As the president and trustee of the Arthur M. Blank Family Foundation, Penny McPhee reveals how the economy affected her organization, why the foundation will fund advocacy-related initiatives in 2009, and why she aims to partner with the Obama Administration to further the organization’s “green” program.

Q: What are your foundation’s priorities and how has the economic situation has affected you?

Penny McPhee: There is no doubt that we’ve had to amend our plans and change the way we work. The Arthur M. Blank Family Foundation is based in Atlanta. Arthur, the founder, was one of the co-founders of The Home Depot, so that’s where the foundation’s resources come from.

Since undertaking a five-year strategic plan, almost five years ago, 85 percent of our grantmaking is now focused in Atlanta. Because of the changing economy, we’ve scaled back our grantmaking and we’re exiting two communities in which we have been operating—Phoenix, Arizona and Bluffton, South Carolina.

We have four primary program areas: supporting early childhood efforts; helping young adults transition from high school to postsecondary education; promoting the arts; and creating green spaces and parks.

We’re a pass-through foundation—Arthur funds us as needed—but we have a rolling five-year grant budget. And we do make multiyear grants.

Q: What’s different at the foundation today versus last year at this time?

McPhee: Because the value of one of our principal assets is related to the housing industry, we began to feel the changing economy earlier than other foundations and thus began thinking about how to maintain our long-term strength. We started tackling this issue in 2007, so as we planned our budget for 2008, we reduced our grantmaking budget from just under $20 million to around $15 million.

We also brought our administrative costs into line, reflecting the decline in our grants budget. We’ve made some significant staff cuts over the year but did this without sacrificing our programmatic efforts. And, we will honor all of our existing grant commitments.

Q: Every foundation wants to know: How can we have the most impact with a reduced grant budget?

McPhee: As the economy worsened by the fall of 2008, we began to develop our 2009 strategy. We again looked at other resources and tools we could offer the community, so that we could continue to be a high-impact foundation.

For instance, at our board meeting in early December, we brought in four leaders from national and regional nonprofits whose clienteles were affected by the economic downturn. The CEOs of the United Way of Metro Atlanta, the Atlanta Community Food Bank, the Consumer Credit Counseling Services, and the Atlanta Workforce Development Agency, spent a full day with us because we wanted to understand what was happening at the local and national level, the impact on the ground, the role our foundation can play, and where the CEOs see the need for leadership in the community.

Two things happened: one we learned a lot from these individuals and got a lot of good ideas. Second, the work that we were already doing in our community became even more important and necessary; now it was a matter of getting these initiatives up to scale.

What are some other things we can do to support the family and the community? Because our founder owns the Atlanta Falcons football team, we’ve used that as a resource. At the last game of the season, we helped the local United Way with its supplemental “Critical Needs” campaign. We promoted that via television and radio broadcasts at the game.

As a neutral convener, we’ll continue to encourage nonprofits in our area to use our office building for fundraisers, board meetings, and other events. We are also speaking individually with all of our grantees that have current grants to see if they need to be re-purposed. We realize that the change in the economy could mean that they need to realign their priorities, and we want to help them do that if our resources can be put to a more strategic use.

Q: What will you focus on in 2009?

McPhee: This year we’ll focus more of our efforts on advocacy—getting more folks involved in our work. For example, we learned that the State of Georgia isn’t doing a good job of securing federal dollars in an array of areas: education, human services. I am referring to dollars that local agencies and individuals can access.

One of the things we are working on is commissioning research to learn where these gaps are and what it would take for the state to get federal dollars. We are in the early stages of working with local groups to design the research. Once we know where the gaps are, then we can work with legislators and the state agencies to ask for funding.

From an internal perspective, our staff will probably spend more time developing new ways to support our nonprofit partners and less time developing new grants. This requires a different skill set.

Q: How much of a priority should and will the new administration give foundations to help them address societal needs—especially given the current economy?

McPhee: I believe we are witnessing a remarkable moment of opportunity. It’s sad to me that the president-elect has to enter the stage with all these negatives but I think he’s very talented and I think challenges stimulate creativity.

Nothing can be more valuable to the philanthropic community than President-elect Obama’s on-the-ground experience as a community organizer. I believe he is going to get people involved in their communities in a positive, service-oriented way. It may not be grantmaking philanthropy as we know it but, rather, new ways to stimulate the voluntary sector. I do think it’s an exciting opportunity and as a leader, he will see—and sees—the value of the sector.

For those of us struggling to balance our reduced resources with the need to do more than ever, it would be wonderful to put aside some of the old models and really use this as an opportunity to rethink the nonprofit sector and what it can do, what it’s allowed to do, and what it’s capable of doing. It’s the perfect time to be innovative.

Q: The president-elect is passionate about green technology and innovation—one of your program areas. Do you see opportunities to engage with the administration?

McPhee: We will continue to promote our green initiatives and work on environmental issues. For instance, we established the Blank Family Foundation Speaker Series and our last speaker in early December was William McDonaugh—the architect who has focused his efforts in designing environmentally sustainable buildings. His book Cradle to Cradle calls for transforming how we design, manufacture, and dispose of everything in our society.

When we invite speakers, we work hard to link them to the nonprofits in our communities. So we connected McDonaugh with organizations in our community who do similar work. It is one thing to be inspired by a speaker, but the bigger issue is to spur people to act and do something in their community.