Miriam Axel-Lute: Tell us about your experience before coming to Surdna, and how that’s informed your work here.
Phil Henderson: I was an international guy before I came here, and that was a complete accident. I ended up in Romania after the fall of Communism, having never been out of the 50 states before. I went to Romania to teach economics. And I stayed in that world. That was part of the transition-to-democracy period for all these countries; they weren’t even sure where they were going to go. They all ended up being EU members, they all ended up being part of NATO. It’s a big success story in some measure. I was based in that part of the world for five years, and then I came back and was based in Washington, [D.C.], and I worked at the German Marshall Fund for almost a decade.
And during the time I was at the German Marshall Fund, that institution was exploding in terms of size. I was the 14th employee, and when I left there were 100-plus. We had two offices, and then we had eight offices.
My role was to design and work pretty intensively with the grant-making operations that we had going throughout the Balkans, the Black Sea region, [and] Central Europe, to try to figure out how you seed real community engagement there.
I once met somebody in Bulgaria whose business card title was expert-in-chief, which I always thought was the greatest title I’ve ever seen in my life. I was certainly not the expert-in-chief. But, I knew something about how to design good grant-making programs. I had some knowledge about what it meant to actually figure out how to engage communities who were simply not interested, or not in the habit of taking on their own problems because, in the Communist era, you deferred all that to the central government.
Part of the life of working at the German Marshall fund was I was on airplanes all the time. I was in Europe at least once a month, flying coach, and at 6’2”, coach got a little tiresome. And so, after about eight-plus years of that, I began to look around for a job. I was sure I wanted to stay in Washington, D.C., and that I wanted to keep doing international work. And so, naturally, I end up at the Surdna Foundation in New York City running a family philanthropy that’s focused domestically.
But, there is actually a lot of symmetry between the kind of grant-making we were doing in Eastern Europe and the kind of community-building that we’re trying to do here.
Harold Simon: So, what do you see community engagement being, and how do you foster it?
Phil Henderson: So, you have this problem that there are elites at any level, right? There are elites even within a community that has almost no social capital.
The challenge is how do you not just get them to tell you what’s going on but actually engage people who are the everyday folks, who don’t at the time have the bandwidth, don’t have the wherewithal, don’t have the training, perhaps, to be a part of the conversation that you need to be able to [have to] surface what really matters to these places, to give them the opportunity to voice what matters to them and to, in some small way, contribute to that solution.
Miriam Axel-Lute: Are there things that you brought from your work in Eastern Europe here that perhaps were new or a different angle or different lens on the domestic work than what was standard?
Phil Henderson: Over time, I’ve been trying to weave in the idea that we don’t have all the answers. American cities don’t have all the answers. American communities don’t have all the answers. American nonprofits don’t have all the answers. We should be open to the idea that the answers to our problems may be elsewhere. That’s the sort of openness that I brought because of my experience.
Miriam Axel-Lute: When somebody new comes in at the head of a foundation, with new sets of experiences and backgrounds, there’s always some shift in direction. At Surdna there was some consolidation of programs, but the new direction is also clearly built on the skeleton, the structure of what was here. Can you talk a little bit about the shift, and then where you see the foundation going?
Phil Henderson: Yes. I’ll tell you a little more than you may have asked. When I got here, I was taking over for Ed Skloot, who’d been here for 19 years. Surdna is now 97 years old, but the modern era really started with Ed’s arrival in 1989. The foundation before his arrival had some areas of interest but no formal programs, no professional staff.
The modern version of Surdna had been built under Ed’s leadership. And so, it was kind of a big deal to have a transition in leadership. I was, in effect, the second-ever professional staff leader at the foundation. I had a lot of learning to do, both about where Surdna had been but also where Surdna sat in the foundation world.
And so, I did a lot of listening for the first six months or so. The foundation had built, at the time, five grant-making programs. [The board members] were trying to figure out, Are these the right five? Do we give them enough money, the right amount of money out of our budget allocation? And they were trying to find a technical solution: Is it data that we need?
My observation was that the real key to unlocking the answer to that question was getting clear on mission. Surdna at the time had a mission, and I say this maybe less carefully than I should, that basically said, “We do really important stuff in the world for people that really need it.” And that wasn’t very helpful.
We spent years ultimately retooling the organization around a central mission that’s about sustainable communities, that’s built around the idea that social justice matters.
And so, we were able to take these five programs, keep a couple of them as they were roughly, rebuild a couple of them, and drop a couple of them. We ended up with three programs around thriving cultures, strong local economies, and sustainable environments.
I didn’t write it for them to have them approve it. We actually spent the day, after having spent a year thinking together, and actually built the sentences that are the mission. It’s not a thing that’s written down that we never look at. It’s actually something that we refer to all the time, and it’s allowed us move the foundation into a new era not built around me or what I care about, but built around the collective sense of what Surdna’s values and historical footprint [have] been.
Harold Simon: Kind of like form follows function, and this is programs follow mission.
Phil Henderson: Yes. Yes. When we did the mission, I thought, I wonder how much teeth it will have? I said to the board, “Well, the next step is to figure out, So then what?” I brought back three or four scenarios, and they picked the one that was the most closely aligned with the language they had chosen for mission, which meant much more change for the institution than some of the other options I brought to them, where we could [have faked it a little], saying, “Well, this is sort of the mission. We’ll still do that.” They chose the harder path. They really meant it. They really wanted the institution to go there.
Miriam Axel-Lute: And so, those three programs all relate to the mission. How do they relate to each other in the operational day-to-day?
Phil Henderson: Our board was really interested in what are those overlaps, and isn’t that the place where we might actually focus our attention and be maybe a little different, get a little more effective by looking at where economy and environment intersect rather than having an economic development piece that goes its own way, and then an environment piece that goes its own way?
What does that mean operationally? Do we have an organization where people have multiple specialties? Do we have people who have specialties, and then we help them interact differently so that they can learn from each other? We sort of ended up in between. We ended up with people who are issue specialists, in a way, but we like generalists at Surdna. We like people who are interested broadly, who may be environmental at their core, but they’re really interested in economic issues. They’re really interested in the cultural questions around how environment can be a top priority.
Miriam Axel-Lute: I had somebody say to me recently, “So, what happens if I go to Surdna and I work in culture and economy and environment? I’m not the best at any of them, but I put them together very well. Who do I talk to? Where do I start?”
Phil Henderson: Well, the good news is, if you got in the door here, you’d have them all, because there’s a real interest in that, finding those organizations or those experts that could speak to those multiple venues.
There was a meeting of funders that happened some weeks ago [in New Orleans], and one of the things that our staff said was we were the only foundation there with representatives from our different points of view. Everyone else had their person who was only coming at it from the economic development angle, or the environment angle.
It means we travel more, I suppose, more of us on airplanes, but it really feels like that’s an effective interface for us. Learning happens accidentally in those moments—just being in the room, even if I’m somebody who cares about urban infrastructure and you’re talking to a culture grantee who doesn’t really touch that space much, there are networks that cross over, and there’s learning that happens just because you’re in the room.
We’re trying to see how do you do that as efficiently as possible so you don’t spend all of your time in meetings.
We have overweighted a little bit in terms of the growth on professional staff, which we think is a pretty good investment, and so that does create both more opportunity for the kind of incidental learning that happens because you bump into more people, but the complexity of how you actually share information internally has grown, no doubt.
Miriam Axel-Lute: Yes. And then, there’s also the relationship between you and your grantees, which always is a power imbalance no matter what you do. You’ve spoken about trying to find a balance between being supportive and being directive. How’s that going?
Phil Henderson: The reality of it is that we have the money, and so we have power. We know that. One of the things that we have tried to carry with us since way back before I came here is this value of modesty. I’ll be the first to tell you there’s stuff I don’t know. We don’t have all the answers. Thank goodness, right? If we did, then it would be a heavy burden to bear.
I think the best kinds of relationships for us with grantees are ones where we’re really co-creating an idea and recognizing that you can never quite co-create on equal footing.
One of my former program directors used to say that some grantees get the full concierge service. There’s one we were talking about today, Juxtaposition, which is a social enterprise in North Minneapolis that is arts-based, working with kids, helping kids get skills that they actually can use in the real world in art and design and whatnot. That’s a place that got the full concierge service. George worked with them on some communications stuff. We helped them connect with other potential funders. We worked directly with their staff to try to figure out how we could scale our grants up [so] that they could absorb the additional money and not collapse under the weight of it.
But, the reality is we’re giving away $30 million-plus a year. We can’t do that with every grantee. So, some of them are more sort of pure transactional or longstanding relationships that don’t require that sort of care and feeding. But we like to see that there are at least some places where we’re deploying the full breadth of our assets, our tools, our smarts, our networks, our exposure to other grantees’ learnings. And now PRIs. It’s being able occasionally to move quickly as opposed to moving at a more plodding pace than we moved before.
So, we’re trying to build those muscles. It’s not easy, and I think it requires some delicacy, and at least reminding yourself that you’re not the master of the universe. You don’t have all the answers. We don’t do the work. The folks we’re working with, working through, giving money to, they’re the ones that are doing the work.
Miriam Axel-Lute: You mentioned the longstanding grantees, and that is something Surdna has been known for compared to some foundations—sticking with folks over a longer period of time. What are the advantages and opportunities versus challenges of that particular approach?
Phil Henderson: We try to be pretty careful about not being too big relative to the scale of the institution so that our changing of our minds, or not, isn’t sort of the decisive—like, if you’re 60 percent of someone’s budget, then if you change your mind, then they’re going to have a hard time surviving. So, part of this is engaging with institutions that you’re involved with over the long haul in a sustainable way for them, right?
The other thing that’s been interesting is we had in our arts program, which is now our Thriving Cultures program, a program that was almost exclusively focused on teens’ artistic advancement, looking for high-quality arts programs through which teens were getting training to be better musicians, dancers, visual artists, et cetera.
Now it’s called, instead of Teens’ Artistic Advancements, Teens’ Artistic and Cultural Advancement, so it’s really trying to see how arts institutions are working with the whole kid, not just their artistic skills, particularly focused on disadvantaged communities, communities of color, kids who don’t have access otherwise to these sorts of things.
Some grantees were really good at the former version of what we did and are really not very good at what we’re trying to do now. So, they are no longer grantees. Some of them we worked with for a long time. Good news is they’re really big institutions, oftentimes, and they’ll be fine. But, what’s been interesting is, as we have moved ahead, some of the institutions we’ve been working with for a long time also were moving in a different way, in ways that were only exposed to us because we began talking to them about how we’re thinking now, which is different than the way we were. And they said, “Oh, my gosh, thank goodness. This is something we’ve been thinking about a long time, too. That’s really exciting.”
We’re both responding to the same cultural imperatives, which is a nice thing to see. This kind of growing-together piece means that you can sustain these relationships over time, not in a way that’s static but that actually is responsive to the world around us, which is kind of a nice thing. Sometimes the rethinking of our own priorities allows the conversation to change.
Miriam Axel-Lute: Talk about how you see your PRI work in the larger impact investing space.
Phil Henderson: When I first arrived at Surdna, I swear, the first 20 people I talked to, 15 of them said, “You guys really have to do PRIs.” And I didn’t even really know what that meant.
This issue had been around Surdna for quite some time, [but] we’re a family institution, fairly conservative in terms of adopting wild new stuff, and so there was kind of an inertia problem.
And then, I got us all wrapped up in this mission stuff. So, it has felt like, in some ways, a long time, a long gestation period. I really wanted us to think broadly about impact investing, not just about one intervention point or one tool, but, I came to the conclusion about two and a half years ago that the comfortable entry point was probably PRIs, because the landscape is well defined, there are lots of experts out there who can help you, [and] even though most foundations have not tried it, there are lots who have.
I really wanted it to be in addition to our 5 percent spending. I wanted it to be seen as a portion of the investment portfolio, lower performing in terms of returns, higher performing in terms of social impact, hopefully.
We really looked intensively at this. I had the CFO here work with our friends at Cambridge Associates and build a financial model. We were able to give the board facts and they said, sure, let’s do it. And then we spent about a year, from the approval moment to the moment we actually had our first—now two—PRIs.
It seems like a lot of money, $18 million. It’s 2 percent of our endowment. And it’s not all going out at once. The idea is, at any one time, we could have up to that much in play, and so far the two deals we’ve got are about $1.5 million total. The real idea here is this is driven from program strategies that could benefit from a different kind of capital, investment capital, as a way of extending the impact.
And so, the first two PRIs [were] BOC Capital [Corp.] around post-Sandy rebuilding and access and then an investment with RSF Social Finance around food hubs. And in each case, we have grant money as well going in to help these institutions do their everyday work.
We don’t have a bunch of bankers here at Surdna. We don’t have a bunch of investment people. We have grant-makers. Luckily we have people who have brought some of that experience to Surdna. Shawn Escoffery, who did the BOC Capital [deal], he’s done affordable housing deals, so he knows how to stack capital. That’s been really helpful.
But, as an institution, we didn’t have ready built-in mechanisms to be able to monitor and deal with loans. We’ve had to build that as we’ve gone, and that’s part of the reason it’s taken us some time to go from board approval to an announcement.
I was told before people would be really interested if Surdna did this, and my perspective was, “Well, Ford’s been doing this for 40 years, or 35 years. Why would anybody care about Surdna?” But, I think certainly within the family foundation world it’s been noted.
Miriam Axel-Lute: There’s been a lot of talk about broader impact investing as a new thing, or a new term for an old thing. Do you have a sense about that—where it’s going, more broadly, and what the foundation’s roles are in it?
Phil Henderson: My lay view is that the sophistication of the possible ways you could go is growing day by day. Cambridge Associates have been great. For 25 years we’ve been working with them. Our endowment’s grown beautifully. Up until four or five years ago, they were see-no-evil, hear-no-evil. They were ignoring that world. And now, their endowment clients are demanding that they be responsive to the demands of their constituents, which is a better and more sophisticated array of ways that you might engage in a mission-relevant way with your assets.
So, it’s not like flipping a switch, but it feels like, over the last 10 to 15 years, the pathway is clear, that this is moving pretty strongly in that direction. Little bit of a hiccup when we all lost 40 percent of our endowments, but I think we’re kind of back where we were.
Harold Simon: It’s interesting to hear you say that the clients are demanding it. Do you sense that there will be enough demand? Is it just institutional or foundation investors who are exhibiting this so-called mission-driven private investing?
Phil Henderson: There was some statistic that came out recently about the increase in people who ride their bicycles to work, and it’s gone from 450,000 to 750,000 in the last two years or five years. On the one hand, you can say it nearly doubled, and on the other hand the writer sort of sarcastically said they went from 0.3 percent of the commuting public to 0.4 percent of the commuting public. So, it all depends on your perspective. I think scale matters here.
So, the big money is still the big money. It’s not university endowments. It’s not little old Surdna. We feel like we’re big, $1 billion, but the amount of money flowing through Wall Street and flowing through the international financial markets vastly outstrips anything we’re doing. So, we should be a little bit modest in our expectations about shifting the whole landscape.
On the other hand, we’ve been funding, over the years, groups like Ceres, who work with businesses about their sustainability, footprint, and their worries about climate. It feels like there is something real happening here, and that part of it is we foundations feeling more conscientious about how we’re spending our money and trying to align it with our mission. But, part of it’s that the broader landscape could well be shifting.
Harold Simon: So, it’s gone from fad to trend.
Phil Henderson: Yes, I would give it trend status. It’s not a fad.
Harold Simon: So, you said you don’t fix communities. So, that’s an interesting thought, because a lot of people do want to fix communities.
Phil Henderson: Here’s what I mean by that. We’ve wrestled with this question. So, when we go to Detroit and we invest our $250,000 in work along the Woodward Corridor, we’re not the [Detroit-based] Kresge Foundation. We’re not the Mott Foundation. We’re not the Kellogg Foundation. That is whose very credibility is on the line about fixing Detroit. We’re not putting $10 million into these things. We’re trying to figure out where we can be useful investors with what we know and what we think matters, to be able to help those efforts, the broader efforts, work in a way that we can then perhaps use in our work elsewhere.
We’re not a New York City funder that’s here to try to fix New York City. We know there’s lots of interesting stuff going on in New York City that we invest in and we think is worthwhile and useful, et cetera, but we’re not delusional, luckily, to think that we are tasked with fixing a particular place. Our role is to be a good, solid partner, to move ideas, to work with lots of other actors, some of which are philanthropic and nonprofit, some of which are not in those categories, to be good civic actors in their space.
We’re a contributing factor, but we don’t find ourselves in the place of believing that we should own the whole problem. If you take that the wrong way, you might think, well, we’re just sort of hopscotching around and doing the fun stuff, right? It’s really not about that, but it’s about saying our role is just different than it would be if we were a place-based funder that had its identity wrapped up in the future of Pittsburgh, let’s say.
Harold Simon: Tell us more about how you collaborate externally with your grantees and others.
Phil Henderson: We really strive to be helpful, thoughtful partners. The good news about being a national funder that’s relatively small as national funders go is we never have the illusion that our money’s enough. And we pick big ideas, right? Got a lot of them. We recognize we have to work in concert with lots of other actors, and we can only do that well if we are a really good, true partner.
We don’t always get it right, [but] we are really a good partner with lots of other institutions, and often we are playing the role of creating some connective tissue among them.
For example, we have been a core funder from the very beginning of, in fact helped create, the Urban Sustainability Directors Network. In the era of the Obama stimulus package, there was all this sustainability money, and then the creation of these offices in mayoral offices that were about using money in a sustainable way.
There was a network created of all of them, and we were right in the middle trying to help that happen. That’s kind of emblematic of the kind of thing we want to do.