We've Got Relationship Problems

There is probably greater frustration with—even anger toward—foundations coming from nonprofits then there was 15 or 20 years ago. Frustration with funders is a common subject of conversations between nonprofits, but that emotion is rarely conveyed directly to foundations. Instead, it stays seething below the surface of grantee/grantor relations. It is one of the reasons why many outstanding executives have left nonprofit organizations.

The frustration relates to all program areas and is found among groups that are great fundraisers as well as those that aren't. Part of the problem lies in the nature of the philanthropic process. Not everybody will get a grant. Nor is it easy to understand why certain groups receive money and others don't. Who you know, friendships, board contacts, reputations, visibility, access or lack of access and poor judgments all play a part in the dynamic of grantmaking.

Another part of the problem is the increasing popularity of foundation-controlled initiatives. A growing number of program officers are not content with just being reactive to the ideas of nonprofits, and that has added to the pressure for special initiatives. Plus, a growing number of foundations want to have a "measurable impact" on their interest areas. As a result, grantees feel they must do exactly what the foundations want or they will not receive any money.

There has always been a leap of faith in the grantmaking process, by which funders grant money to groups they trust to do the job. A growing number of foundations no longer seem to trust grantees to do the job without imposing their own vision, checks and controls. Grantees resent this.

This lack of trust between what should be partners in the philanthropic process is undermining both effective grantmaking and the relationship between donors and donees. Nonprofits don't have any channels through which they can vent their frustrations, while foundations seem to be unaware of the depth of the problem.

The bottom line? There's an urgent need for common ground where both sides can discuss concerns openly and candidly.

What's Broken, and How to Fix It

In the interest of getting a frank dialogue going, let me describe several "relationship" problem areas. Then, I will suggest solutions for each.

Problems

Communication Gaps. For most nonprofits, the application for a grant is the only contact they will have with donors. Only rarely are nonprofits asked to join their foundation counterparts in discussions about serious policy issues, the nuts and bolts challenges to philanthropic institutions and the big questions that face the independent sector. When they are, they're frequently present as tokens, or at one-shot meetings.

Unfilled Forums. Independent Sector (IS), composed of both donor and grantee members, serves as a forum where both sides have a chance to interact with one another. But only a relative handful of nonprofits belong to IS, all of them national and most of them established institutions. Not many of the top foundation officers attend or stay very long at the IS meetings. The same goes for meetings of the Council on Foundations.

Slighted on Site Visits. Then there are site visits, among the most important tools of program officers. At the Center for Community Change, we considered ourselves fortunate if we were visited by more than five or six of our more than 50 funders each year, despite entreaties from us to do so. Other organizations that had much more tenuous relationships, were local or were not yet grantees have had a much more difficult time getting funders out to see them.

Suggestions

Ad Hoc Task Forces. The Council on Foundations could take the lead in establishing such groups, composed of equal numbers of donors and grantees, to assess mutual problems or issues (for example, evaluation or matters of policy, such as welfare reform). The task forces could meet regularly for one or two years, and could involve hundreds of nonprofit leaders.

Grantee Advisory Committees. To get continual constructive advice, foundations could appoint grantee advisory committees as sounding boards for their policies, priorities and practices-in some cases, for specific program areas.

Inviting Grantees. The Charles Stewart Mott, Rosenberg and a few other foundations have regularly invited donees to address their board meetings about subjects of mutual interest. The boards have found these presentations both stimulating and of assistance to their own deliberations.

More Frequent Site Visits. Grantees shouldn't have to beg donors for visits. Nor should site visits be limited to program officers—executives and trustees benefit from doing site visits, too.

Problems

Jerking Grantees Around. There is no greater irritant to potential grantees than these frequent foundation practices: changing signals, requirements or deadlines in the middle of a grant application; delaying consideration of proposals; and failing to communicate the status of a proposal.

When I was at the center, for almost two years we were encouraged to apply for a new grant by our W. K. Kellogg Foundation program officer. Then we were told things had changed and our refunding was up in the air. Then we were told we still had a chance but we had been assigned to another unit. Our calls to the vice president were never answered. Then we were turned down. A number of other organizations, including some on whose boards I sit, have had the same experience with other funders, too.

The point is this: No grantee deserves to be left twisting in the wind. We would have much preferred an early "no" to two years of herky-jerky communication.

Arrogance. Philanthropic arrogance includes such practices as failing to return phone calls, an unwillingness to meet with potential grantees, favoritism and courtesies granted to well-known personalities and friends, lack of explanation for turndowns and rudeness to applicants.

"Closed" Conferences. Possibly the most visible symbol of this arrogance is the way grantees are treated at the Council on Foundations annual meeting, which is three days long. Despite complaints by nonprofit representatives, the Council limits the attendance of speakers to the one day in which they've been asked to participate, provides hotel accommodations for one night, and expects nongrantmaking participants to leave once their sessions are done. Not permitting the nonprofit invitees broader access to sessions at the conference is tantamount to treating them as third-class citizens.

Suggestions

Reports from a Neutral Party. An academic institution or other nonprofit organization could be given the responsibility for issuing periodic reports on grantee/grantor relationships. For example, surveys of grantee opinion could be taken and an annual report issued.

Ombudsman. Another approach could be the creation of a national ombudsman for grantee grievances, perhaps located as an independent unit within Independent Sector. Mindful that a similar experiment failed in northern California a few years ago, such an office would have to be carefully structured and headed by an outstanding, impartial individual with no ties to philanthropy. It would need up-front funding, for at least five years.

A Code of Ethics. The Council on Foundations has a statement of principles and practices, but it does not get into the specifics of how best to interact with grantees. A written grantmaker's code is needed to set standards for

• handling proposals,      
• communication between foundations and grantees or other applicants,      
• expeditious decisionmaking, and      
• handling payments to grantees.

The effectiveness of codes always depends on the degree to which they are enforced by the leadership of an organization. The Council on Foundations has a special responsibility for providing leadership on the matter of strengthening donor-grantee relationships, because, by virtue of their money and perceived power, foundations are in fact the senior partner in the philanthropic partnership.

Practitioners-in-Residence. Just as some universities have practitioners in residence for a year, foundations could do the same. Bringing on a experienced nonprofit representative could help the foundation enhance its understanding of a particular field, gain new perspectives about the grantee community, improve its grantmaking process by making it more sensitive to grantee needs and provide an occasion for grantees to get a better understanding of philanthropy. Many program officers could also benefit by the opportunity of spending time working at grantee organizations. Sabbaticals remain rare in both the nonprofit and foundation worlds. They should be widely introduced.

Foundation Evaluations. Evaluations of grantees are a trendy topic. But what about evaluations of foundations? A few, including the Kellogg and David and Lucile Packard foundations and the French American Charitable Trust, have hired consultants and sent questionnaires to grantees. This is a positive beginning. But many more foundations need to undergo evaluations, and nonprofit representatives could play a much bigger role in such assessments, including being part of outside evaluation teams.

A Longer Invitation. It would be a tremendous gesture for the Council on Foundations to invite nonprofit speakers and participants to stay for its entire conference in order to interact with like-missioned funders, rather than quickly showing them the door after they've made their contribution to the conference.

Problem

Urgency, or Lack Thereof. A sense of urgency drives the activities of most nonprofits, because they must adapt to the changing needs of their constituencies and clients. Many fight yearly to survive. Nonprofits don't have the luxury of watching and waiting, but foundations do.

Foundations have secure budgets and staff, and they can afford to observe as events unfold. Most foundation boards meet infrequently, four times or fewer in a year. And, few have discretionary funds with which they can meet urgent new problems, emergencies or targets of opportunity.

That explains why there is often a lag time between national developments and foundation responses to them. For example, foundations were slow to react to the collective impact of devolution, welfare reform, federal budget cuts and the Contract with America. Many funders stayed in a state of "watchful waiting" as all of those things made life more difficult for the poor people of this country, and more difficult for the nonprofits that serve them directly.

Suggestion

Meet More Often. Foundation boards should meet more frequently to make grants. Or, committees of the board should meet between board meetings and be delegated responsibility for grantmaking. The rolling grant model, or continuous grantmaking, practiced by the Kresge Foundation could be adopted by other institutions.

Delegate More Authority. Foundation boards should authorize discretionary pots of money for use by staff to meet emergency situations. And, program officers of medium and large foundations should have the authority to make a limited number of grants up to $50,000 without board or executive staff review. If they cannot be entrusted with this responsibility, they're not qualified to be program officers.

Problems

Bureaucracy. Foundation procedures frequently are based much more on bureaucratic imperatives than the needs of nonprofits or communities. Their categorical structure—program priority areas each with an assigned budget—often prevents them from funding cross-cutting programs, projects and coalitions.

Small vs. Large. In many cases, especially when local and small nonprofit organizations are involved, there is a pressing need for small amounts of money. Yet many funders believe it isn't cost effective to give away small grants, even though this may be precisely what certain groups and communities require.

The Waiting Game. The payment of funds to grantees once they have received notification of their award is often a lengthy and complicated process. For organizations with cash-flow problems and no reserve fund, waiting several months or more for payment is not a pleasant experience. Nor is the practice of dribbling out the grant, particularly if the sum is small, in three or four portions during the course of a year.

Here is another example from my own experience. Not long ago, the center received a grant of $10,000 from the California Community Foundation. The money was delivered in amounts of $2,500, each installment to come only after a detailed report of activities had been submitted each quarter. Just think how much paperwork and staff time could have been saved with one payment and one final accountability report about this relatively small grant!

Moreover, most organizations need the money up front. Why should funders take so long to pay?

Suggestions

Defy Categorization. To be responsive to the changing social and political environment, the importance of cross-cutting issues and promising new initiatives, foundations ought to set aside a portion of their funds each year for noncategorical purposes. The new president of the Carnegie Corporation, Vartan Gregorian, has already indicated that he plans to do this. Other foundations should follow his lead.

"Do" Small Grants. In a time of devolution, national and regional foundations should not ignore what is happening at the state and local levels. Grassroots and small nonprofit organizations are starving for funds to carry out their important work. For many years the Charles Stewart Mott Foundation has successfully implemented a regranting program through national and regional intermediary organizations to hundreds of community-based organizations that have received up to $15,000 a year. This is a donor-grantee partnership that works well.

Easy to Be Hard

In the end, there's no easy solution to the challenge of improving donor-grantee relationships. The relationship won't change unless both parties expand their contacts with one another around mutual, substantive issues of concern.

A recent gathering of a 20 grantors and grantees—convened by the Council on Foundations and Independent Sector—to discuss their relationships is a good beginning, but such efforts must be extended on a continuing basis to a broader group from both parties, including critics from both sides. The Council and IS, I hope, are committed to a long-term approach to improving relationships.

For its part, the nonprofit community must overcome the "mystique of philanthropy" to assert its right to fair philanthropic practices. This means that grantees must be much more direct, candid, courageous and risk-taking than they have been in the past. Standing up for "donee rights" is all too rare a practice.

Foundations, on the other hand, must be prepared to take the initiative in this effort to narrow the gap between donors and grantees. It will take some imagination and creativity, as well as a willingness to change some long-standing practices and attitudes.

Above all it will take real leadership—on both sides.

Illustration by Brian Ajhar