Kauffman Foundation renews its embrace of the community

Tom McDonnell, one year into being chief executive of the $2 billion Ewing Marion Kauffman Foundation, swivels from a conference room table and fishes blank paper from a credenza.

In seconds, he sketches a street map of a Kansas City neighborhood, illustrating a big-sky idea for nearby schools. But the sketch shows more than that.

It shows that McDonnell knows Kansas City — and that the foundation is now led by someone changing a perception that it had turned its back on the city to cultivate a worldwide reputation.

McDonnell, the former head of DST Systems Inc. and one of Kansas City’s most powerful business leaders, sits in the CEO chair previously occupied by Carl Schramm.

Civic leaders didn’t warm to out-of-towner Schramm and felt he didn’t embrace the community. In a move led by McDonnell himself, Schramm was ousted in 2012.

Now “Kauffman again is involved in the community,” said Steve Roling, a former Kauffman executive who recently retired as CEO of the Health Care Foundation of Greater Kansas City. “That focus went away for a few years and Kauffman wasn’t a real player on the Kansas City scene, even if it was doing good work.”

For years the foundation has spent nearly three-fourths of its money locally, but that didn’t stem the notion Kansas City interests had paled under Schramm.

Though still working to increase the global scope of its two-part mission — to improve education and entrepreneurship — McDonnell is reworking the foundation’s image to make clear it’s a Kansas City-based entity.

It hasn’t always been smooth sailing. The effort to change how the city views the foundation was jarred slightly in the last few months after the Missouri Department of Elementary and Secondary Education asked Kauffman to co-fund a study about how to improve Kansas City Public Schools. The resulting report by an outside entity wasn’t well received by some district advocates.

The foundation, of course, remains a prized local asset. Locally rivaled in wealth only by the Stowers Medical Research Organization, Kauffman has the power to move the needle in research and then put the results of that research into action.

McDonnell is known for pushing such needles. An informal poll of civic leaders once named him one of the two most powerful men in Kansas City.

At the time, he was CEO of DST and well known for fostering downtown redevelopment. He served on many corporate and nonprofit boards, including Kauffman’s.

So after his 2012 retirement from DST it was scant surprise that the Kauffman board — which he had led since 2006 — tapped him to succeed Schramm after a lengthy search process.

A Kauffman board majority said McDonnell’s civic zeal, his insider status and his knowledge of the foundation trumped other candidates. McDonnell, they said, best fit the mission intended by Ewing Kauffman, founder of Marion Laboratories and former owner of the Kansas City Royals, whose wealth created the foundation.

But the CEO transition was messy. Two board members resigned because they thought Schramm’s ouster was too hasty. They liked Schramm’s push to raise the foundation’s national stature and feared it would be too parochial with a Kansas City insider CEO and a locally dominated board.

But Kansas Citians enmeshed in civic priorities ached for more of the homegrown foundation’s involvement.

Before Schramm’s tenure, “there was not a whole lot that went on in Kansas City that Kauffman wasn’t a part of the discussion,” Roling said. “What’s different now is that Kauffman has re-established itself as clearly part of the discussion. For many years, it was difficult to have an opportunity to visit with Kauffman folks about anything because Carl was intent about what he wanted to do and how to do it.”

Schramm, now teaching at Syracuse University, responded in email that “Mr. Kauffman was my north star, his expressed intent my guide.”

One of those intents — burnishing the Kauffman Foundation’s reputation as an entrepreneurial think tank — appeared to Kansas Citians to eclipse the education work, which had a brick-and-mortar visibility.

Schramm said that he proudly tells the Kauffman story in speaking appearances and that the dream “to make the way easier for American entrepreneurs is now entrenched, and deeply so, in our nation’s economic policy thinking.”

Nonetheless, local folks saw six- and seven-figure grants going to entrepreneurship projects in such places as Silicon Valley, Washington and Yale University and bristled. But, to be fair, similar large entrepreneurship grants also went to Kansas and Missouri schools.

Then, too, the national economy had soured during Schramm’s tenure. The foundation’s assets shrank, and it pulled back on the number and size of grants it made. It also had shifted away from giving a raft of small grants to a variety of Kansas City nonprofits in favor of concentrating philanthropy on larger, targeted projects.

Though the foundation no longer is eyed as a deep pocket for any nonprofit to dig into, it still gives some small grants, sponsors dinner tables and provides free meeting space to various organizations — $3.4 million worth of support in 2013 alone.

In all, the foundation spent $32.4 million last year in Kansas City, including on its own operations, compared with $9.7 million spent nationally. That’s roughly the same annual breakdown as previously, but McDonnell said earlier tensions seem to have eased.

“I think the grant making issue is pretty well resolved,” he said. “I talk to all kinds of groups about our focus and our support. I think the community now sees the value of our research and commitments.”

That value, he said, is to be a think tank and laboratory in education and entrepreneurship.

To help people attain economic independence, Ewing Kauffman “wanted to take prudent risks, to research, to try things, to test things that others can’t and we can because we have the resources,” McDonnell said. “We try to identify things where we can make an impact.”

As the CEO in charge of the foundation’s assets, McDonnell feels like a kid in a candy shop. At age 67 and wealthy, he could have retired to golf and travel. But, he said, civic involvement, not golf, is his passion.

Jan Kreamer, the Kauffman board chair who succeeded McDonnell, believes he has struck the right balance between working with about 200 Kauffman associates on staff and strengthening community ties.

“His sincerity in wanting to advance Kansas City is unparalleled,” Kreamer said. “At the same time, he has continued to underscore the importance of the foundation having a national impact when we have best practices and proven interventions to share.”

‘Proven interventions’

That map McDonnell was sketching? It centered on 63rd Street and the Paseo, site of the foundation’s shiny new $50 million Ewing Marion Kauffman middle school and soon-to-open high school.

“We’re there,” McDonnell said, pointing first to the Kauffman charter school’s site and then, accurately, to locations of a covey of public, charter and parochial schools in the vicinity.

The charter school, opened under Schramm’s tenure, is where the foundation is putting education theory into practice, a test kitchen to find “proven interventions” for urban students from low-income neighborhoods.

Someday, McDonnell dreams expansively, the foundation might help create a school-to-work career center for students from an array of urban high schools that now don’t share resources.

It’s the kind of blue-sky thinking that Kauffman associates do.

It’s also the thinking that led Kauffman to sponsor a report, along with the Hall Family Foundation, that roiled some local educators and residents who read it as a pre-emptive strike against public schools in favor of privately backed charters.

The report, produced by an Indianapolis organization, CEE-Trust, suggested replacing the unaccredited Kansas City Public Schools district with a new system of independent, nonprofit school operators — a network of neighborhood schools not unlike what Kauffman operates.

Kansas City school board president Airick Leonard West said the foundation’s investment in Kansas City “is welcome and beneficial when it’s done collaboratively, as with the Kansas City Public Schools and Teach for America,” but he wished there had been communication ahead of the report.

“All scholars benefit when the adults communicate,” West said. “We’ve had great research in partnership with them in the past. Let’s do more of that.”

The headline-grabbing CEE-Trust report ended up being one of six district reorganization plans on which the Missouri State Board of Education sought public comment before a Feb. 18 state school board meeting. No proposal was adopted, and some board members appeared cool to the independent network idea.

Aaron North, Kauffman’s vice president of education, downplayed any charter/public school schism.

“Our approach is sector neutral,” North said. “We’re not buying a distinction between district schools or public schools and charter schools. We’re looking for what works. What we’re trying is to do things that are replicable and accessible by other schools.”

McDonnell is proud to promote that kind of research in Kansas City. But he acknowledged that it isn’t easy to explain all of Kauffman’s interests in education.

He has begun carrying a trifold business card that lists the foundation’s two “core” programs in education. One is its charter school, now serving 363 students in its third year of middle school education at the former Church of the Nazarene world headquarters site. School staffing and operations cost $2 million in 2013 alone.

The other is the longer-running Kauffman Scholars program, which now serves 1,500 students in Kansas City, Mo., and Kansas City, Kan. It’s a college prep and tuition program for low-income students that evolved from one of Ewing Kauffman’s ideas.

The foundation has spent $63 million on Kauffman Scholars since 2003.

Those core programs “are the things totally funded by us,” McDonnell said. “We decide how to run them.”

Also crammed onto his trifold card is information about Kauffman’s “strategic” programs. Those include working with Teach for America, which trains and places teachers in urban schools. Kauffman has financed more than 430 teachers in the Kansas City district and charter schools.

Another strategic program involves the KC STEM Alliance, which promotes science, technology, engineering and mathematics education in 32 local school districts through such programs at FIRST Robotics and Project Lead The Way.

“We put serious research and major funding into working with others who know a lot about these issues,” McDonnell said.

The foundation also has “support” programs, making grants of up to $50,000 each for after-school and summer programs at individual schools and modest funding for college advising programs.

Finally, there’s a nod to “community engagement” issues that Kauffman helps fund — issues like nutrition and health that affect children’s ability to learn.

“I hand these out when I pitch to groups,” McDonnell said of the trifold cards. “It helps me tell them what we’re doing … and how they can volunteer to help.”

Helping startups

If organizing Kauffman’s education interests is difficult, McDonnell said it’s even harder to get arms around the foundation’s multiple entrepreneurial efforts, many of which are credited to Schramm.

“We haven’t figured out a billfold card yet on that,” McDonnell said with a laugh.

If he had a card, top billing might go to the foundation’s annual State of Entrepreneurship report on startups and small businesses in the national economy. McDonnell, like Schramm before him, delivers the report to the National Press Club in Washington.

This month, McDonnell summarized the fifth annual report’s three main calls for action: linking university research to business creation; easing immigration for researchers and entrepreneurs to work in America, and having mentorship programs like those supported by Kauffman.

“In entrepreneurship, there is no significant body of knowledge about what makes a successful entrepreneur,” McDonnell said. “But I believe we’ve established ourselves as credible and the most visible supporter of activities that help entrepreneurs grow.”

McDonnell said he has little interest in altering the foundation’s combination of local and national attention to entrepreneurship. Rather, he promotes the expansion of Kansas City’s good ideas onto a national stage.

A top example is the 1 Million Cups networking program. Kauffman spends about $300,000 a year to support its website and other costs. The idea — in which a couple of startup companies each week present their stories to entrepreneurs, potential investors and others — has gone viral. In addition to the original every-Wednesday-morning gathering at the Kauffman conference center, 1 Million Cups meetings now are held in 28 cities.

The foundation also created and owns Entrepreneurship.org, a website designed to educate and connect business developers.

One big-dollar outlay for entrepreneurial support, $2.5 million committed for 2014-2016, will go to the UMKC Institute for Entrepreneurship and Innovation at the Bloch school. Another large grant went to the University of Kansas Institute for Advancing Medical Innovation to help commercialize medical discoveries.

An example of a small gift — about $150,000 a year — helps stage the annual Maker Faire, a gathering of inventors and crafts makers, at Union Station.

And one of the foundation’s most recognized programs, born in 1993 as FastTrac, is a course to help entrepreneurs start and grow. About 350,000 people have taken the course in Kansas City and worldwide in classes taught by affiliates, such as chambers, universities and development agencies.

In the community

The foundation’s re-energized local role involves “a lot of convening and connecting,” McDonnell said.

“There’s nothing like us in Kansas City, and that couldn’t be better for me,” the CEO said. “It’s a constructive way to stay engaged in the community. I just hope to bring credibility to the organization as it relates to KC.”

Fortunately, McDonnell said, the foundation has the needed wealth. From the $700 million endowment by Ewing Kauffman, its assets grew to nearly $2 billion, fell in the 2008 stock market collapse to about $1.4 billion and last year grew 17 percent, regaining the $2 billion height. It gives away 5 percent of the total each year.

Part of the foundation’s largesse was poured into its 37-acre office and conference center site in midtown.

Over the years, it has given tens of millions of dollars to the Kauffman Center for the Performing Arts, the main beneficiary of a companion foundation endowed by Ewing Kauffman’s wife, Muriel. And all told it has given millions to the Kansas City Public Library, Union Station, Liberty Memorial, the Nelson-Atkins Museum of Art and other local institutions.

There are no plans to change that kind of giving.

“We look at ourselves as an institution in perpetuity,” McDonnell said.

“We have a great staff and great programs. Could we be more effective in what we’re doing? Sure. Are there unmet needs? Yes. There are things just begging to be explored with more research. What we want to do is find directions that everyone can get behind.”