Passing Gear Philanthropy tackles root causes of chronic disparities in three Southern communities

For more than 15 years, MDC has been advising foundations across the South and beyond about Passing Gear Philanthropy—strategic grantmaking that aims at addressing the systemic, root causes of chronic disparities in education, income, health, and a host of other factors holding back people stuck at the bottom of the economic ladder, blocking their upward economic mobility and their communities’ healthy growth.

In that time, MDC has worked with the boards and staff of more than more than 20 foundations—including community foundations, conversion foundations, family foundations, independent foundations, and United Way organizations—and redirected more than $1 billion to address the upstream causes of persistent challenges.

MDC’s Passing Gear process calls for “reading reality truthfully” by reviewing data and history, “taking action responsibly” through creative deployment of multiple forms of philanthropic capital, and advancing toward the “North Star” of a desired future based on community values. It involves engaging in more than the traditional philanthropy of relief (immediate need) and improvement (maximizing human potential) to include social reform (dismantling structures that perpetuate problems) and civic engagement (building community). And it recognizes the five forms of capital foundations have—not just money—to create change in their communities: social, moral, intellectual, and reputational, as well as financial.

But does it really work? To find out, we went back to the leaders of three foundations that MDC has partnered with in the past—a family foundation, the John M. Belk Endowment; a conversion  foundation, the Woodward Hines Education Foundation; and a corporate foundation, Humana Foundation—and asked them. They were adamant and excited in their responses that yes, it does. They said it changed their way of thinking—their culture—and focused their grantmaking to have greater impact and results in the areas most important to them and their communities. Here are their stories.

John M. Belk Endowment—MC Belk PIlon

MC Belk Pilon is the President and Chair of the board of the John M. Belk Endowment, a family foundation with assets of more than $345 million in Charlotte, N.C. The Endowment’s board and staff went through a Passing Gear engagement with MDC in 2013, and now are in the midst of a follow-up engagement.

The Endowment was founded in the early 1990s to create a national merit scholarship program for Davidson College. Based on the vision of the Endowment’s founder—a four-term former mayor of Charlotte, N.C., who passed away in 2007—that the focus be broadened to education, she says she began to model the Endowment, in part, on the business model of the family’s department stores by working closely with their communities, focusing on data, and building the workforce pipeline. Since his death, the Endowment has identified as its mission improving college access, college completion, and workforce relevance, with particular attention to community colleges.

“This work with MDC is a place to pause. When you are attempting to unlock system change, I believe it is vitally important for our entire team to build in reflective practice, connect the dots, and use the opportunity to reset,” Ms. Pilon says. “This whole process allows you to zoom out on our work and focus on the long-term vision. It is easy to get caught up in the every day. It is harder to ask what you’re learning from your work that you don’t know you’ve learned, and then put it into practice,” she says.

“It was great for us to go through framework exercises. As we started building this out with MDC, we realized that community was central to the work that we do. This shouldn’t have surprised us because it was core to the family’s business, but it was still a moment of recognition for our team,” she says. “We recognized quickly we had to make sure we were not coming in to say we have a solution. We have begun to reiterate again and again that part of our role is to support what works for the community, whether it was our idea or not.”

In studying the data and thinking about using different forms of social and financial capital, she says, the Endowment was able to identify its three areas of focus. “We walked through this amazing historical perspective. We then looked at the [education] pipeline and looked at where young people and returning adult populations were dropping out of the system. One key finding was people could get into college, but they couldn’t stay in,” she says. Ultimately the Endowment board realized that community colleges “were undervalued and under-appreciated,” she says, even as the North Carolina Community College System is the third largest in the nation and serves more than 700,000 people annually.

“The community colleges deal with everything due to the open door nature of their work—poverty, education, K-12, business and industry, government, funding (or the lack thereof), and when you go to these small towns, you recognize their importance,” she says. “We connected this realization with the Belks’ business model. As a company, we recognized sometimes we were an important voice in the room, and as a result people listened to the company. Our hope was to build off of this history and convince the colleges to be more conveners because they see it all each day, and they are asked to do everything by policymakers,” she says.

“One of the things we hope to change is the value proposition of the community colleges, and elevate what they’re doing along the way,” she says. “Nobody knows what the community colleges do, how important they are, or where the funding comes from.”

One big bet to emerge from the framework was the Endowment’s investment in the College Advising Corps, which puts recent college graduates as advisers in high schools to work with low-income students who would be the first in their families to go to college. Once advisers are placed, they help their students finish high school and consider their next steps after graduation.

“Passing Gear Philanthropy really informed that big bet and how we built it out,” she says. “It was our signature grant, and it said who we were. Ultimately it established and deepened our roots. Ultimately, it showed everyone that we are focused on the education continuum across North Carolina.”

The Endowment invested $10 million in 2013, and another $10 million in 2016 in the College Advising Corps.

Ms. Pilon says the board saw in the College Advising Corps different elements of the four forms of philanthropy illustrated through the MDC framework. “The College Advising Corps was bringing relief to the system—improvement, really—because it was hiring recent graduates from North Carolina’s postsecondary institutions and putting them in the K-12 system. It also stood out as social reform because when we started it, we funded a research component to track their data as a national organization, so they could show the work mattered” she says.

Backing the work up with research, she says, “would make a good business case for why a public-private partnership could be formed to put more advisers in every high school so all students in North Carolina could have this tool to address the college access and affordability piece.” The Endowment’s work also has shown the College Advising Corps the importance of community colleges in their work, she says.

The Endowment is also working with the Aspen Institute to identify best practices for on-boarding new community college presidents and trustees to help them understand their roles and the colleges’ challenges and potential, and to help them recognize and address the success gaps between different student groups.

One lens the Endowment has added to the Aspen work is the value of civic engagement. “We want everyone to know the value of this work,” she says.

Passing Gear Philanthropy emphasizes the importance of changing the culture within a foundation, so the organization can understand its full potential.

Ms. Pilon went on to say, “We had to create a culture where there was a willingness to learn, make adjustments and strengthen practices. And, ultimately, to acknowledge that we are advocates and not experts.”

Asked how she and the Endowment see philanthropy differently after learning Passing Gear Philanthropy, she said: “Our key lesson is that history builds upon itself, systems aren’t irrevocably broken, and they’re producing the results they were designed to produce. So, the big question for us now is how do we create new systems that produce different results.”

Woodward Hines Education Foundation—Jim Mchale

Jim McHale is the President and CEO of the Woodward Hines Education Foundation in Jackson, Miss., a foundation formed with an endowment of $150 million from the Mississippi Higher Education Assistance Corporation, a nonprofit, secondary market for federally guaranteed student loans founded in 1980 by Jack Woodward and J. Herman Hines. The corporation’s goal was to help more students in Mississippi get a postsecondary education, and it continued that goal through the Education Services Foundation, created in 1995, and its Get2College program, a service to help students and their families get the resources, support, and training needed to get to and through college. It recently changed its name to the Woodward Hines Education Foundation.

The Foundation, now one of the largest in the state, engaged MDC to help it expand its philanthropic mission and repurpose its assets to help more people in Mississippi obtain postsecondary credentials. Mr. McHale came to the Foundation in 2015 after 21 years at the Kellogg Foundation.

“I wanted someone who would be a thought partner—not someone who was going to do something to us or for us, but someone who would work alongside of us, helping us,” Mr. McHale says. After sending out a Request for Proposals to five organizations to assist in the strategic planning process, he says “what helped MDC move to the top was its knowledge of the South. The South is its own unique place, and race plays a strong role.”

MDC took the Foundation’s board through the process of reviewing data and the state’s history. “It was a fascinating process for the board to see these milestones in the history of the state, and to acknowledge the progress that we’d made… We looked at where we fit in that timeline and saw we were doing a good job of getting students to college but a dismal job of getting them through college.”

The Foundation also started looking at the composition of its board, which “didn’t have expertise in our new work,” McHale says. Board members recognized that, and some chose to step down to make room for new board members. One replacement was the CEO of Entergy Mississippi, the Southern utility company. “Unfortunately, he has to spend too much of his time on where he’s going to get the workforce to get the work done. He realized Mississippi needs a foundation that could help provide leadership in working with other organizations to address the future workforce needs of Mississippi. He’s representing one of the largest employers in Mississippi.”

One of the board’s first steps with MDC was to look at MDC’s adaptation of a Gates Foundation tool called the “loss-momentum framework,” which examines where students are falling out of the education system, spurring the Foundation to look more closely at Get2College, which has three help centers in different parts of the state. “We also now are looking at how do we scale that type of work so more students can benefit from it without having to open more offices and increasing staff,” he says. Since the state is mostly rural and it’s hard for many students to get to the centers, one innovation is creating virtual counselors and workshops working with high schools online. “At first schools were resistant,” he says, “but this has been equally effective. We’re reaching a lot more students and families.”

Mr. McHale says he didn’t jump in immediately, but first set out to learn about the state and its needs, and to talk with its leaders and students. “I needed to be extremely cautious, being a white guy from the north coming into Mississippi, and not having the attitude that I’m here to save the day.”

Making connections using multiple forms of capital has been key to much of the Foundation’s work. “I think knowledge and lessons learned are equally important as the financial resources that we bring to the table,” McHale says.

After six months of listening and learning, those relationships are starting to pay off.

The Foundation used its reputational capital in forging a relationship with Phi Theta Kappa, the national community college honor society that happens to be based in Jackson. It partnered with the honor society to create a Get2College Corps, selecting honor society students at colleges in Mississippi to help other students fill out the FAFSA form to receive financial aid. Mississippi now has the fourth highest FAFSA completion rate in the country, McHale says (Louisiana is first, where completion is a requirement for all high school seniors).

The Foundation also is partnering with Phi Theta Kappa to reform a $100,000 scholarship program that wasn’t getting to the students who needed it most. The Foundation is repurposing half of that money to help the honor society sign up more eligible members who can’t afford its $65 annual fee, which then often makes them eligible for full scholarships, McHale says.

“We got the two-year report, and 97 percent of those students have persisted or completed,” he says, and the grant has leveraged six times its amount on transfer scholarships.

The partnerships haven’t ended there. There were no Mississippi colleges in Achieving the Dream, the national community college reform network focused on helping low-income and African-American students complete college (which MDC helped create, working with Lumina Foundation, another student loan conversion foundation). Working with ATD, WHEF committed $900,000 over four years to provide capacity-building support for two colleges—one an HBCU—to join ATD.

McHale has been meeting with national foundations focused on the same issues, and with the Mississippi Association of Grantmakers to create and fund an education affinity group of community and private foundations. Its November meeting is focused on workforce development. “We can help bring all of them around the table to see if there are common areas where we do programming issues or public policy issues they can identify and address,” he says. On next year’s agenda may be sponsoring a gubernatorial debate on education issues.

The horizon also includes possible funding for summer bridge programs to help students adapt to college (“For first-generation students, they might as well be navigating on Mars,” he says), a texting program to remind students of registration and paperwork deadlines—which research has shown can be helpful—and a public policy agenda that is likely to focus on revisiting financial aid in the state, he says.

“We’ve identified some public policy agendas we’re working on aggressively,” McHale says. He is on a state commission looking at financial aid issues, and also is working with the state to create a postsecondary attainment goal. “We’re working hard to encourage and support the leadership who would be the ones to establish the goal to go about doing that. We remain optimistic that Mississippi will, in the next year, have an attainment goal… We’re starting to be seen as an influencer and expert in our space,” he says.

“MDC really helped us develop that North Star. If you look at other foundations, their mission and vision are pretty broad and not very realistic. The Passin g Gear process allowed us to create an ambitious vision and mission, but where it has really helped us—with our limited resources and expertise—is finding the area where we can have meaningful impact,” he says. “I don’t think we would have ended up as sharply without the support of MDC and Passing Gear Philanthropy.”

Humana Foundation—Walter D. Woods

Walter D. Woods is the CEO of the Humana Foundation, the philanthropic arm of health care corporation Humana, based in Louisville, Ky. Woods, who is returning to Louisville after 41 years, arrived at Humana in 2017. He was previously president of the Evangelical Lutheran Good Samaritan Foundation in Sioux Falls, S.D., and before that was in executive roles in organizations including AARP Foundation, the World Bank, and the Boys & Girls Clubs.

A news release issued when Woods’ position was announced—after the Foundation’s board had gone through its exposure to Passing Gear Philanthropy with MDC in 2016—announced that:

Woods joins the Humana Foundation as it has been evolving its overall strategy to focus primarily on addressing the upstream barriers to overcoming social determinants of health. This approach aligns with Humana Inc.’s work to help people have more “Healthy Days” by pursuing a Bold Goal of improving the health of the communities it serves 20 percent by 2020.

“It really opened my eyes,” Woods says of the board’s incorporation of Passing Gear principles. “I had never thought about inequity in the way that your team presented it to the board, and recognized that the five forms of philanthropic capital allow the Foundation to deploy its resources differently to address structural barriers to equity. Ultimately, you look at what you’re doing and realize that unless you’re impacting policy, you’re not being transformational. People who have power focus on policy, and many people who don’t focus on programs.”

Being an affiliate of a corporation that includes health insurance and health care facilities, the Foundation board was focused on health and learning more about what’s called “the social determinants of health”—that is, the impact of income, education, geography, and other social factors on peoples’ health outcomes.

“There are government policies that disinvested in communities, in part because of the racial makeup of the communities,” Woods says. “How do you unravel these systems and help people get where they need to be, because it took decades to get us where we are? It takes very intentional policies to undo that.”

In MDC’s work with the Foundation, the focus was on Louisville. In the next few years, Woods wants to scale up what the Foundation has learned in Louisville and apply it in several more areas, including Baton Rouge, La.; Broward County, Fla.; Jacksonville, Fla.; Knoxville, Tenn.; New Orleans, La.; Tampa Bay area, Fla.; and San Antonio, Texas. These are markets where the Humana Corporation is furthest along at implementing its Bold Goal of having residents become 20 percent healthier by 2020.

“I think that learning more about equity helped us realize that it’s a systemic issue,” Woods says. “I’d never thought of it that way before. You always think you can pick yourself up out of any situation and survive. And for some reason, some people can do that. But a lot of people can’t.”

He also plans to widen the spectrum of issues the Foundation addresses under the umbrella of social determinants of health. While some cities are focusing on asset security and postsecondary success, others are looking at social connections and food security. “We’re now thinking we need to focus on all four,” he says. “We think organizations that use a collaborative approach, that deal with more than one area, will be more successful at building resilience and stability.”

As a result of the Passing Gear engagement, the Humana Foundation changed its core language and the ways it approaches philanthropy, Woods says. It’s mission now states that the Foundation “co-creates communities where leadership, culture, and systems work to improve and sustain positive health outcomes.” Those are the three areas of impact that are focused on in Passing Gear Philanthropy.

“You helped us figure out what the focus areas needed to be,” Woods says. “From there we took that and put it into an investor framework that focuses on the human gain you’re trying to create. You do that three ways: What are we buying, what are the chances we’ll get it, and is this the best possible use of our investment?”

The Foundation fundamentally changed its grantmaking process, moving away from proposals and setting target areas and, Woods says, instead of evaluating them, “we’re verifying and learning from them.” The Foundation also reduced its number of grantees to make larger, more substantive investments. To track their progress, dashboards and metrics are being created and reviewed quarterly. “We’re moving away from what we used to do, which is fund activities. Now, we’re investing in results,” he says. “We’re laser focused on the idea that our work needs to be clearly articulated through the results we’re trying to achieve. How do we look at power in our communities and how that influences equity—or not?”

The Foundation recognized that it has capital beyond its checkbook. “We definitely discovered we were only focusing on one thing, and that was finance. But there were four others we hadn’t considered before, so we’re considering all of that now,” he says.

Woods anticipates using the Foundation’s convening power—social and reputational capital—to create active civic engagement, building “transparent, trusting relationships and co-creating strategies with stakeholders,” he says. “We need to have nonprofits, government and the private sector at the table so we can read the reality truthfully and assess the data.”

He says: “That’s wielding power, exercising public leadership beyond grantmaking to make equitable, catalytic change. We think those things together represent the highest aspiration of grantmaking—advancing equity and justice.”