Richard McFarland, business executive
and foundation board member
Foundations should get to root causes of
civic problems, not just treat symptoms
A Civic Caucus
Review of Minnesota’s Public
Interview February 19, 2016
John Adams, Steve
Anderson, Dave Broden (vice chair), Paul Gilje (executive
director), Lars Johnson, Randy Johnson, Ted Kolderie, Richard
McFarland, Bill Rudelius, Dana Schroeder (associate director),
Clarence Shallbetter. By phone: Janis Clay, Sallie Kemper
Foundations should be
doing more to get to the root causes of problems, rather than
just treating the symptoms, says Richard McFarland, veteran
member of several foundation boards in the Twin Cities. An
interviewer restates the issue: whether foundations should be
doing good directly, such as putting up a building for an
organization, or doing good indirectly by supporting, in an
ongoing way, institutions or organizations that would play a
role over time in resolving community problems.
McFarland has served on the boards of
the Dain, Graco, Minneapolis, McKnight and Bush foundations. In
his experience, the Bush and Minneapolis foundations have
usually focused on initiatives put forward by the staff, as
opposed to the board looking outside the staff to get ideas on
issues. But he stresses that every foundation is different. The
McKnight Foundation is a family foundation, he notes, so the
McKnight family sets its priorities. And the Dain Foundation was
really run by the employees, since it funded organizations and
causes in which employees were involved. He says the priorities
of each big corporate foundation depend on the company's CEO and
According to McFarland, foundations
should evaluate the success of their initiatives against
measurable goals. He gives examples of several foundation-funded
projects, some of which failed to succeed and some where the
jury is still out. In one case, he faults the funding foundation
for not reporting, when a major initiative came to an end, what
had worked and what hadn't.
McFarland believes that a number of
local foundations feel a responsibility for the health of the
metro area and the rest of the state and for picking the most
urgent issues to work on. He points to the success of the six
nonmetro regional initiative funds, still in operation today,
that the McKnight Foundation started 30 years ago.
Richard D. McFarland is
retired chairman of RBC Dain Rauscher. He had joined Kalman &
Company, a predecessor firm, in 1953, was elected a vice
president in 1957, a senior vice president in 1969, president in
1972, and president and chief executive officer in 1976. He
served as chairman of Dain Rauscher from 1985 to 1995.
He served as trustee of the
Minneapolis Foundation from 1998 to 2006, including a term as
board chair of the foundation. He served on the Bush Foundation
board from 1989 to 1999 and on the McKnight Foundation board
from 2005 to 2013. In addition, he served on the Dain Foundation
board for 20 years and on the Graco Foundation board for 30
McFarland grew up in Minneapolis and
is a 1947 graduate of Minneapolis West High School. He received
a B.A. degree from Dartmouth College in 1951 and a master's
degree from Dartmouth's Amos Tuck School of Business
Administration in 1952. He served two years in the U.S. Air
The Civic Caucus is
undertaking a review of the quality of Minnesota's past, present
and future public policy process for anticipating, defining and
resolving major public problems and issues. The Caucus
interviewed Richard McFarland, veteran board member of several
local foundations, to get his perspective on the role
foundations have played in that process in the past, play
currently and could play in the future.
When you've seen one foundation, you've seen one foundation.
"They are all different,"
said Richard McFarland, veteran board member of several local
corporate, private and community foundations.
Small corporate foundations don't do
much in the area of policy issues in the community.
McFarland said Dain Bosworth was a five percent company, meaning
the company donated five percent of its pretax profits to
charity. In his 20-year experience with the Dain Foundation, it
never had any involvement with political or policy issues in the
community. He said that might be different at other corporate
foundations. "At Dain, we supported the things our employees
were involved in," he said. "We had 60 branch offices in the
Midwest and Rocky Mountains. If our employees were involved in
community activities in those locations, we would support them.
I don't think we ever turned anybody down, giving grants of
anywhere from $500 to $5,000."
The private Bush Foundation's function
was leadership. During his time on the Bush Foundation board
(1989 to 1999), McFarland said, the leadership work in which the
private foundation was involved cut across political lines,
educational lines and other areas. Humphrey Doermann was
executive director (1971 to 1978) and then president (1978 to
1997) of the foundation. McFarland called him a "rock star" and
said the foundation had a very strong board, although many
initiatives were staff-driven. "They had some wonderful staff
members who would make recommendations," he said. There were no
Bush family members on the board.
The Minneapolis Foundation, a
community foundation, was deeply involved in issues of
governance and education. McFarland served on the board of
the Minneapolis Foundation from 1998 to 2006, when Emmett Carson
was CEO. "The foundation had a major impact on immigration back
in the early 2000s," McFarland said. "Like the Bush Foundation,
the agenda was pretty much staff-driven and the board would
The McKnight Foundation is a family
foundation. During McFarland's time on the McKnight
Foundation board, from 2005 to 2013, he was one of only two
non-family members on the board, along with nine family members.
Russ Ewald was the foundation's executive director. Virginia
McKnight Binger was the "key player" at the McKnight Foundation,
McFarland said. Now the fourth generation, Virginia and Jim
Binger's grandchildren, is on the board and, according to
McFarland, they are "rock stars." He said now the board has six
family members and six community members.
McFarland noted that Virginia Binger
and Russ Ewald would ride along at night in Minneapolis police
cars. "They would see areas that really seemed to be in
trouble," McFarland said. "Virginia would step up to the plate
and the foundation would contribute whatever amount of money she
thought was appropriate for those areas. Her leadership for her
children and grandchildren has been spectacular. The family
determined where McKnight would spend its money."
The priorities of the big corporate
foundations depend on the company's CEO and senior officers.
"The General Mills Foundation has been a powerful foundation in
this community for a long time," McFarland said. "They've done
good work in a lot of different areas, such as housing." He said
the priorities of a corporate foundation depend on decisions
made by the CEO and senior officers of the company.
How do foundations evaluate the impact
of projects they've funded? In response to that question,
McFarland gave an example of an initiative funded by the
McKnight Foundation. "In everything McKnight was going to do,"
he said, "we made sure we knew what success was going to look
When he went on the McKnight board,
education was at the top of the list of the foundation's
priorities. Over a period of 10 years, the foundation had put
millions of dollars into trying to improve the graduation rates
of kids in Minneapolis and St. Paul schools. But after 10 years,
the graduation rate in Minneapolis and St. Paul was still only
50 percent. "It hadn't moved the dial one bit," he said.
The staff and the board decided the
initiative was not working and the foundation shouldn't fund it
any more. The board hired outside consultants from Boston, who
recommended that the foundation undertake an initiative aimed at
achieving literacy by third grade.
The foundation is doing that now. It
adopted six public schools, three in Minneapolis and three in
St. Paul. "It's not very successful," McFarland said. "It's not
having an affect at the six schools." Kate Wolford, current
president of the foundation, told him recently that the project
is a mixed bag and that the staff and board don't really know
how the initiative is coming. "They're spending millions of
dollars on this program," he said. "We'll have to find out later
on whether or not it's successful. But they will know whether it
worked or not."
At several local companies, members of
senior management were required to get involved in community
service. Wheelock Whitney was CEO of Dain Kalman & Quail
when McFarland became senior vice president there in 1969.
Whitney noticed that McFarland hadn't been involved in the
community and told him that with the title comes responsibility.
Whitney gave McFarland a month to get involved with two
nonprofits in the community. "It was Wheelock who forced the
issue," McFarland said. "It came from the top. That's what you
do; you're involved."
He noted that other local companies,
including General Mills, Pillsbury and Graco, had similar
requirements. "They all had CEOs who were deeply involved in the
community," he said. "It starts at the top."
A number of local foundations feel a
tremendous sense of responsibility to the community. An
interviewer said he has always believed that the local,
non-corporate foundations are great institutions. He thinks
they're knowledgeable about community problems and if anybody is
going to help solve these problems, it will be these
foundations. The interviewer asked if those foundations see
their role that way, that is, as responsible for the health of
the metro area and the state and needing to pick the most urgent
issues to work on.
McFarland said in his experience, the
foundations do feel that sense of responsibility, both in the
metro area and outstate. He said he's seen that in his
involvement with the Minneapolis, McKnight and Bush foundations.
He noted that 30 years ago, the McKnight Foundation started six
regional initiative funds around the state in Duluth, Bemidji,
Fergus Falls, Little Falls, Hutchinson and Owatonna. "McKnight
still supports them, but they're on their own now," he said.
"The funds have done a fabulous job outside of the metro area."
It's a mixed bag as to whether
foundations are trying to do good directly or indirectly. An
interviewer drew a distinction between foundations doing good
directly or indirectly. Examples of doing good directly, he
said, would be putting up a building for an organization or
giving scholarships to kids in need. In contrast, the
interviewer said, doing good indirectly would include developing
institutions in the community that would play a role over time
in resolving problems. He said there was a tremendous amount of
that type of institution-building here in the late 1940s and
early 1950s. Now, he said, foundations love three-year grants,
rather than sustaining community nonprofits in an ongoing
McFarland responded that it's a mixed
bag. He agrees that foundations should be doing more research on
the causes of problems, as opposed to treating the symptoms.
Destination 2010, funded by the Minneapolis Foundation, was an
attempt to do that. The foundation adopted six third-grade
classes, three in Minneapolis and three in St. Paul. The promise
was that if the kids in those classes graduated from high
school, they would receive a scholarship for postsecondary
After the first year, those six
schools turned into 43, because the kids moved so often. "The
foundation was trying to make things better and find out what
works," McFarland said. "Then the program could spread to other
schools, if it were successful." Of the 450 kids in the original
six classes, 200 graduated from high school.
"I'm convinced that teachers are
crucial," he continued. But the family is also important. "This
all starts at home."
Foundations have tended not to
coordinate with other foundations. But McFarland thinks
that's no longer the case. "There are great opportunities to get
together now," he said. "Our efforts should be coordinated and
we should look at the causes of problems."
The role of the board versus that of
the staff is different at each foundation. An interviewer
asked how much of what foundations choose to focus on comes from
proposals put forward by the staff, as opposed to looking
outside the staff to get ideas on issues. McFarland responded
that in his experience at the Bush and Minneapolis Foundations,
the staff director set the tone, supported by the rest of the
staff. At the McKnight Foundation, though, the McKnight family
set the agenda, not the staff. The Dain foundation was really
run by the employees.
Another interviewer commented that in
earlier times, at the Citizens League and at other
organizations, the staff used to work for the board, instead of
the board working for the staff. At the Citizens League, he
said, it was citizen volunteers, rather than staff members, who
testified at the Legislature and presented study committee
reports to the League's board of directors. He wondered if we've
shifted too much the other way. McFarland responded that the
staff has taken the leadership role at some foundations.
Foundations should evaluate the
success of their initiatives against a measurable goal. When
the Destination 2010 initiative ended in 2010, McFarland said
the Minneapolis Foundation failed to do a white paper on what
had worked and what hadn't. "You've got to be able to measure
'Did we make it or didn't we make it?'" he said.
He said at the Bush, McKnight and
Minneapolis foundations, the staff was very interested in
results and in doing things that would make a difference. "I
think we dropped the ball on results of the Destination 2010
project," he said.
Eighty percent of the money the
Minneapolis Foundation pays out is from donor-advised funds.
Individuals can set up donor-advised funds within community
foundations, like the Minneapolis or St. Paul Foundations. The
donors decide how to spend the money in their individual funds.
An interviewer asked how the foundations work to facilitate
understanding among these donors about what they could or should
do that would result in some kind of change. He also asked to
what degree these individual donors believe trying to change
public policy is something they should undertake.
McFarland said he and his wife have a
donor-advised fund at the Minneapolis Foundation. They've told
the foundation general areas they're interested in funding. The
foundation staff will contact them when they know of an
organization they think deserves support.
Foundations don't go to the federal or
state governments to try to make a difference in public policy.
An interviewer asked how individual donors and foundations
could assemble something of consequence to make a difference in
resolving a public problem, such as conditions for Native
Americans on the reservations.
McFarland responded that he doesn't
think that happens at the level of individual donors or
foundations. "They don't go to the federal or state
governments," he said.
The Civic Caucus
is a non-partisan,
tax-exempt educational organization. The Interview Group
includes persons of varying political persuasions,
reflecting years of leadership in politics and
business. Click here
to see a short personal background of each.
S. Adams, David Broden, Audrey Clay, Janis Clay, Pat Davies, Bill
Frenzel, Paul Gilje (executive director), Dwight Johnson, Randy Johnson, Sallie
Kemper, Ted Kolderie,
Dan Loritz (chair), Tim McDonald, Bruce Mooty, Jim Olson, Paul Ostrow, Wayne
Popham, Dana Schroeder, Clarence Shallbetter, and Fred Zimmermany,