Do You Fund Like Chairman Mao?

eJewish Philanthropy, June 12, 2017.

All that death and destruction could have been avoided with honest and timely feedback.

One of the greatest famines of all time took pace in China in the late 1950s. During the so-called “Great Leap Forward,” tens of millions – maybe as many as 55 million – died of starvation in one of the worst man-made catastrophes in history.

Mao Zedong’s goals weren’t necessarily bad; he wanted to jumpstart the modernization of China and unleash the enormous productive potential of the most populous nation on Earth. He thought that with a policy of forced collectivization, and with the proper organization and plans, China could overtake the UK and the US in agricultural and industrial output.

Like most policies of forced collectivization, the Great Leap Forward was intrinsically flawed, so it’s no surprise that it failed. However, there’s a huge difference between failure and catastrophe. And when historians try to pinpoint the one element that triggered the cataclysm, they mostly agree: feedback, or, more precisely, the lack thereof.

It couldn’t have been easy to stand up to Chairman Mao. His loyal lieutenant, Zhou Enlai, tried to argue against collectivization. He was ostracized by Mao and forced to humiliate himself in public by recognizing his “mistake” and the infinite wisdom of the Supreme Leader.

The rest of the Party got the memo. Nobody would again, on record, oppose the Great Leap Forward, or tell Mao that his idea was anything less than brilliant. Provincial party leaders competed against each other over who could claim the highest outputs. The first signs of trouble were quickly hidden and an elaborate scheme of lies and false reports was created. While farmers started to starve, provincial officials reported record harvests. While steel production plummeted, Mao was informed of an astonishing increase in output. The only way to cover for the initial false report was, of course, another false report, more fantastic and egregious than the first.

Mao largely believed the reports. We all tend to believe anything that confirms we are right. He decreed that huge amounts of grain, rice, and iron ore should be exported. Even if the figures were slightly exaggerated, he thought, the surplus must still be formidable.

So China exported, and people in Morocco ate Chinese rice while villagers in Hunan starved; Switzerland bought Chinese iron while farmers melted their cooking utensils to meet the metal production quota. Mao even saw in this seeming material surplus an opportunity to repay his loans from the USSR before their maturity.

By the time the truth was unavoidable, millions of people lay dead. Many more had been displaced and the economic structure of the country had been ruined.

All that death and destruction could have been avoided with honest and timely feedback.

In philanthropy, many of us have something in common with Mao. Granted, most of the time the stakes are not that high, but we share with the Supreme Leader a dearth of adequate feedback mechanisms. This conspires against the success of our grantmaking and, in some cases, enables us to live in a fantasy world.

That lack of feedback in philanthropy is structural. A business has a built-in feedback loop: the bottom line. At the end of the day it’s clear whether or not your business is earning a profit. Even nonprofits are well-attuned to the opinion of their donors and clients, who give crystal-clear feedback in the form of donations (or not) and participation (or not). Philanthropy, however, lacks an intrinsic feedback mechanism. If a philanthropist isn’t operating with efficiency and excellence, she won’t lose her own funds. Nor does a foundation have a stock price to rise and fall with the impact it achieves. Except in extraordinary circumstances, a trustee of a foundation won’t be fired if a grant is ineffective.

The problem of feedback in philanthropy is aggravated by the imbalance of power between funders and grantees. Will a grantee take the risk of telling a funder that he had a really stupid idea? Will she jeopardize funding by alienating a donor? Like Mao’s provincial delegates, folks tend to tell philanthropists what we want to hear. Consciously or subconsciously, we tend to reward rave reviews and outright flattery. Think about it: when was the last time that a grantee was openly critical of your work as a funder? When have you last heard the words, “This is really a bad idea” from a grantee? When did somebody tell you, “Your grant process is difficult, convoluted, and asks too many useless questions?”

If the answer to all these questions isn’t “never,” then at least it’s likely to be “rarely.” That can’t be just because we’re all so great. If we were as good at philanthropy as people tell us, the world would look very different: there would be no poverty or inequality, every Jew would live a fulfilled and meaningful Jewish Life, BDS would have disappeared, and cancer wouldn’t exist. Clearly funders need to be proactive and deliberate in seeking feedback.

The honest feedback philanthropy needs can be broken down in two areas: the effectiveness of our giving and our internal operations.

Some of us who are aware of this problem try to solve it by deploying complex, technocratic data-gathering solutions. We hire expensive consultants, we send auditors, we force grantees to fill even more forms and reports, and we adopt the latest buzzword in measurement and evaluation.

All of that can help, when executed well. But I don’t want to focus on procedure, which varies from situation to situation. The main challenge, and the shared challenge, is not technical – it’s attitudinal, even psychological.

At the core of an effective feedback mechanism are phenomena that are emotional and relational: trust, empathy, humility, and cognitive dissonance.

Without a foundation of trust, no procedures or analyses can achieve real constructive criticism. Their substance will either be shallow or false. Trust makes it safe to improve.

And to develop trust, it’s critical to see the world through the other’s eye; to put ourselves in the shoes of our grantees and of the end users we are trying to serve. In a word: without empathy, we can’t get to trust.

Without humility, we can’t listen. True and useful feedback demands active listening and the willingness to admit that we may be wrong and may not have all the answers.

Without a well-honed tolerance for cognitive dissonance, we can’t process complexity and nuance.

All these core emotional and psychological skills must prevail at all levels of philanthropic relationship: within foundations; between funders and grantees; between funders, nonprofits, and beneficiaries; and between all players in the third sector and the broader community.

If we can bring these dynamics into our minds, our hearts, our reflexes, and – most importantly – our relationships, we can avoid the false information trap in which Mao Zedong ensnared himself. And, what’s more, we can make much more real progress toward the missions and visions that drove us to philanthropy in the first place. Perhaps the field of philanthropy can even achieve a “Great Leap Forward” – but one that will be true to its name.