Skip to Content

Stanford GSB News

 
  • Email
  • Print
  • Share

Alignment: A Key to Philanthropic Success and Impact

Remarks by James Canales
President and CEO, James Irvine Foundation

April 2004

At the helm of the $1.4 billion James Irvine Foundation, Jim Canales spends much of his time focusing on one thing: alignment. A foundation must understand the environment in which it is doing work and build a good team internally to achieve success. Engaging the board and communicating effectively with the public are also critical, he told a packed April 8 lunch-hour session at the Stanford Graduate School of Business.

When Canales took over as president and CEO 11 months ago, the Irvine Foundation was facing a host of challenges. The president had unexpectedly left. The foundation was in the process of closing five out of its six programs and had recently laid off 20 percent of its employees, including some senior staff. Making matters worse, four days before Canales started in his new role, the San Jose Mercury News published an article that scrutinized the foundation's spending practices.

"Any one of these factors could throw an organization off, but when you put them together, it became clear to me that the notion of alignment and trying to figure out how to get the organization back on track was one of the most critical roles for me and my colleagues," said Canales.

External alignment—or understanding the groups and issues you are funding—is most critical to philanthropic success, said Canales. The Irvine Foundation's mission is simple: "to promote the general welfare of the people of California." But California and its incredibly diverse population are anything but simple. So, to make sure its funding initiatives were clearly and properly aligned with Californians' needs, the foundation gathered data to find out exactly who the people of California are and what they will be like in the future.

The data helped the foundation tremendously. They showed, for example, that 53 out of 100 Californians are non-white; 43 out of 100 are over the age of 25 and do not have a bachelor's degree; 28 out of 100 live in Los Angeles County; 27 out of 100 are 18 and under; and 26 out of 100 were born outside the United States. The data also showed that in 20 years, there will be four significant population centers in California, instead of just two. Los Angeles will still be the largest, with 26 percent of the population. But there will be two new major centers: The "Inland Empire" (Riverside and San Bernardino), along with Orange County, will account for 20 percent of the state's population; and the Central Valley will have 18 percent—the same as the San Francisco Bay Area.

Armed with these facts, the foundation chose to realign its mission. It decided to focus primarily on underserved youth, ages 14 to 24, concentrating especially on students making the transition from secondary school to post-secondary opportunities. The foundation also decided to direct its giving to the Inland Empire and Central Valley, areas with large concentrations of disadvantaged people and little philanthropic giving.

Internal alignment—or building a good team—is another of Canales' main missions and often, he said, a difficult one to achieve. Holding focus groups, identifying core values and principles, and holding off-site staff meetings is the easy part, he explained. Putting all the information gleaned during that process into practice is tougher. To create the right internal culture, Canales focused on ridding the foundation's culture of arrogance.

According to Canales, all too often in foundation environments there is not enough constructive criticism. Every idea is "great" and the group loses touch with a broader reality. To combat this, Canales brought in experienced managers with strong operational skills, instigated peer reviews, and sought outside perspectives. He also encouraged his staff to execute instead of spending too much time in planning initiatives.

The role of governing boards has come under the microscope not only in the corporate sector but also in the foundation world. Recently, the Irvine Foundation decided to work with consultants to find out how its board actually functioned. Until last year, the board would have been characterized as an "intervening board," one that gets involved only in crisis situations.

Today, Canales is engaging the board to try to find the proper alignment—by focusing on several key questions: How can you balance the involvement of the professional staff and the board? How do you channel the passion, wisdom, and experience of a board into the staff? How can you meaningfully engage board members in the core functions of the institution when they are distant from the grant-making decisions? "It has been critical to us to engage the board in these questions—to figure out their stewardship role and figure out how they can function in the most value-added role," said Canales.

Accountability and transparency are hot topics in the foundation world, as the number of foundations and their assets continue to grow. The Irvine Foundation, which came under scrutiny in an investigative piece by the San Jose Mercury News last year, had to deal with those issues firsthand. Scrutinizing the Irvine Foundation's use of funds, the story questioned issues like the exiting president's retirement package and whether the president's wife had improperly used conference rooms at the foundation for her own executive search firm business. The foundation decided to deal with the scrutiny by being as proactive as possible.

Before the story hit newsstands, the board hired counsel to see which if any of the foundation's actions had been inappropriate. Then, in a letter on the foundation's website, Canales and board chairman Peter Stanley explained where the board had misstepped and which actions were completely proper.

Canales said he believes foundations have a responsibility to focus on their public image and effectively communicate with the public. They have the power to influence policy and public opinion on issues. "We have to be transparent to a fault," said Canales. "We need to communicate more effectively and strategically the results of the investments we are making. We don't do that self-servingly. We do it in a way to shed light on issues that we're working on. It's critical."

To Canales, it's no surprise there is more public interest in foundations. From 1991 to 2001, the total assets held by foundations almost tripled from $162 billion to $476 billion. Within California, the total assets held by foundations jumped from $20 billion to $66 billion, with the number of foundations in California increasing to 5,000.

Finding alignment with the external environment, the internal staff, the board, and the public is no easy task. But every day Canales tries to concentrate and get his staff to focus on three simple questions. What are we trying to do? What's working and not working? Are we taking enough risks? "Foundations are often described as the venture capitalists of the social sector," said Canales. Finding alignment is "not a static process. It is always dynamic."

Related Links

James Irvine Foundation