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Stupid Funder Tricks

Wednesday, February 1st, 2012

This is the third in a series of posts written by Paul Beaudet of Wilburforce Foundation on the complex relationship between funders and grantees. In Doing Less with Less, he raised the issue of the unrealistic expectations some funders placed on nonprofit organizations in the face of the economic downturn and the subsequent recession, advocating for what he calls a shift from transaction-based grantmaking to interaction-based grantmaking. Last week, in Putting Grantees In the Center of Your Map, Paul expanded on that proactive approach for funders, focusing on the effect of using strategy to increase the effectiveness of funders’ work with grantees and progress toward achieving mission-driven goals. Here, he calls on the philanthropic sector to take a critical look at collective bad habits, offering advice on how to maximize the potential of the partnerships all funders forge with their grantees. 

 

Grantmakers for Effective Organizations (GEO), one of the sector’s largest coalitions of grantmakers, is organized around a fundamental truth: “grantmakers are successful only to the extent that their grantees achieve meaningful results.”

In my last post, I described how Wilburforce Foundation developed an outcome map that placed emphasis on grantee relationships, grantee capacity, and grantee results. These elements are at the heart of our strategy.

Many of us in the sector refer to our grantees as partners. In some cases, funders and grantees do in fact forge strong working relationships that are truly collaborative. But not always. Sometimes these “partnerships” are more fantasy than fact. Perhaps my perspective is biased by the years I worked as a grantseeker, but I would argue that grantees sometimes see themselves less as partners and more as shoddily treated temporary contract employees.

What are the elements of an effective partnership? My list would include the following:

  1. Focus on shared goals;
  2. Open communication that embraces the perspectives of all partners;
  3. Sense of shared responsibility and interdependence that lasts until the work is done.

As a sector, I believe we generally fail to maximize our potential to create true partnerships. Some aspects of our funding processes, internal grantmaking guidelines, and — most importantly — interpersonal behaviors may make us a bad partner. Acting out the worst aspects of the grantmaker-grantseeker power imbalance can be an impediment to impact.

Over the years, I’ve heard reports of foundation practices that are inexplicable, disappointing, or shocking. One grantee wryly dubbed these bad practices as “stupid funder tricks.” Here are a few examples that I believe undermine our sector’s potential for success, shared by grantees and culled from my own personal observations:

  • Marching to your own Bette: One of my favorite movie quotes was uttered by Bette Midler in Beaches: “But enough about me, let’s talk about you… what do YOU think of me?” Funders sometimes seem to forget that we are one of many players, and that the work is not exclusively about us. One grantee reported having to rewrite a proposal and revise a board-approved strategic plan to more explicitly align his organization’s goals, outcomes and objectives to the funder’s. Another complained that foundations sometimes seem to create initiatives that presume the participation of others without actually engaging potential partners before a new strategy is announced.
  • The view up here: I have sat through some wince-inducing meetings between funders and their “partners.” I have seen my foundation colleagues dominate the conversation, make demands, and tell a grantee that their strategy was — direct quote — “bad.” The kindest possible frame for this: funders have a uniquely broad perspective, we have seen what works and doesn’t work in other parts of our grantmaking portfolio, and we need to assure that our grantees are using resources as wisely as possible. That is certainly sometimes true. But we have to allow for the possibility that we may be wrong. Our grantees are likely to have a much deeper understanding of the social, political and economic context in which they are working than we do. Strategies or tactics that succeeded elsewhere may be ineffective applied in a new context. In short, we have something to learn from our partners, if we let them speak, and we approach with questions and not prescribed solutions.
  • ADDled Funders: Another grantee described the devastating loss of a $250,000 grant when a foundation suddenly decided that his campaign was no longer a priority. This group was forced to lay off the staff they had hired with the implied promise of ongoing foundation support, and this significantly harmed the organization and its ability to advance its goals. Other grantees have expressed dismay at the life expectancy of a typical foundation strategy, which rarely seems to last for more than two or three years. I can certainly point to funding colleagues who seem to display a bit of institutional Attention Deficit Disorder (ADD): trouble staying focused, extreme distractibility, and difficulty completing tasks.
  • I need air: Some foundations set arbitrary caps on the maximum number of years a grantee can receive funds. Despite affirmations that a grantee’s work is critically important, I have heard some funders worry aloud that groups will become “dependent” on their grants. Instead of sustaining work over the lifetime of a project, some funders retreat, forcing the group to seek new revenue sources. Funders not only hurt their grantees, they hurt themselves by sabotaging any progress they and their former partners may have made.
  • Getting to “No” you: Some foundations seem perfectly happy to reject potential partners merely on procedural grounds. Applicants who submit well-polished prose and neatly organized attachments are rewarded. Those who stumble during the process may be dinged. One funder once boasted to me that he generally declined proposals that arrived by overnight post, suggesting that if a group was too disorganized to get a proposal in early and had money to waste on delivery charges, it didn’t deserve foundation support. He had never worked for a nonprofit organization, and didn’t understand that fundraisers are struggling to meet the demands and deadlines imposed by multiple funding sources. Process-based decision-making may favor organizations with savvy grantwriters, but these may not necessarily be the groups whose programs are most effective. Instead, we should be exploring the quality of ideas or the potential for a group to advance shared goals.
  • Drowning in Paperwork: Process overload often doesn’t end when an application is submitted. Each funder imposes its own set of requirements on grant recipients. Written and financial reports are the norm. Multiplied across multiple funders, the process burden grows. Sadly, even if these reports are read—and too often they are not—they may not be useful. Project Streamline describes the problem well:

“the current system of application and reporting has grantseekers and grantmakers alike drowning in paperwork and distracted from purpose. Such practices may be only a small part of the bigger picture of grantmaking effectiveness, but they threaten to undermine other grantmaking effectiveness efforts by creating barriers to nonprofit success.”

If funders want to advance a strategy, they need to invest more time in developing relationships with potential partners. The due diligence process can be stronger with less transaction and more interaction.

I could go on.

I am not trying to give the impression that my colleagues and I at Wilburforce Foundation have an unblemished history of perfect behavior. Nor do I want to suggest that the shortcomings in grantee-funder partnerships are always the fault of the grantmaker. But generally speaking, we funders can and should be more sensitive and responsible in wielding the power we accrue as the check-writer in the relationship.

I’ve described some of the symptoms of bad partner behavior. Now I’d like to propose some simple remedies:

  • Identify shared goals: We have the power to impose our strategic vision on others, and will almost certainly find grantees to happily use our funding to advance our ideas. But I would argue that our strategies will be stronger if we work with — and are influenced by — our partners. If we ask questions and invite feedback from grantees, welcoming their knowledge and perspectives, we can strengthen our strategies.
  • Be patient: Achieving real impact takes time. If we want to forge effective partnerships, we should commit until we have succeeded…or until the evidence suggests that we cannot succeed and a new strategy is needed. Shiny new projects may seem irresistibly alluring, but pursuing new initiatives make it less likely that your previously funded work has time and resources to yield results.
  • Build better relationships: We must communicate clearly, consistently, openly and frequently to better understand each other’s goals and strategies. All partners need timely information about new developments, opportunities, and threats that emerge. A partnership cannot simply rely on the process-oriented elements of our work: applications and reports. We need to shift from transaction-based grantmaking to interaction-based partnerships.
  • Invest in our partners: Rather that worry about dependence, we should instead recognize our interdependence. To the extent possible, we should be making long-term investments in the capacity of our partners. We should be making explicit multiple-year commitments. We should be helping groups with leadership coaching, fundraising, financial management, evaluation, technology, communications, and other investments that build effective and efficient organizations. We can only succeed if our partners succeed.
  • Invest in ourselves: Many of us focus on foundation overhead, striving to keep that number within some benchmark percentage. Instead, we should align foundation operations and programs to assure that we have sufficient human and financial resources devoted to successfully advancing core strategies. We may need to make investments in our own capacity to be effective partners: hiring or reassigning staff, changing grantmaking processes, or shifting to fewer strategies that we can implement more thoughtfully.

It is hard work to be an effective partner. I have learned from experience, though, that healthy partnerships are at the heart of our biggest successes.

 

Paul Beaudet is Associate Director of Wilburforce Foundation and a member of CEP’s Advisory Board.

 

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Putting Grantees In the Center of Your Map

Tuesday, January 24th, 2012

This is the second post written by Paul Beaudet of Wilburforce Foundation on the complex relationship between funders and grantees. Last week in Doing Less with Less, he raised the issue of unrealistic expectations by some funders that nonprofit organizations would maintain their prior level of activity despite the impact of the economic downturn and the subsequent recession. He discussed alternatives to this practice and what he calls a shift from transaction-based grantmaking to interaction-based grantmaking. This week, Paul expands on that proactive approach for funders, focusing on the effect of using strategy to shape funders’ work with grantees. That requires a greater investment of time and attention on the part of funders, but in the example of Wilburforce, suggests greater effectiveness and progress toward achieving mission-driven goals.

 

The Center for Effective Philanthropy (CEP) defines foundation strategy as “a framework for decision-making that is 1) focused on the external context in which the foundation works, and 2) includes a hypothesized causal connection between use of foundation resources and goal achievement.”

Loosely restated, this says 1) foundation strategy should focus on the change that you are trying to make in the world, and 2) any logical person should be able to see the connection between how you spend your time and money and that change.

Most foundations are able to articulate one or more goals– ending homelessness, building a more just and sustainable world, eradicating disease – to name a few examples. Many also acknowledge that these goals are ultimately achieved individually and/or collectively by the grantees in which we invest. But very few foundations explicitly include grantee-specific outcomes in strategic plans, outcome maps, logic models and theories of change.

In our early years, Wilburforce didn’t do that either. We do now, and it has transformed that way we approach our grantmaking.

Wilburforce Foundation was founded in 1991, addressing a variety of environmental causes. In 1998, we created a strategic framework to prioritize the protection of specific, critical habitats in Western North America. Our plan focused on audacious long-term goals, such as protecting the last remaining pristine places, and assuring strong and lasting public support for wilderness preservation. We assumed that if we picked the right grantees and they reported the right types of short-term successes, we could make a leap of faith and assume we were having a longer-term impact. This approach was dissatisfying to our staff and board. We knew we could do better.

So, in 2004, we decided to refresh our strategy and develop deeper understandings of the ecological, social and political contexts of the places we were striving to protect. We realized that the vast majority of our grantees were receiving consistent annual support from us. We were increasingly relying on these grantees to provide on-the-ground wisdom that informed our work. And we were stepping up our investments in capacity building to improve the efficiency and effectiveness of these partners.

We began scanning for the latest thinking on foundation effectiveness, and encountered a monograph that led to a “Eureka!” moment. The Dorothy A. Johnson Center for Philanthropy and Nonprofit Leadership’s report Agile Philanthropy: Understanding Foundation Effectiveness, included a logic model that showed a causal relationship between a foundation’s investments and its desired social change linked to grantee relations, grantee capacity and grantee outcomes:

The Wilburforce outcome map and logic model was built on this framework, and describes the causal links in our strategic plan by more clearly highlighting the importance of grantees in achieving our goals:

By organizing our work in this way, we are better able to describe the logic of our approach to long-term social change:

  • Grantee relations: Since grantees are partners, we must communicate clearly, consistently and frequently to better understand each other’s goals and strategies, develop trust, and address opportunities and/or threats that inevitably arise. We often learn more about issues, strategies and tactics from our grantees than they do from us. We hired additional staff to ensure that our foundation had sufficient capacity to nurture grantee relationships, and we developed processes to shift from transaction-based to interaction-based grantmaking. We also consistently use CEP’s Grantee Perception Reports to provide feedback about how well we’re doing.
  • Grantee Capacity: Using what we learn from our grantees, we feel better equipped to make smart investments in their programmatic and operational capacity. We invest heavily in capacity building service providers that offer customized consulting, coaching and training in leadership development, fundraising, financial management, human resource management, strategic planning, and engagement technology. We also underwrite and share conservation and social science.
  • Grantee Results & Sustained Social Change: If grantees are receiving the support they need to sustain their operations and programs, these organizations will likely be better able to engage in effective work that creates change. Wilburforce also has a better sense of the return on our investments since we can make a logical connection between what we do and what our grantees achieve.

In practice, Wilburforce starts with the change that we desire, which, stated simply, is to create a network of protected habitats that sustains wildlife populations. We select priority regions based on conservation science, and work to identify the local advocates who have, or can develop, the capacity to respond to opportunities and threats to these ecoregions.

One of the earliest places that we fully embraced the Agile Philanthropy model was in the Great Basin. Nevada and Oregon sit at the heart of this remarkable landscape, which contains some of the wildest, most remote lands in the continental U.S.

When we began funding in the Great Basin, there were a few underfunded organizations with passionate leaders working in a region with enormous opportunities and not much history of public lands conservation. As we refined our strategy and shifted to more “interactional” (and less transactional) grantmaking, foundation staff attended science and strategy meetings, grantee events, and field trips to increase our knowledge of our grantees, their work, and the landscapes they are protecting.

As we forged stronger working relationships with our grantees, we learned about their need for:

  • Greater inter-organizational collaboration;
  • Scientific identification of on-the-ground priorities;
  • Leadership development;
  • General support funds;
  • Membership development and fundraising skills;
  • Board capacity;
  • Technological capacity.

We brought in a team of talented capacity builders at Training Resources for the Environmental Community (TREC), whose associates have deep experience in conservation advocacy and are trusted by our grantees. TREC developed a Regional Conservation Initiative of coaching and training opportunities that targeted services to four organizations with tremendous potential to advance a conservation agenda.

We also brought together a blue-ribbon panel of science experts from academia, federal agencies, and grantee organizations to develop a useful tool for our grantees to prioritize landscapes. And we provided significant, multi-year general support funding, affording the organizations greater stability and staff retention, and the ability to sustain long-term relationships with important constituencies and decision-makers.

Since Wilburforce began funding in the Great Basin, our grantees have helped protect millions of acres of federally designated wilderness. Wildlife refuges have been expanded, new National Conservation Areas have been established, and hundreds of millions of dollars have been allocated for private lands acquisition and habitat improvements on our public lands. And they’re not done yet. Our grantees are ready to use the relationships they’ve built to ensure that renewable energy development on public lands protects wildlife habitat while decreasing our dependence on fossil fuels.

Wilburforce can only succeed if our grantees succeed. And our grantees can succeed only if they are given the funding, tools and resources they need to do their work. By placing grantees at the heart of our outcome maps, we can focus on strengthening relationships and building capacity to empower grantees to achieve the outcomes that ultimately contribute to our shared goals.

 

Paul Beaudet is Associate Director of Wilburforce Foundation and a member of CEP’s Advisory Board.

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Doing Less With Less

Wednesday, January 18th, 2012

Those of us who work for foundations want our grantees to invest in core activities that more efficiently and effectively contribute to desired outcomes. Yet funders may make it harder for grantees to do so, often by focusing exclusively on specific grant-funded activities — as opposed to outcomes — and by underinvesting in core organizational needs.

The National Bureau of Economic Research pegged the official end of the 2008/2009 recession in June of 2009. That may be true, but many foundation leaders recognized then that battered stock market valuations were only the start of what would likely be a multi-year drop in grant making, since payouts were tied to a rolling average of diminished investment portfolios.

That year, I heard far too many colleagues casually suggest that we needed to help our grantees “do more with less.” That remark has been echoed at conferences and convenings ever since. At a foundation event this fall, I challenged a colleague who expressed surprise that grantees still seemed to be doing too little to embrace the fundamental wisdom captured by this phrase. I think I understood the intent behind his lament. But the message he and others may be unintentionally conveying to grantees is unfortunate: that we believe that nonprofits have substantial resources that are being inefficiently deployed, and those of us who work for foundations would do a better job of managing the stress of decreasing revenues and increasing demand for services.

At Wilburforce Foundation, we work with grantees over the long term to protect wildlife habitats in Western North America. Investing in and disseminating science, working with local communities to build support, and convincing policymakers to endorse durable conservation solutions takes time, often years.

Many of our grantees are highly dependent on foundation grants, and we have seen firsthand the consequences of their attempts to do more with less. We’ve been tracking financial data for all of our grantees, including annual revenue and expenses, cash holdings, and net assets. Since the recession began in 2008, more than one third of the groups we support have experienced decreases in net assets of 10 percent or more, and many more have cash-flow cushions that can be measured in weeks, not months.

One of our grantees nearly collapsed in the aftermath of the recession. Many of its programs were funded by restricted grants, and foundations invariably wanted their grant-funded activities to be part of the “more” this group should sustain with “less.” This grantee was shoveling increasingly scarce general support dollars to these programs. The organization only recovered after it jettisoned underfunded projects and sacrificed the foundation grants that had ultimately harmed the organization.

Another grantee relied heavily on one foundation for significant support of its largest program, subject to an arbitrary cap of 15 percent of overhead expenses. The true cost of its organization overhead was closer to 25 percent, and its net assets plunged as the group tapped unrestricted funds to pay for its core needs.

In fact, I see far too many organizations trying to do “more” by sacrificing living wages for its staff, shifting the cost of benefits to employees, cutting professional development budgets, and working with obsolete technology.

An article in the Stanford Social Innovation Review in 2009 described what they called the nonprofit starvation cycle, and attributed much of that problem to funders:

“The first step in the cycle is funders’ unrealistic expectations about how much it costs to run a nonprofit. At the second step, nonprofits feel pressure to conform to funders’ unrealistic expectations. At the third step, nonprofits respond to this pressure in two ways: they spend too little on overhead, and they underreport their expenditures on tax forms and in fundraising materials. This underspending and underreporting in turn perpetuates funders’ unrealistic expectations. Over time, funders expect grantees to do more and more with less and less—a cycle that slowly starves nonprofits.”

So, let’s dispense with tired clichés. Jan Masaoka, director and editor-in-chief of Blue Avocado and former executive director of CompassPoint Nonprofit Services, has better advice for nonprofit leaders: do less with less.

“Of course there is more need, more demand, and we probably have less money. And we love the gritty heartfelt nature of the cry, “We need to do more with less!” Pause. But it’s not only unsustainable, it probably means you will be able to do even less in the future. If a program’s funding has been cut by 30%, you may need to do 30% less.”

The trick, of course, is figuring out which programs are most effective, and make those as sustainable as possible. As funders, we can help our grantees do this in several ways by:

  1. More clearly communicating with grantees about our own strategies as funders, and the outcomes we hope to achieve. These conversations have the potential to surface more creative, efficient and effective alternatives to the projects or activities that we may have historically funded.
  2. Forging stronger relationships with grantees, so that they feel comfortable approaching us when trouble arises and before the organization’s financial situation becomes dire.
  3. Understanding and supporting the real costs associated with running an effective and sustainable organization, including livable wages and quality benefits to recruit and retain quality staff, maintaining adequate facilities with current technology, and building sound financial and fundraising infrastructure.

Paul Beaudet is Associate Director of Wilburforce Foundation and a member of CEP’s Advisory Board.

 

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