Headwaters Foundation’s first CEO to depart after M in grants • Daily Montanan

Headwaters Foundation’s first CEO to depart after $26M in grants • Daily Montanan

When the Headwaters Foundation formed in 2017 to support community health in western Montana, its first chief executive officer set out to change traditional grantmaking.

This year, CEO Brenda Solorzano announced she will pass the reins to a new leader of the organization that formed out of the sale of Community Medical Center.

Local nonprofit leaders say the foundation met its mission — and then some. April Quinlan, of the Mineral County Health Department, described Headwaters as “miraculous,” and not just because it’s doling out grants.

“They really respect the organizations they work with and take the time to get to know them and take great joy in the successes that they have with us,” Quinlan said.

In a recent story about Solorzano taking the helm of the $4.7 billion California Endowment, the Chronicle of Philanthropy described her as a “maverick.”

The Headwaters Foundation spun out of the $75 million sale of the then-nonprofit hospital to a for-profit. In such transfers, federal and most state laws require sale proceeds go to the original nonprofit’s mission.

In Montana, the deal required a signoff from the Attorney General’s Office of Consumer Protection, and former Attorney General Tim Fox approved it in 2015. Hospital board chairperson Scott Stearns told the Missoulian then the sale would benefit the community “for generations to come.”

Seven years after the foundation launched, Solorzano also views its work in terms of generations and said its approach goes far beyond money in the region it serves. It works in 15 counties in western Montana.

Headwaters isn’t funding direct services, Solorzano said; it’s funding the capacity of a community to come together, “a big, transformational thing” in philanthropy. It is building relationships and changing systems, she said, not just cutting checks.

Nonetheless, in 2023 alone, the Headwaters Foundation counted 113 grants awarded to 107 partners in Montana to the tune of $4 million. Headwaters lists $26 million granted since its inception.

At the same time, the cost of doing business at Headwaters is pricey, according to survey data from the Council on Foundations. According to the national data, Headwaters pays its top leaders more compared to other foundations overseeing similar assets, and notably more in relation to Montana.

The board president said the high salaries are well-deserved for Solorzano and the “dream team” staff, and the board wants to show value. And Solorzano, who plans to stay on board through the summer, said the work is unique.

“We are doing our work differently. We are breaking the mold. You cannot compare us to other foundations,” Solorzano said.

A new way to make grants

People who have received grants from Headwaters — and worked with its team — agree the foundation is turning traditional grantmaking on its head.

Quinlan, in Mineral County, said Headwaters didn’t mandate a set of rules to follow. Rather, it offered flexibility and asked residents what their community of 2,078 households needed as a whole.

In Mineral County, they decided they needed support for parents, Quinlan said. In the past, she said, Mineral County had received government grants that allowed it to serve parents in specific demographics.

They’re more than just the money piece of it. They really are interested in culture and systems shifts in Montana and being an active part of that.

– April Quinlan, Mineral County Health Department

For example, low-income parents received some services, but middle-income ones didn’t. Because of Headwaters, however, Mineral County has leveraged a cultural shift that allows the health department to “get rid of those lines.”

“Are you a parent? Great. We love to support parents,” Quinlan said.

Now, health department workers do home visits for any family regardless of income and regardless of the age of the child, she said.

Another change will benefit the health of mothers. It’s rare that county health departments have doulas, Quinlan said — doulas are professionals who are trained to support people in labor.

But Mineral County has home visitors who are passionate about healthy pregnancies and deliveries, and it now offers birth doula services at no cost, she said. Quinlan said some research shows the support leads to a reduction in C-sections.

Generally, she said, Headwaters allowed the community to consider its needs through its own lens, not through the assumptions of an outside funder.

“They’re more than just the money piece of it. They really are interested in culture and systems shifts in Montana and being an active part of that,” Quinlan said.

Trusting grantees, empowering communities

Headwaters is cutting red tape for those applying for grants too — such as small cities and nonprofits. A longtime nonprofit leader in Missoula said it’s also identifying gaps in health and well-being in Montana and not only filling them but drawing needed attention to them.

(From Headwaters Foundation’s Evaluation and Learning Data Book)

To accelerate grantmaking, Headwaters started GO! Grants. In rural communities, smaller nonprofits don’t always have access to significant foundation funding, Solorzano said.

The GO! Grants — GO stands for “general operating” — connect them to funds in a quick, straightforward way. A potential grantee can hop online and apply for as much as $7,500 (up from $5,000 earlier).

Headwaters typically reviews applications within 24 hours, and the grantee can have a check in hand within two weeks, Solorzano said. She said Headwaters has given out nearly 300 in the last six years.

Susan Hay Patrick, CEO of United Way of Missoula County, said Headwaters sees its grantees “as partners, not as supplicants.”

“They really do treat us like trusted partners. It shouldn’t be, but it is rare in the philanthropic world, and I think they are leading the way in changing that,” Hay Patrick said.

Solorzano agrees Headwaters is one of the foundations in the U.S. that is driving the shift toward “trust-based philanthropy,” empowering communities.

“That is a big win in changing the field of philanthropy, and it is coming out of the voices of the people of Montana and western Montana,” Solorzano said.

High compensation

Federal tax law doesn’t set many requirements for private foundations. Generally, they must pay out at least 5% of their assets each year in the form of grants and “operating charitable activities,” according to the Council on Foundations.

The Council on Foundations describes itself as a nonprofit association that guides philanthropies and supports more than 900 members in the U.S. and around the world to build trust in giving.

For 40 years, it has produced a report on salaries and benefits at foundations. The 2023 Grantmaker Salary and Benefits Report is described as a tool grantmakers can use to “analyze and benchmark policies,” and it assesses compensation for 10,733 full-time staff in the U.S.

By comparison, Headwaters is a high-end operation.

The median salary for 119 CEOs running private foundations of a similar size as Headwaters was $271,846, and the mean was $283,387, according to the report.

Those CEOs run foundations with at least $100 million assets and as much as $249.9 million in assets.

By comparison, Headwaters paid $316,704 in salary to its CEO, not counting other compensation, according to its 2022 tax filing. It has $115.7 million in assets, based on the same record.

The difference is just 12% more than the average. At $33,317, it’s also a fair chunk of median household income in western Montana. In 2022 in Missoula County, household income was $68,305, on the higher end in the area; in Lincoln County, on the lower end, it was $44,593 the same year, according to U.S. Census data.

The head of the Montana Healthcare Foundation earns a similar salary, $310,324, according to its 2022 tax filing. According to the tax form, that CEO oversees $239.3 million in assets for a statewide organization.

The Council on Foundations’ report also surveys chief financial officer salaries. For a foundation with a similar amount of assets, the median salary was $229,465, and the mean was $227,630, according to the 2023 report.

In 2022, Headwaters’ CFO earned $252,866, roughly 11% more, according to its tax filing.

‘Changemakers,’ complex work

Solorzano said Headwaters has a different analysis of compensation that compares assets, number of grants made, and geographic region covered. She said Headwaters is in the 50th to 70th percentile of that study, which she said is private.

She said Headwaters also looks at the Montana Healthcare Foundation and tries to stay comparable and competitive with it. At the same time, she said, the work at Headwaters is different.

“Our work is far more complex than most foundations,” Solorzano said.

(From the Headwaters Foundation’s Learning Book)

She said the team at Headwaters isn’t made up so much of grantmakers as it is of “changemakers.” And it aims to be not just transactional but “transformational and relational.”

“That is a different skill set. It’s way harder work. It’s way easier to just sit here and read proposals and write checks,” she said.

The foundation considers impact differently as well. In its reports, it shares stories and ideas it has learned, and it isn’t measuring whether it’s moving the dial in traditional ways in its early years.

Are children healthier now? Are people less hungry? Solorzano said the work that is taking place will take time, and change doesn’t happen quickly.

She also said the $4 million it distributes in one year across 15 counties is a drop in the bucket compared to dollars from other sources — and the cost, for instance, of actually ending hunger.

“Which is why we are building capacity and trying to work on systems change because we believe that is how we best leverage our resources,” she said.

As Solorzano sees it, one outcome of Headwaters’ achievements is a $14 million award from philanthropist Mackenzie Scott, announced in 2022; the national recognition is evidence Headwaters is doing good work, she said.

Headwaters has not made any grants with those dollars yet. Solorzano said the goal was again, not to just write checks, but to invest in something that would pay off in the long run. To that end, Headwaters is exploring social impact investment — a revolving loan fund of sorts that would make low- or no-interest loans to aligned nonprofits, for instance.

“This would allow us to run that money over and over again in perpetuity,” she said.

Additionally, nonprofit leaders are retiring and burning out, she said, so Headwaters is considering using that money to help build a pipeline of emerging leaders as well.

Hay Patrick said it will take time to know whether the “proof of concept” at Headwaters is correct, but the foundation is playing the long game: “That is something that is worth noticing and appreciating. It’s a different approach.”

In the meantime, she points to its attention on early childhood as being transformative in Montana. Hay Patrick said Montana is one of only a handful of states that doesn’t publicly fund preschool, so children here do not start on a level playing field.

Yet early childhood is the time of life when most brain development occurs, she said.

Hay Patrick said Headwaters has called attention to the issue in a way that has not been done before, and it has funded it. Headwaters counts $11 million to that effort to date.

“They’ve planted this seed. But this tree is going to take a long time to grow,” Hay Patrick said.

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