Profile: S. D. Bechtel, Jr. Foundation

October 16, 2018

Key Statistics

Founding Date: 1957
Location: San Francisco, CA
Assets (2017): $247 M
Total Grant making (2017): $120 M
Number of staff: 35

Background

The S. D. Bechtel, Jr. Foundation (the Foundation), based in San Francisco, was established in 1957 by Stephen D. Bechtel, Jr. as a reflection of his personal commitment to ensuring a prosperous California. To this day Mr. Bechtel remains involved with the Foundation as Chair of the Board, and his daughter, Laurie Dachs, serves as President. As of this writing, the Foundation has a professional staff of 35 and maintains close ties to the founder and the family under Laurie’s leadership.

Organized as a private foundation, the S. D. Bechtel, Jr. Foundation is a grant making organization. Its formal mission states: “The Foundation invests in preparing California’s children and youth to contribute to the state’s economy and communities, and in advancing management of California’s water and land resources.”

Based on Mr. Bechtel’s interests, the Foundation has made grants in the areas of education and the environment since its founding. These issue areas have been further developed to focus primarily on K-8 STEM education (science, technology, engineering and mathematics), character development, effective education policy, and environmental issues including water management and land conservation and stewardship.

In 2009 the Foundation made a pivotal decision to spend down its assets in a defined period of time. The Foundation will sunset at the end of 2020.

Core Framework

The Foundation is governed by a ten‐person board of directors, four of whom are non-family members. By design, the directors are not issue‐area experts. Rather, they are all smart, critical thinkers who ask probing questions and provide high‐level guidance. The staff engages the board in strategy‐setting and budget discussions, but not in day‐to‐day organizational issues nor in individual grant management. Board members are encouraged to raise questions regarding individual grants prior to board meetings, during which grants are approved primarily through a consent agenda. This enables staff to address concerns and/or remove grants from the consent agenda to facilitate further dialogue as needed.

Charter

“In large part, we look for open doors and opportunities that fit with the interests of the founder.”

−    Allison Harvey Turner, Environment Program Director

The S. D. Bechtel, Jr. Foundation operates based on a donor‐led style of charter, in which the Foundation’s guiding principles and operational style were largely set by Mr. Bechtel in 1957. Although the Foundation does not have a formal documented charter, Mr. Bechtel’s vision and character are clearly woven into the fabric of the organization. Ideals he champions—such as integrity, excellence, optimism, and respect—comprise the Foundation’s values and guide the way the staff do their work. In addition, under the influence of Mr. Bechtel, an engineer, the Foundation focuses on advancing sensible solutions that are based in science or practice and backed by clear evidence. The staff promotes what works, as opposed to pushing an ideology. They also conduct deep, analytical due diligence to understand context, risk, and opportunity as well as grantee capacity.

The founder’s interests and the needs of the fields in which the Foundation invests are aligned to shape organizational priorities. This may, in part, be due to Mr. Bechtel’s approach to philanthropy. Foundation President Laurie Dachs shared what it was like when she started working for the Foundation: “What was great about it was that [her father, Mr. Bechtel] wasn’t one to say, ‘This is how you fix it, this is what I want you to do.’ He said, ’Go find people that you trust and work with them to come up with what we need to do to fix the problem.’”

Staff maintain that having Laurie at the helm is as good as having a written charter, if not better. She embodies the donor’s intent, interpreting and exemplifying it through her actions and advice as President. She also plays a bridging role between the board, the family, and staff.

Social Compact

“We represent the board in how we do our work and we represent the field in what it is that we do to move toward having some impact.”

−    Laurie Dachs, Foundation President

The Foundation considers itself accountable to the Board of the Foundation as well as the fields in which it works and the grantees it supports. Staff are quick to acknowledge two key drivers for their work: first, actualizing Mr. Bechtel’s vision for the Foundation, and second, engaging in thoughtful, thorough grant making that will leave grantees and other partners in good stead once the Foundation closes its doors. Due to increased grant making during the spend‐down, the Foundation is often the largest funder of a project or initiative, and staff and the board are careful to handle that privilege responsibly. Laurie explained, “We are really looking for key ways to make a difference. It has to be done in a way that is very respectful of everybody we work with.”

There is also a modest budget set aside for Mr. Bechtel’s discretionary grant making. Recent grants supporting the California Academy of Sciences and the California Pacific Medical Center were made through this discretionary fund.

The Foundation’s sense of accountability to the field requires that staff be strong listeners. Program teams develop goals and strategies with input from academics, grantees, and others, considering the field as the primary source of expert knowledge. When new staff are hired, Laurie meets with each to discuss the Foundation’s deep respect for and reliance on grantees and the importance of working to mitigate funder/recipient power dynamics as much as possible. The Foundation recognizes that grantees are the ones effecting change in the world. Thus, staff are intentional about creating opportunities to strengthen the organizations and fields the Foundation supports.

Operating Capabilities

The Foundation’s core capabilities are grounded in an approach that values decentralized decision making, balances both a building and buying approach to dispersing resources, employs a more independent style of internal peer relationships, takes a disciplined approach to strategy development, and a uses a deep style of program focus.

The Foundation’s approach to decision‐making spreads the decision‐making authority out across the board, the President and the Program Directors. Strategy is set at the board level, but is informed by deep work on the part of staff who develop strategies and implement plans. The board’s time is purposely dedicated to review of strategy and high‐level decisions, and the board gives final approval for large grants. In addition, individual board members are invited to program‐level discussions based on their interest and expertise. To streamline the grants process, Program Directors have authority to approve grants up to $50,000 and the President can approve grants up to $500,000 without a formal board vote.

“We’ve made very good use of experts and have a really smart, sophisticated staff who listen and reflect knowledge from the field.”

−    Laurie Dachs, Foundation President

Each program area has clearly defined strategies and goals that reflect a melding of the board’s interests and input from the field. Due to time limits imposed by the spend‐down, Program Directors stay focused on a limited number of initiatives but are given the latitude to make adjustments. They are encouraged to be nimble, especially in response to changes in the field or context in which they are operating.

The Foundation’s approach to resourcing work entails a combination of buying and building. Leadership knew early on that to spend down responsibly, greater internal capacity was needed at the Foundation. They staffed up, hiring specialists and smart, curious generalists. They have also used experts and consultants liberally. At various times, both the Environment and Education Programs have convened advisory councils. With time and experience, the Foundation has developed a cadre of trusted field experts that includes academics, NGO leaders and attorneys, as well as policy makers, civic leaders, and other funders. Foundation staff often vet their ideas and receive input about the field and its key players from this curated roster of professionals.

The Foundation also added an Effectiveness team to help improve internal processes and knowledge sharing. That group developed a range of tools, including a Resiliency Guide. The Guide is available publicly for use by other funders and nonprofits and is intended to:

  • facilitate explicit conversations about resiliency throughout the grantmaking process, and
  • encourage documentation of strengths and concerns as well as specific resiliency-building efforts and their results over time.

Whenever possible, the Foundation likes to work with and engage other funders and partners. This both ensures an increase of the intellectual resources that can be drawn upon when considering how best to approach an issue, and that there will be others engaged in the work when the Foundation closes. In some groups such as the Common Core Funders Collaborative, a group in which the Education Program participates, members share what they are doing to align their work and sometimes co‐fund projects, avoiding redundant or discordant efforts. The Foundation’s water work has also incorporated significant funder engagement. The Water Foundation, a pooled fund that the Environment Program helped start recently incorporated as an independent non-profit working to transform Western water management. The Foundation also participates in the Water Funder Initiative, a collaborative effort among water funders to develop a shared roadmap for philanthropy and to align funding to common priorities.

However, partnerships can be challenging. Aligning grant making processes and building relationships takes time that is lost when there is staff turnover. And, with the spend‐down deadline looming, the Foundation is on a tight timeline. The Foundation sometimes has to forge ahead on its own when others don’t feel the same urgency to act, are less risk‐tolerant, or are less nimble.

“Part of stepping up and being a good partner to other funders is being flexible with our own work and our own grant making and taking half steps toward others.”

−    Allison Harvey Turner, Environment Program Director

Theory of the Foundation in Action

The decision to spend down was predicated on a few factors. First, there were opportunities to create impact that could only be realized with greater investment. The Foundation’s longtime focus areas of education and environment are complex and the board knew that larger grants would allow strategy to grow beyond the peripheries of the issues to make a more significant impact. According to Laurie, “We really needed to jump in and jump in big time, both with bandwidth and in terms of resources.”

Secondly, the Foundation wanted to avoid the presumption that it could predict the future. In a letter written the year before the decision was made to spend down, Mr. Bechtel expressed his reasoning to his fellow board members, explaining, “It is more important for the Foundation to focus on the contributions that we see as the highest priority near-term charitable needs, and let future generations of charitable contributors determine, in the future, the greatest needs of their time.”

While agreement on the decision to spend down came relatively easily, deciding how to do so has turned out to be quite complex. (The 2009 decision by the Foundation to spend down its corpus initially had a goal date of 2016. Later, when it became apparent just how ambitious the Foundation’s goals were – and how challenging it is to responsibly grant very large sums of money with a definitive end date – the timeline was pushed out to the end of 2020.) The Foundation is thoughtful in all of its operations. When considering the spend‐down, Laurie wanted to make sure it was done well. The Foundation’s baseline was to “do no harm,” but the board and staff wanted to go much further, devoting themselves to leaving grantees and sectors in a better, stronger place than before. This desire led the Foundation’s leaders to a number of key insights and actions:

“We could do systems change work once we had the opportunity to look ahead [for several] years with a budget that was really healthy. It would help us to be influencers.”

The significant increase in grant size and grant making budgets gave staff the opportunity to think beyond direct grant making to focus more on policy change and systems level thinking. It gave them seats at new tables and the opportunity to interact with a new set of players. Over time, as they have engaged in work at this level, they have become more and more comfortable with advocacy and interested in effecting state‐wide and national impact.

The switch to systems‐level strategy didn’t happen overnight. The Foundation devoted a lot of time to determining how its increased grant making would best serve its priority issues and the grantee organizations it funds while not leaving the grantees or fields facing a cliff when the Foundation exits. As a result, capacity building is embedded in its program work and, in some cases, makes up entire grants. The Foundation works with grantees to build internal organizational and leadership capacity, and also makes investments to grow field-level capacity. This approach centers on strengthening already‐established institutions such as districts or agencies, rather than trying to disrupt them. Program staff seek out and invest in people within the system who have the desire to improve it. By providing this piece of the funding puzzle, staff believe that they will leave behind leaders, models, frameworks and systems that will outlive the grants they make.

“We use the Effectiveness team as internal consultants so we don’t have to always go outside and then teach somebody about who we are. They already know who we are.”

In 2013, the Foundation hired a Director of Effectiveness with deep grant making expertise to: (1) support program teams in their work; (2) help ensure that the Foundation’s grantees are capable, resilient, and continue achieving results after the Foundation’s sunset; and (3) generate and share knowledge about effective philanthropy generally and spending down specifically. Her role includes research to bring back lessons learned and questions that the Foundation should be considering. She manages spend‐down communications, which has included developing the Foundation’s website into a platform for sharing what the Foundation is learning, helping program teams articulate their initiatives to the field and the public, and writing articles sharing the Foundation’s bank of knowledge. In addition, she provides thought partnership to Laurie and the Program Directors around capacity building and grant making, generally.

Moreover, unlike other foundations that might reduce staff or use intermediaries as they spend‐down, the Foundation decided to add to its internal capacity not only with the Director of Effectiveness, but by creating a full Effectiveness team. Led by the Director, the team knows the Foundation’s priorities inside and out and can provide support and expertise on strategic grants, as well as manage final grants that may fall outside of work that program staff are pursuing or expanding. Without primary programmatic responsibilities, the Effectiveness team can focus its time on evaluation, internal processes and learning, and on advancing knowledge in the field of philanthropy, especially on exiting and spend‐down.

“We had to get liquid very fast.”

In 2008, the Foundation had $182 million in its endowment and made $17 million in grants. When it decided to embark on the spend‐down the following year, the leaders knew the rate of grant making had to dramatically increase, especially since contributions to the Foundation would continue to increase the endowment and potentially offset the grant making. In 2013, funds totaled $421 million. Since then the Foundation has slowly decreased its endowment while increasing its grant making, which was up to $147 million in 2016. To do so, the Foundation had to change its investment policy to provide more ready cash, including making its last private equity investments in 2011.

“If you lose somebody, you lose momentum.”

To support a greatly increased level of grant making, staffing had to ramp up quickly. The Foundation went from a staff of nine in 2008 to almost 40 by 2014. Hiring smart, sophisticated, motivated people who stick around despite knowing there is an end date to their employment poses an interesting challenge. In addition to the natural motivation provided by the opportunity to have an impact on important issues and be part of a unique organizational change, the Foundation’s leaders offered additional retention incentives. The Foundation developed a transition assistance fund to reward Foundation employees who remain actively employed during the spend down and to ease the process of obtaining new employment. It also created a career development fund to provide staff with opportunities to improve skills and knowledge in their areas of interest and explore career options through continued education and/or career development coaching.

Now in the last few years of the spend‐down, the Foundation is operating in high‐gear. The staff continue to draw inspiration from the implicit charter and formalized mission and values of the Foundation, working to fulfill its social compact by representing the board and family well, and striving to make a sustainable impact on its priority fields and organizations.

The 2009 decision by the Foundation to spend down its corpus initially had a goal date of 2016. Later, when it became apparent just how ambitious the Foundation’s goals were – and how challenging it is to responsibly grant very large sums of money with a definitive end date – the timeline was pushed out to the end of 2020.

“This is tough work. We’re not sprinting anymore. It’s a marathon at sprint level… People work really hard.”

−    Laurie Dachs, Foundation President