Partnerships Between Funders and Nonprofits
It is well established that non-profits define partnerships with funders as transactional; but this can’t be in the best interest of the communities being served. What I have found is there is often a stark disconnect between the perceived issues as it relates to “partnership”. Here are example comments I have heard when I ask each side of this important community equation:
Foundations and Funders: “Why are non-profits always coming to me for money after a plan is already developed and with no room for input? What am I, a ‘community ATM’”?
Non-Profit Organization: “Why do funders want to be a “partner” when few community initiatives can be accomplished in one year and most funders establish grant cycles annually and have policies against multi-year funding commitments? How can they effectively partner if they are not willing to go the distance?
Foundation and Non-Profit Partnerships – Fact or Fiction? This was the title of a piece released back in 2011 by Jan Masaoka, editor of Blue Avocado, an online magazine for nonprofits. The article appeared alongside the National Committee for Responsive Philanthropy Summer journal report Jan wrote also on this topic The question posed to Jan by NCRP was: “Is it possible for a foundation and a grantee to have an honest, real partnership” – and it is one that is still very much appropriate today. The article is a necessary critique of the power dynamic that exists within the philanthropic community.
*I don’t agree with every premise – for example, the statements seem to lump every funder in the same bucket, when in my experience “if you have seen one foundation, you have seen one foundation.” She also writes about intentionally fawning over program officers, which Kapor rightly calls out as well in their repost of this article and report.
Since I have had the fortune of working on both sides of this equation, I would like to put forward several of my own encouragements. If we are to believe partnership is transactional in nature, it is important to realize both parties then are at fault for this current state of funding and need to perhaps adjust the ways in which they interact for a more equitable outcome. Additionally, in each of these scenarios, I will make references to what is known as venture philanthropy – where there is an attempt to have more involvement to help drive innovation as well as an emphasis on performance measurement, with the primary goal of improving systems as opposed to funding individual projects. It was coined in the late 1960’s by the Rockefeller Foundation and is a helpful way to better articulate this need for “partnership beyond a transaction.”
“All we are, is a community ATM. Non-profits simply expect to walk up, submit a request, and withdraw funds.” I have heard this repeated so many times by funders. And yet, our grant cycles, grant applications, and project specific requests, contribute to this very complaint.
Get involved. Take some cues from the investment world on this point. The way programs are structured and how program officer’s budgets are set up, inhibit this ability to truly get involved. In fact, many foundations prohibit a program officer from being on a board of a grant recipient. How can that be prudent? Wouldn’t it be in the best interest of the cause and both organizations, to be involved in the decisions that this money is contributed to do? I am not saying in every case and at every dollar amount; but where the amount is significant and the cause vital to a funder’s objectives, wouldn’t this make sense?
Multi-year initiatives. I have also heard program officers tell me they can’t, or don’t like, doing multi-year grants because of the ways these are internally accounted for. On the flip-side, the engagement period for venture philanthropy is a minimum of three years and an average of five to seven years. Many of these arrangements require multi-year funding commitments. It takes time to see results. It takes time to work out the bugs.
Philanthropic capital should be the most risk tolerant capital.
Failure is a part of the equation. I once read on the Gates Foundation website that philanthropic capital should be the most risk tolerant capital, and yet, funders are super risk averse and the adage “first to be last”, tends to be true. This places (yet again) more pressure on the transaction versus a partnership that is willing to take a measured risk in trying new ways at combating community problems. Not all of the efforts you fund will succeed and that doesn’t mean the organization that “failed” is doing a bad job. These become new data points and opportunities to refine an ever changing strategy together.
On the other side of the equation are grant recipients. Venture philanthropy is not just a cool way for funders to talk about their approach. It’s also an opportunity for program officers and organizations to “fail fast” and try new efforts while identifying more strategic “investors”.
Not all funders are the same. “If you have seen one funder, you have seen one funder” is yet another common phrase within philanthropy. And yet, program officers often approach every funder in the exact same way, and with the exact same information/format/request. Figure out what type of funder you are working with…and tailor your ask/material/approach. I know one entrepreneur raising a Series A that has literally over 100 slide decks for various investors because they each emphasize something different or are interested in more detail on a multitude of things that relate to the business itself. It’s still the same product and company, but entrepreneurs recognize they have to understand their investors and package the material in a way that is accessible to them. Additionally, not all funders have a standard process or criteria that can be found online and some even want to be a part of the design process for the solution.
Ask. The old adage, “ask for money and get advice; ask for advice and get money” is generally true. No matter the funder – traditional or progressive – figure out the level of engagement they desire in the project development and ask for their input. Make sure you leave room enough in the timetable to allow for this step so funders don’t simply feel like the community ATM.
Develop Connections. The best entrepreneurs don’t simply raise money from whomever. They develop a plan and then look for strategic investors that can bring more than money to the table. Many a friend has talked about the woes of “dumb money” and wish they had instead, spent time looking for “smart money.” This is aligned capital. This is money that comes with industry expertise. As a grant recipient, look for ways to build connections with funders and talk about the desire for strategic capital – financial capital, but also human capital you need for this effort to be successful. If “smart money” isn’t accessible in your own backyard, it might necessitate a national search.
The best entrepreneurs don't simply raise money...they develop a plan and look for strategic investors
Embrace failure. Much like funders need to anticipate and expect some failures, grant recipients need to learn to embrace failure, and not justify it away. This should be one big, iterative process of trying radical, new approaches to big community problems. Some will work, and others will not – but, in every situation, there is something important to be learned. Broach the topic of failure with potential funders from the beginning. Open dialogue at the beginning about the likelihood of failure with innovative new solutions will help you to identify which funder is most appropriate.
Grants and grant processes are here to stay, and strong partnerships are the key to maximizing returns. The relationship between funders and grant recipients is still, at the end of the day, a business transaction. But it’s a transaction that doesn’t have to be lopsided and it’s a transaction that hopefully improves the community and the organizations that partnered together to make it happen.