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Funders and Nonprofit Leaders: Can We Talk?

Date: December 7, 2023

Kathy Reich

Director, BUILD, Ford Foundation

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Two years into CEP’s study of the effects of MacKenzie Scott’s grantmaking on the social change sector, the findings are overwhelmingly positive. Scott’s strategy of making multimillion-dollar gifts with no strings attached has led to significant, demonstrable benefits for the nonprofits she supports, the communities they serve, and the causes they advance.

To me, these findings aren’t surprising at all. Sadly, I also wasn’t surprised by another finding: Many funders remain quite skeptical of flexible giving.

A Fundamental — and Persistent — Disconnect

Although 80 percent of the funders in the CEP study laud Scott’s approach, “More than three-quarters of the interviewed funders express concern about nonprofits’ ability to handle large, unrestricted gifts.” Not only do they “express concern,” but some of CEP’s funder respondents shared their concerns in patronizing terms. This was especially true when these funders talked about grassroots organizations, which are often led by people of color, women, and members of other marginalized groups:

While the funder noted that starting grassroots nonprofits is “wonderful,” they also suggested that, for these organizations, “Sometimes managing the dollars is a little more difficult, because it’s not necessarily their background, or maybe they just don’t have the staff to handle it.” Another funder noted, “When nonprofits get additional funding like this, it requires that they scale up internal operations and infrastructure in ways that some CEOs or executive directors and boards just weren’t built to handle.” Still other funders voiced concerns that nonprofits receiving large, unrestricted gifts might be “resting on their laurels,” having difficulty “understanding the complexity of that infusion of cash,” or even “embezzling.”

Contrast these quotes from funders with the data that CEP reports from nonprofits receiving Scott funds. 90 percent of the nonprofits report that Scott’s gift somewhat or significantly improved their organization’s ability to innovate or take risks. More than 80 percent are using Scott funds to increase their long-term operational capacity. Fewer than 2 percent report major challenges associated with using the Scott gift, and 80 percent reported no challenges at all.

Learning from BUILD

As I compare the data on funder beliefs with the data on nonprofit experiences, I feel pretty frustrated. As director of the BUILD program at the Ford Foundation for the last seven years, I’ve led a foundation-wide initiative to award 5-year, highly flexible grants to more than 400 social justice organizations and networks in nearly 40 countries. An ongoing independent evaluation of BUILD has yielded findings similar to what CEP is finding in its research about the Scott grants: Organizations that have received BUILD grants are better able to plan and execute on their missions than before they received BUILD support. They are more financially stable, and more successful in leveraging support from other donors. They are better able to compensate and support their staff. And as a result, the evaluation reports, BUILD has contributed to increases in social impact.

With this evidence in hand, BUILD team members and I have met with hundreds of funders all over the world, urging them to shift their grantmaking toward larger, longer, more flexible grants. We argue that these grants strengthen leaders and institutions, leading to demonstrable impact. They also provide the basis for more trusting and equitable relationships between donors and doers. Ultimately, they may even help to shift the power in our sector in favor of social change leaders.

After countless articles, one-on-one meetings, and conference presentations, I remain amazed at how curious other funders are about BUILD. And CEP research does find that funders are giving more unrestricted support than they did prior to 2020.

Unfortunately, I’ve also been amazed at how many funders remain resistant to shifting their own practices.

Why do so many funders remain reluctant to adopt flexible funding? Why do they continue to doubt that their grantee partners can “handle” large gifts? Why do they continue to think of themselves as the experts, and their nonprofit partners as the hired help? And more importantly, what will it take to change their minds?

I’ve written in the past about some of the reasons for funder intransigence on these issues. At the end of the day, I think it comes down to funders’ fear of losing power, influence, and control. And so, I am wondering: What might convince funders to trust our nonprofit partners more, and seek to control them less?

Start with Listening

I wonder if the answer to this question might be deceptively simple. Maybe both funders and non-profit leaders need to get a whole lot better at engaging in genuine dialogue.

When I compare what funders think about unrestricted gifts, to what nonprofits think about them, I am struck by the fundamental disconnect in perception. It seems to me like no one is really listening or talking to each other. Funders clearly are not hearing what nonprofits have to say about their visions for change, what multi-year flexible funding might enable them to accomplish, and how carefully they manage money in pursuit of their missions. Nonprofits clearly are not hearing curiosity from their funders. Too frequently, instead of viewing each other as engaged in a shared enterprise of repairing our broken world, funders and nonprofits are still viewing each other as other. There is still so much we don’t understand about each other, and CEP’s findings make that painfully clear.

I don’t pretend to know how to repair this fundamental disconnect. But I do believe that the path to understanding starts with listening and moves from there into honest dialogue.

What would it look like for donors and doers to have authentic, open conversations about what it takes to achieve lasting social change, and what roles are more or less constructive for funders and nonprofits to play?

How might we set up dialogue in ways that enable nonprofit leaders to feel safe in speaking truth to funders — who, after all, hold a disproportionate share of the power in the funding relationship?

How might we help funders to listen with openness and curiosity, and without diagnosis or judgment?

How might we bring foundation boards and nonprofit boards together, to dialogue with each other about the challenges facing their organizations and the sector as a whole?

How might we dismantle the sense of grantmaking as a transactional negotiation between funders and nonprofits, and instead foster a sense of shared purpose, mission, and strategy?

I’d love to hear your ideas. Let’s talk.

Kathy Reich directs the BUILD Program at the Ford Foundation, a 12-year, $2 billion initiative to strengthen key institutions around the world that work on inequality. Find her on LinkedIn.

Editor’s Note: CEP publishes a range of perspectives. The views expressed here are those of the authors, not necessarily those of CEP.

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