August 2017

The USC Center on Philanthropy & Public Policy (The Center) has released a case study, Detroit’s Grand Bargain: Philanthropy as a Catalyst for a Brighter Future, describing the uncommon role that philanthropy played in resolving Detroit’s bankruptcy crisis in 2013. The case focuses on how foundations leveraged their dollars, networks and reputations to set the city on a course for a brighter future, offering lessons for bold philanthropic leadership.

What became known as “Detroit’s Grand Bargain” was actually a complex set of agreements and commitments between a group of foundations with a stake in Detroit, the Detroit Institute of Arts, the State of Michigan and the city’s pensioners that raised $820 million in “new money,” leading to a resolution of the city’s bankruptcy in just 16 months.

The foundations who participated in the Grand Bargain came to understand that if they failed to act, they would undermine much of the good work they had already done in Detroit to rejuvenate the city. They came to share a common vision and commitment for the future of the city, each finding their own way to the agreement, even if supporting the city in such a way was not articulated in their mission statement or specified in their strategies.

The analysis emphasizes the catalytic role that philanthropy played and offers four lessons for foundations to provide bold leadership in other communities, particularly when faced with crisis.

First, adaptive and distributed leadership are critical for philanthropy to solve complex and ever-changing community problems. In this case, a cross section of philanthropic leaders worked without a script, hashing out a final agreement that ended the bankruptcy and set a new course for the city.

Second, relationships and networks must be leveraged for collective action to occur. In Detroit, old and new relationships within and across sectors allowed leaders to move quickly to the different tasks at-hand – whether it was getting consensus in the boardrooms or working to hammer out the details of how to structure funding and implement reforms to assist Detroit as it emerged from bankruptcy.

Third, philanthropy can act as an anchor in the communities it serves. The focus on the city created a rallying point for foundations with a variety of missions and histories to find a common cause. Connections to place were critical, especially given the absence of strong public sector leadership and capacity.

Fourth, the Grand Bargain illustrates that opportunity can emerge from crisis. Detroit’s bankruptcy made it possible for foundation leaders – executives and their boards – to think beyond their strategies and programs and to see how taking collective action was integral to their core values and missions, something that was not likely to have happened without the immediacy of the bankruptcy.

The case study, available on The Center’s website, was underwritten by the recently launched Irene Hirano Inouye Philanthropic Leadership Fund. The Fund elevates and amplifies the role of philanthropic leadership in strategies for scaling impact, bringing greater attention to the issues of shared governance between foundation boards and their CEOs through the development of cases to stimulate conversa¬tions with foundation trustees and executives. Inouye, an alumna of the USC Sol Price School of Public Policy, serves as president of the U.S.-Japan Council and is a former board chair of both The Kresge Foundation and Ford Foundation.

The Center on Philanthropy & Public Policy promotes more effective philanthropy and strengthens the nonprofit sector through research that informs philanthropic decision-making and public policy to advance community problem solving. The Center is a part of the USC Sol Price School of Public Policy, which works to improve the quality of life for people and their communities, here and abroad.

For more information: Please contact Gregg Millward, Senior Director of Development, The Center on Philanthropy & Public Policy at [email protected] or 213-740-1776.