Grantee-Grantor Relations

I am only modestly embarrassed to state this publicly: My world is founded upon an undying commitment to the truths revealed in the film, It’s a Wonderful Life.

In that incredibly sentimental movie, through the eyes of the main character, George Bailey, we are shown the reality of how deeply our lives are interconnected—people’s lives matter, and people’s absences are felt. To paraphrase the wisdom of the film’s director, Frank Capra, if we are not engaged grantmakers we are nonplayers in the process of life’s discoveries.

As grantmakers, instead of our absence being noted through the degradation of our small town into a veritable “Pottersville”—where all the townsfolk are financially indentured to the avaricious banker, Mr. Potter—our quiet absence is felt through a trail of cashed checks and anonymous turndown letters. Our very own “Nonprofitsville” is weakened by our efforts to stand apart from the organizations and causes found inside its city limits. In truth, we are all engaged—that is the nature of life itself. The question is simply one of degree.

The issue of appropriate funder roles is not new.  But now, with the rise of  new “high tech, high touch” donors, practicing variations on venture philanthropy and other strategies of engaged grantmaking, these questions are increasingly being asked:

• How close is too close?   
• Just how “engaged” should a grantmaker become?   
• How great is a grantmaker’s influence?

Before entering into this discussion, let’s begin with a central reality: Despite our protests and demure words, we are, regardless of our posture or philosophy, already engaged with our grantees.  To be sure, sometimes this engagement is oh-so-subtle; its influence understated.

But we all know the truth. We know our annual reports directly engage grantseekers in positioning their programs to accommodate our stated funding desires. We each must acknowledge that the casual comment made during a site visit all too easily influences the future development of proposals crossing our desks. And unexplained decisions made by boards distant from the streets, steering funds this way and that, speak volumes about the nature of our connection to the sector. Yes, we are each engaged, both as institutions and individual players, with the larger universe of nonprofits of which we are a part.

So, let’s begin by ending the pretense that we are not intimately engaged in the lives of our grantees and those who would seek to become such. In my view, too many grantmakers are hesitant to acknowledge the very real power role we do play—whether stated or not. I would suggest we get over ourselves and simply acknowledge our power; certainly our grantees have already recognized it.

Being more directly engaged with grantees is not for everyone. But I, for one, would like to encourage my colleagues to consider a more active form of engagement—that is, a more upfront, deliberate and accountable use of our role in the grantmaking process. Because (and here’s the twist!) by being more up-front with regard to the extent of our current engagement we must also become more honest about the true nature of accountability, the accountability we seek to demand of our grantees and must also accept for ourselves.

Indeed, through the practice of mutual accountability we may be better able to truly maximize the effectiveness of all our work—both as grantees and grantors.

How Can I Miss You if You Won’t Go Away?
It is hard to escape the notion of accountability in today’s world. And yet, to be truly accountable does mean a degree of commitment to the Other (in this case, our grantees). If one is more fully and honestly engaged, one is by definition more susceptible to opportunities for being mutually accountable—you can’t run and you can’t hide if you meet with your grantees every month! The eyes directed toward you and the tenor of voice combine to ask some basic questions: Did you fulfill your commitments from the prior month? Did you encourage risk taking and then stick it out when your grantee encountered problems? Will your grantees even tell you if they are having problems? And (this won’t hurt too badly…) do you model that accountability you desire of your grantees? Do you tell your board when you squander the foundation’s money on great ideas that were executed to stunningly poor effect? Do you publish reports for your peers that tell what you learned—and tell it truthfully even when the written record kind of makes you look like a fool?

Being engaged means one is present within the funding relationship. One is not a visitor, but rather a partner, an investor, a sounding board. Grantmakers who are accountable to their grantees are those who take their share of responsibility for the work funded. Ideally, grantees who receive funding from engaged grantmakers attempt what they propose—and then don’t lie to you when what they get is not what they told you they were going after. Being engaged means working to have the type of relationship that allows your grantees to be as truly honest as one can get within a funding relationship.

In addition to being honest about the impact of the funded strategy, being mutually accountable—being engaged in a funding relationship—means when your grantees struggle, you struggle. Engaged grantmakers, whether they’re new philanthropists or seasoned givers, are investing financial, personal and political resources in pursuing a vision of a changed world.

Engaged grantmakers are willing to take their place within that world, for better or worse. You do not practice philanthropic voyeurism, but rather acts of true compassion. You “suffer with” your grantees as they attempt to do the impossible—heal the ill, teach the illiterate and protect the defenseless people and creatures of our planet. And you support their efforts in the midst of your role as a player in a fragmented, illogical nonprofit capital market. Your giving guidelines, grant process and board docket are tools to facilitate connection. They’re not rolling snakes of barbed wire strung along your trenches of defense like some nonprofit Maginot Line.

In effect, mutual accountability means you become a charitable George Bailey—leveraging resources, sharing respectfully in others’ life dreams and being present for at least a part of the real tragedy that inevitably comes with risking one’s energies in an effort to create positive value in the world. George was not the farmer or the shopkeeper or the pharmacist; nor are you the social worker, teacher or community activist. But you are nevertheless invested in their lives and foibles. You are engaged in their efforts and honest about the effects of your own. You are a grantmaker.

Now, mutual accountability is not about checking up on your grantees to justify some grant you’re never going to miss anyway. It’s not about creating a process to generate numbers that can become part of the political lies of petty politicians and government grant administrators marking time until retirement. Its focus is less upon units of outcome than a pursuit of the process of value creation made possible through the application of your resources—financial and otherwise—in support of the work of grantees.

Clearing Out the Fog
Accountability comes to be understood as a process of holding us all—grantmaker and grantseeker—within our mutual commitment to push and pursue and suffer in the creation of a better way, a way that promises to build exits out of poverty and environmental abuse and personal malaise. Accountability is a marker of progress and a path toward tomorrow. It is a way of clearing out the fog and cutting through the clouds of meetings and proposals and conference posturing in order to speak an honest language that asks, “What are we really doing here and how will we know our collective lives’ work have been worth the effort?”

Being accountable means you’re not afraid of taking risks together with the very people you believe in—while at the same time recognizing the reality of the differing risks that are in play depending upon which side of the checkbook one sits. It’s not about making donors or staff comfortable with our charity—it’s about making us, those who are already most comfortable in this array of social sector players, first feel dis-ease so that we might—as a community and society—come to be healed. And it’s about using all the resources within our reach to help each of us get there. It is, indeed, about living, fully engaged, within the wonderful life that awaits us all, just outside our office, just around the corner from our gated community.

It can, however, be a frustrating life. Prior to joining in foundation work, I was head of a well-regarded community program targeting the needs of homeless youth.  Much of my nonprofit’s success was directly tied to my ability to convince our donors we were worthy of support. This involved politicking and media savvy and my being a “fighting young executive who could talk to street kids.”

Yet this funding process was largely removed from our being truly accountable for assuring consistency between word and deed. There was no system or framework to understand the relative success or failure of our program’s strategy. There was no connection between how well we did in the alleys and streets and the amount of resources made available to support our work. In the absence of any long-term assessment of the effectiveness of our efforts, as long as I spoke well and we maintained a regular media presence, there was a presumption that our program was effective and worthy of support.

I will admit that on its own, this system functions well enough for many—good programs do receive needed support. However, one must also ask: How many bad programs receive funding that otherwise might go to organizations with more effective strategies?

In a capital market (and make no mistake about it—at 7 percent of the GDP, the nonprofit sector is indeed a capital market with billions of dollars at stake) with few objective measures of success or standards of operation, I can’t help but wonder how many more poor decisions are made than not? How much money is assuredly invested in creating meaningful change in the lives of our youth, elderly and general communities?

You and I both know the answer. We talk about it between meetings. We fund endless studies to guide us toward a vague truth. Still the answer remains: We simply do not know.

Instead, we have created what is all too often a collective dance of deceit whereby funders are told what they like to hear and grantees are freed of true accountability for their efforts. Such an approach to grantmaking creates situations where, for example, those operating what may be fundamentally sound youth programs must “spin” various aspects of the program to fit a variety of funders’ stated interests. Within this funding vortex, the same basic youth center is simultaneously presented to different funders as an innovative program serving (1) “at-risk” teenage boys, (2) youth “at-risk” of substance abuse and, at the same time, (3) youth “at risk” of teen-age pregnancy.

What would you like to fund? Take your pick…or, wait…You have a different interest? Give me a minute…I’ll be right back….

Yet it is often the same organization simply operating related programs presented differently to different funding agents. Within this system, nonprofits plug along for years on the basis of “new” programs and initiatives, yet are never fully capitalized to fulfill the potential promise of their fundamental value proposition and strategy.

Granted, this dance is not executed by a single set of players, but you dance with them that brought you. In the case of many nonprofit managers those that brought them are those that pay the bills.

To be sure, this is also a two-way street. There are many grantees who ignore their better inclinations and refrain from challenging their community to rise above each organization’s partisan self-interest. However, as it is more than a decade since I was the head of a grantee organization, I will leave it to the members of that community to hold themselves accountable for their role in this charitable charade of musical chairs.

Instead, let me suggest that it is the funding community that should take the lead in altering the terms of engagement. One way we might do this is through a commitment to mutual accountability and honest engagement with those in whom we invest. In recent years, our field has seen some positive steps in this direction with the formation of Grantmakers for Effective Organizations (how could one not be a member?) and the increasing attendance at sessions addressing any number of strategies for program evaluation and “capacity building.” However, we need to do more.  

Traditional understanding of evaluation, which runs the risk of being viewed by nonprofit managers as backward-looking and too punitive, must be complemented by the creation of operating systems capable of telling practitioners and their investor partners where they are today, and guiding them toward where they need to be tomorrow.

In the same way every business person works to build management information systems (MIS) to maximize every dollar and show how their service or production offerings fare in the market, a social MIS must come to form a central part of our understanding of the capacity of any nonprofit to pursue its goals. It is not simply a question of having a great vision and good strategy—for every funder knows there is certainly no shortage of “promising” program offerings. It’s a question of whether or not you are able to execute. And without a social MIS in place you have no clue whether you’re moving forward or back.

Now, what is not being called for here is counting for the sake of counting or mindless efforts to monetize units of service. After all, as Albert Einstein once said, “Not everything that can be counted counts, and not everything that counts can be counted.” However, that does not then mean building appropriate tracking and documentation systems—creating newly conceived metrics that seek to reflect social value—is a wasted effort.

The current movement toward building effective, comprehensive client tracking systems and leveraging nonprofit Application Service Providers (ASPs) as operating platforms to support such infrastructures is a promising trend in this area. One example of this is the OASIS Project. In partnership with its nonprofit investees—the word investees is used since all support is viewed as a form of investment in a portfolio—this project is sponsored by the Roberts Foundation, Helen and Charles Schwab Foundation, the Phalarope Foundation, Surdna Foundation and William and Flora Hewlett Foundation. The OASIS Project is working to build a social impact and tracking system capable of telling both funder and investee where the greatest value is being created and on what terms. More such efforts are needed in other regions of the nation and they are no doubt out there waiting to be promoted.  

But such innovations in managing the work of nonprofits do not come about simply by putting a group of executive directors in a room and asking them to develop a better mouse trap. They come about in dialogue and discussion and debate between those who are doing the work and those making long-term investments in their programs.

Just as we see in It’s a Wonderful Life, new approaches to addressing old problems will not come about in isolation from those presently involved in the work—whether investor or investee. It will take all hands and all minds to advance better strategies that may then be supported by all the resources we can muster.

The intellectual capital and wisdom of the foundation community should not be stored in the bank vaults of Potter’s gray and sterile institution, but rather, as the film suggests, invested in Bob’s house and Leng’s business and lent to bankroll Maria’s dream. If all we do is make grants, all we will have is annual reports justifying grantmaking. What we need in addition to traditional grantmaking is appropriate and meaningful engagement in the life of our grantees if we are to achieve the true potential of our collective future.

George Bailey would ask for nothing less.