The crises this country has endured for nearly a year now have underscored the desperate need for donors to provide the kind of flexible funding and trust that nonprofits require to be effective. Nonprofits have been on the front lines of responding to community needs — as I have written about here multiple times — and they continue to be there, often facing the brutal twin realities of increased demand and decreased or highly unpredictable revenue.
It’s true that many foundations have stepped up with more flexible support, more dollars to communities of color and organizations led by people of color, and fewer restrictions, as CEP’s research has documented. But many questions remain about whether the changes are deep and lasting enough. I worry, and I know I am not alone, about a reversion to pre-crisis practices when what the sector actually needs is a fundamental rethinking of how funders work with nonprofits in the future.
Foundations are “discovering that they can provide flexible general operating support, accelerate grant decisions, and loosen heavy reporting requirements” and should continue to do so, argues Ford Foundation Executive Vice President for Programs and CEP Board Member Hilary Pennington in one of six essays in a new collection called Funding Performance: How Great Donors Invest in Grantee Success. The publication, produced by the Leap Ambassadors Community and released this week, is an ideal pre-read for any foundation board considering how best to shift their practices to better support nonprofit success. (Disclosure: I am a Leap Ambassadors Community member but didn’t contribute to this publication.)
The essays are insightful, persuasive, and full of practical guidance. But what’s frustrating, honestly, is that they even needed to be written at all. For decades, numerous organizations — from CEP to GEO to NCRP to the Nonprofit Finance Fund to Bridgespan to the recently established Trust-Based Philanthropy Project — have been calling for nonprofits’ needs to be heard and supported differently.
In fairness, many foundations and individual donors have quietly done it right for decades: helping strengthen organizations by encouraging them to invest in their staff and infrastructure; providing unrestricted multiyear support to those grantees whose organizational goals align with their programmatic goals; funding those closest to issues and communities (and building their own understanding along the way); and communicating clearly and openly.
Yet, at least until our ongoing crises took hold, these funders were a minority. After all, as my CEP colleagues reported last fall in a study for which data was collected prior to the pandemic, just 12 percent of foundation grants are multiyear and unrestricted.
Look, I am not a general operating support absolutist. I believe there is a time and a place for a good old-fashioned single-year project-restricted grant. But 12 percent? It cannot possibly make sense for the proportion of multiyear general support grants to be so low. Nonprofits are suffering and are financially weaker than they should be as a result, in ways described by Bridgespan’s Jeri Eckhart Queenan and Jeff Bradach in another essay in the Leap compilation.
While we can point to progress in the form of some real changes in funder practice, the pain continues for many nonprofits — and it’s real. If you’re skeptical of that, just ask your grantees, or read this powerful open letter from Jami Duffy, who leads the Denver nonprofit Youth on Record, along with the article it prompted in a local paper there.
“While no group of philanthropists understands the sector better than foundation partners, they can and need to make adjustments to their practices to better meet this moment,” Duffy writes. “Sure, they may be moving slightly more money. Yes, they ask different (and more) questions in their ‘COVID Response’ applications. They host webinars. They send resource lists and tell us they care. But ultimately, the support comes with too many strings.”
So what on earth is getting in the way?
“It’s about power! It’s about control! It’s about being able to say, ‘My input got this output and that’s what I care about,’” argued Ford Foundation President Darren Walker when the question of low levels of multiyear general support arose during a CEP program on racial equity last month.
I agree with Walker. I also think, and I am guessing Walker would agree, that it’s about a far too prevalent point of view among individual and institutional donors alike in which nonprofits are seen as less than — seen as in need of reinvention, or in need of someone (like the donor) to hold the nonprofit’s feet to the fire. Some of those espousing this view truly believe they know best how to “maximize impact,” and that the job of the effective donor is to impose discipline and metrics on organizations that, in their view, lack either. (They believe providing unrestricted support means leaving nonprofits unaccountable for results, but that’s a false choice, as Walker made clear in the session.)
To be effective as a donor, you need to reject the stereotypes, understand the unique challenge of running a nonprofit, and understand what nonprofits most need from their funders. So, it’s true that overcoming the problem is about sacrificing power. But it’s also about an evolution in mindset for how to best foster effectiveness and impact. For those donors that are really motivated by a desire to do as much good as possible, power will only be relinquished when they see how doing so will lead to better results.
Such evolution is possible. When I interviewed him while doing research for my book, Giving Done Right, Mario Morino, the donor who created the Leap Ambassadors Community, told me, “I probably did as much background research as anyone, and I’d argue I didn’t do enough. … I was really arrogant.” He described how the analogy between giving and venture capital investing that he had embraced in his early days as a donor didn’t quite work.
“These decisions have a degree of social complexity that is far greater,” he told me. His advice to other donors? “You’ve got to bear witness.”
And, interestingly, we at CEP have seen change in funder practice and in the experience of grantees among those funders that listen routinely, through the Grantee Perception Report (GPR), to those they fund — including increases in the provision of general operating support. As Lowell Weiss of Cascade Philanthropy Advisors, who happens to have been the editor of the new Leap publication and author of the lead essay in the collection, put it simply in Washington Monthly last year, “When donors listen, they become more effective.”
Lowell’s quote brings me back to the question of why the pieces in Leap’s new publication needed to be written. I’d argue it’s because, fundamentally, foundations — and individual donors, for that matter — haven’t been listening closely enough to nonprofits and their staffs. And if ever there were a time when that needs to change, it is now.