler,” and later Gaspard—have sought to bring clarity to the institution. 

“I think George Soros always sort of wanted to have a polyphonic organization. It was decentralized defacto and by design for a very long time now,” said a former consultant to OSF, who requested anonymity to preserve relationships. But those separate parts “devolving into decentralized fiefdoms that are working, to a certain extent, in competition has been a challenging balancing act for OSF.”

Impact on grantees and staff

Any funder reorganization will leave many grantees wondering if their support will continue. Some may have few alternate sources they can turn to. OSF’s grantmaking extends into regions that few if any foundations have the reach or wherewithal to support, and backs advocacy work that can struggle to secure institutional backing. The size and scale of its grantmaking could also make any lost funding difficult to replace.

Among staff, there is some anxiety and uncertainty about several elements of the process, according to the staff person who spoke with Inside Philanthropy anonymously. Some staff are unclear which lines of work are continuing and which will be shut down, making it difficult to take next steps (the memo directs employees to consult with their supervisors). The timing of the shifts, with the pandemic adding to the challenges facing grantees and decimating the job market, raises concerns, as well.

The already extended timeline of the transformation process has been another source of frustration, with some feeling the organization has been in extended strategic limbo and now appears to be restarting the process, according to this source, who said the organization has been in strategy development mode since late 2019. 

These shifts come as many staff in the organization, particularly people of color, are disappointed, particularly in the wake of last year’s historic protests against structural racism, that the foundation is now led by a white man and governed by an all-white global board, said the staff person.

What this may mean for the philanthropic landscape and OSF

This shift casts new uncertainty on the future grantmaking of an institution that is a philanthropic leader in several major issue areas. Over the past year alone, OSF made several landmark pledges and new commitments. In November, OSF revealed a new climate initiative, which was funded with $40 million through the end of 2021. Last August, the foundation pledged $220 million over five years in new money to support racial justice and movement-building in Black communities in the United States. And last January, in the biggest move of all, George Soros committed $1 billion to the Open Society University Network, which he told an audience at Davos was “the most important project” he had ever launched.

Maintaining the foundation’s current level of spending—as Silber suggested is the plan—would likely require more resources. After being funded for years largely on a pay-as-you-go basis by Soros, OSF revealed in 2017 that Soros had quietly boosted its endowment to $18 billion, making it the second-largest philanthropic fund headquartered in the U.S. after the Bill and Melinda Gates Foundation. Soros, notably, had initially intended his foundation to spend down his fortune by 2010, but in 2005, he reversed course, deciding there was a need for an institution to support his goals in perpetuity. To maintain 2020 spending levels in perpetuity, Soros will, if he hasn’t already, likely need to grow the endowment.

According to Forbes, Soros is still worth an estimated $8.6 billion, but it is unknown how much of that fortune will make it to his foundation. Regardless, questions about the succession plan for this philanthropic empire continue to build.

“We’re now on at least the third president who might be seen as the person to bring us into the post-Soros era,” said the former consultant. “Thankfully George is still with us, but that won’t always be the case.”

You can reach Michael Kavate at michaelk@insidephilanthropy.com or via Signal or WhatsApp at +34 657 164 086.