Addition by Subtraction: Part Two

  • By Neel Hajra, June 25, 2021

Editor’s Note: Read part one of Neel Hajra’s blog series here.

Last time I introduced the concepts behind Addition by Subtraction as a tool to advance your mission. Now it’s time to share five specific examples of how my institution, the Ann Arbor Area Community Foundation, implemented Addition by Subtraction.

  • Scholarships: Like many community foundations, over the decades we picked up dozens of donor-centric scholarship funds. Our 45 scholarship programs had little or no connection to one another and we concluded that most of them were not actually helping students graduate from college and were not equitable in distribution. We proposed to our board a new scholarship program that blended financial support with success coaching while (here’s the key) ceasing to accept new scholarship funds unless they supported this flagship program. Our reasoning was that we had to be all-in on this new program to grow it to critical mass and to achieve our target graduation rates. Are you panicking yet? The good news we have more than doubled our scholarship income since making this change while turning our “Community Scholarship Program” into a respected model nationally. We continue to operate our legacy scholarship programs (and accept gifts for those) alongside this flagship program but even a few of those legacy funds have converted over to the new program because of our ability to focus on, and achieve, better outcomes.
  • Affiliates: While the theory of ‘one community foundation + many affiliates’ is appealing from an efficiency standpoint, often it can lead to tension and mis-matched expectations. Years ago, my community foundation took on an affiliate in an adjacent community with significant wealth. After I became CEO, we showed our board that not a single original goal for the affiliate had been achieved. Just as, if not more, important, the affiliate community had no interest in aligning their work with the Ann Arbor area. After several years of exploration, we released the $1 million in assets to another community foundation that neighbors our affiliate region. The result? AAACF has more capacity to focus on our primary community and our former affiliate is thriving now that they’re hosted by a foundation more local to their geographic service area. A classic win-win!
  • Programs: Many years ago, AAACF entered a programmatic collaborative venture with a bank, a local newspaper and a community organization to help low-income families buy winter clothes. Awesome goal, right? This relationship went on for years until we posed the question: Is the foundation really the best platform for this? And did we want to be known as a service provider rather than a steward of permanent community capital? Through some investigation we concluded (in coordination with the other partners) that a different local service organization could be an excellent fiduciary and better yet, instantly become a source of hundreds of volunteers to help run the program every year. By transferring the program, we freed up capacity to focus on our bread and butter, were clearer with the community about who we were and what we did, while letting the new host take the program to the next level along with the other original partners.
  • Collaborations: This one hurts. A decade ago, I helped to launch “Coordinated Funding,” a unique public-private funding partnership for Washtenaw County, Michigan that ultimately involved a community foundation, a United Way, three units of local government, a hospital system, and a family foundation. We all pooled our resources for human services and made $5 million/year of grantmaking decisions together. In fact, we won a national award for this collaborative effort. It might surprise you to know that the foundation initiated the dissolution of this long-standing local partnership during the pandemic. Why? Because after 10 years, the arrangement had become bureaucratic and wasn’t able to pivot during a time of great need for our community. It was a misuse of foundation capacity at a time when we needed to be proactive, nimble, and responsive to the community. Some partners were frustrated with our decision, nonprofits were frustrated with a change at a challenging time, and some donors were concerned. We engaged firmly and transparently with the belief that this was critical “addition by subtraction.” The partnership was a huge undertaking for our staff and the ‘found capacity’ now enables us to pursue a bold, new strategic plan that launches later this year and to pursue new partnerships that are more nimble than our previous primary effort.
  • Donor-Advised Funds: Like many community foundations, donor-advised funds are a meaningful asset within our portfolio. Unlike some community foundations, we do not think this class of funds should drive the foundation’s strategy - we believe our institution is positioned to lead and serve community rather than simply administer charitable checking accounts. Don’t get me wrong - we love donor advisors and have continued to grow this asset class. We’ve simply become more selective about the kind of partner we’re looking for and whether some of our current advisors are better served elsewhere. We are starting to experiment with the idea of off-boarding donor advised funds that don’t need our local expertise and guidance. The national corporate DAF platforms can provide excellent service to them at a lower fee, so we see this as a donor-first idea. In turn, we think that the reduced administrative burden for us allows the foundation to pursue and provide more support donors (and yes, donor advisors) who are truly locally- and partnership-oriented. This year we engaged a half million dollar DAF that wasn’t a great fit geographically or by subject matter. We offered to transfer the fund to a national platform and instead the advisor chose to grant out all the funds to favorite grantees – another win-win-win for us, the donor, and nonprofits!

By now you might be thinking about all the revenue losses caused by these migrations of assets and practices. Or maybe you think we’re alienating donors. The opposite is true on both fronts. It took AAACF a half century to achieve $75 million in assets, and in the past six years we’ve gotten to $200 million thanks in part to addition by subtraction. Just as important, our growth has been driven by the addition of permanent, board-governed funds. By putting some stakes in the ground on who we are (our community’s endowment) and what we do (leverage permanent community capital to make change through grants, scholarships, and impact investing) we’re attracting more donors and other stakeholders who are more aligned with our philosophies. This is ‘addition by subtraction’ in action. So the next time you are planning for the future, make sure you don’t have a hand tied behind your back: don’t just ask ‘what should we do next,’ ask yourself ‘what should we do less of?’


Neel Hajra

CEO

As the CEO, Neel is excited every day by the opportunity to lead AAACF’s staff and board in their collective efforts to maximize community impact – work for which he has earned both statewide and national recognition. After obtaining his JD from the University of Michigan Law School, Neel worked as a corporate attorney at Ford Motor Company. It was during a one-year sabbatical from Ford that Neel developed his passion for supporting the community through the nonprofit sector. That sabbatical turned into a nine year tenure at Nonprofit Enterprise at Work (NEW), including two years as NEW’s President & CEO. During this time, he led all aspects of NEW’s development efforts, services, and operations, supporting more than 400 nonprofits per year. Since joining AAACF’s staff in 2011 and becoming CEO in 2015, Neel continues his intense focus on producing positive change in Washtenaw County, where he was born and raised. He also helps develop the nonprofit field through a graduate course he teaches at the University of Michigan’s Gerald R. Ford School for Public Policy.