A Case of Arrested Development: The Grantee/Funder Relationship

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Editors’ Note: In researching this issue of the Nonprofit Quarterly one of the strongest themes to emerge was the conflicted nature of the relationship between grantees and funders. These theoretically strong (and certainly critical) partnerships are often less than we would hope. We looked for humorous stories, and received a few, but mostly we received sobering accounts of how our behavior has worked against both grantees and funders on many levels.1

The “difficult” discourse between grantees and funders is one of the most bemoaned dynamics of our sector. Many of us, when faced with a potential funder, find ourselves descending into behavior that is at the very least disempowered and sometimes downright immature. Many funders, for instance, still report that all of their jokes are apparently hilarious. Either many of them missed their callings as comedians, or we’ve got a kind of a co-dependency problem going on here.

Crestview Child Development is a large, well-respected nonprofit with a highly regarded and quite beautiful camp for inner city kids—Camp Destiny on Oblong Lake. Two massive rounds of government cutbacks forced a difficult decision: whether or not to close Camp Destiny, which was leaking money but had enormous sentimental significance and visibility. It was a painful choice, but over the objections of staff, Camp Destiny was closed and the staff let go, though the property was kept with the hope of reopening later.

Two months after the Camp Destiny closing, Crestview was approached by DynaDyne, a large employer in the area who wanted to bring up to 1,000 employees to Camp Destiny for a volunteer “community service day.” The purpose of the affair, which came with a $25,000 check from DynaDyne, was to promote better futures for kids. What to do? The well-known and respected executive director decided not to let on to the corporation that there was anything afoot. The work-day was held (against staff protest at the nonprofit), and a thousand DynaDyne volunteers (with many photos and smiling faces) were deployed for a day, clearing brush and painting cabins, dreaming of the deserving children that would benefit.

A reader recently shared this story:

“Working on a grassroots child rights project in Sri Lanka, I was looking over a program progress report that was to be submitted to our head office in Colombo. “But we haven’t had any child-initiated projects!” I protested, noticing that the field officer had stated that some child-initiated projects had taken place. “I know,” she replied, “but it looks better if we say we have had.”

The report was duly amended by the field officer. You can imagine my surprise when, back in the Colombo office, I glanced over the project report that had been compiled at the head office and sent to the Canadian donor. “But we told you we didn’t have any child-initiated projects!” I exclaimed. “I know,” replied the program officer, “but it looks better if we say we have had.”

This kind of truth bending around funders is counterproductive, solidifying unsatisfying relationships into preset patterns that are hard to break. Fibbing or truth shading, of course, is not the only way we deal with the stress of the funder/grantee relationship. A former program officer at a community foundation tells this story:

“When I was on its staff, the Metropolitan Community Foundation’s giving was guided by a set of policy papers designed to keep us in the realm of “strategic philanthropy.” For homelessness, the Foundation spent most of its grant money on programs that addressed policy issues, and on programs where homeless people were incorporated into the decision-making.
In the third year of this initiative, a collaborative project with other funders brought us into close contact with homeless shelters and traditionally structured direct-service programs, all of which were publicly funded, although certainly not to the level needed. Although the policy papers were available, Bob Nathan, the director of Everwood, a large shelter in a very low-income area, submitted a proposal to support direct-service work that was not guided by the input of homeless people. I let him know, over the phone that the Foundation was probably not a likely funder of Everwood, but our practice was to meet with everyone who came to us, so we set up a meeting.

As the meeting started, I let Bob know again what the Foundation’s position was with regard to homeless services. Bob went ahead and launched his pitch for Everwood as it was written in the proposal, never addressing why he might think the Foundation’s funding strategy was wrong. “But Bob,” I said, “Is there some rationale you have that would persuade us to fund you out of the thirty or so shelters in the area?”

Then it happened. Bob’s eyes glazed over and he once again, using the same words he had previously, made the same pitch; but this time whenever he referred to himself he used the third person—“well, Bob believes…” and “when Bob talked to….”

I was unclear about how to react. I giggled nervously and tried to redirect the conversation, but Bob plowed ahead. After an hour or more I escorted him to the door of the Foundation and went back to my desk, to look up dissociative disorder.

Among the definitions I found were:
“…sudden temporary alterations in the normally integrative functions of consciousness.”
“…dissociation so severe that the usually
integrated functions of consciousness and perception of self break down.” That certainly described what had happened in my view of things…but I knew that Bob was a fully functioning human being, leading an organization with a million-dollar-plus annual budget. I never forgot this.

As with many situations in which there is a clear power differential based on status, people have good reasons for adopting their coping mechanisms.

Many grantees, for instance, are at a loss as to how to respond when they feel their organization has been misused or misunderstood during the grantmaking process. What do you do when your program officer does not return your calls, and then turns you down? How do you respond when your proposal gets postponed cycle after cycle because the foundation is in a reflective space? Even if the grantees’ perceptions of the situation are off, the lack of normal discourse and the perceived lack of recourse are very disturbing to many nonprofits. Grantees seldom feel like they can challenge funders without risking repercussions—even if the funder thinks they have no reason to feel that way.

If most interactions between funders and nonprofits are not designed to get to the full range of honest issues at hand, it can be a huge risk for the nonprofit to disclose any problems it is facing. With the funder in full control of the money, and the organization in typical supplicant mode, the nonprofit lacks the incentive to be forthcoming, particularly when many organizations experience a loss of funding and confidence when they come clean about their follies.

For instance, about ten years ago the Vida Nuestra community center went to several funders requesting infrastructure support. The director, who had been a well-respected leader in his community for many years, felt that there were too many programs, and insufficient staff to manage them. As the executive director, he was alone in overseeing several departments, doing fundraising, managing the board, etc.—the typical scenario for small to midsized agencies. A middle management layer, he argued, was needed. He presented his case to local foundations but the infrastructure funds never came, and even worse, the foundations in town felt more wary about placing grants at the agency given its “unstable” status.
Vida Nuestra landed on the front page of the paper a few months later when its protective services unit lost track of a child and the child was badly injured. Only after this scandal resulted in a significant loss of funding, as well as the subsequent firing of the director and the revamping of the board, was the agency able to leverage infrastructure support.

There are many components to this story but most trace back to the lack of a reasonable dialogue between the organization and its funders regarding what was necessary and when to maintain operations.

Among the hundreds of nonprofit leaders we know, which ones seem most effective with funders, and why? There are a number of people, in our experience, who manage their relationships differently than the rest, and with extraordinarily good effect. They approach program officers as if they are peers; they fully state their cases and remain open about any problems they encounter along the way.

To some extent these individuals exhibit a kind of natural entitlement that unfortunately too often comes from a shared social class with the funders. But, sometimes it comes from a confidence borne out of sure-footedness, a well-grounded practice, a passionate belief in the quality of their organization’s work, and deep knowledge of the field that they work in. These folks see themselves as full partners in helping the foundation achieve its mission and live out its values – and they talk in terms of values and results with equal passion. They feel comfortable asking questions and even challenging their funders, and don’t accept being ignored. They have excellent strategic and negotiation skills, and know how to get their point and perspective across even when a temporary impasse is reached.  If things are not going well with the funder, they know how to keep the dialogue alive, using research, networks, media strategies and other ways of upholding their points of view. Most of all, they expect to be treated as a peer.

In one case, a group of funders, deeply invested in an innovative local community building project, approached the executive director suggesting that they monitor management issues monthly to help him identify and address any problems that emerged. The director, who never suffered from low self-esteem, reacted in a very unusual way. Without a moment’s thought about what their suggestion might “mean,” he welcomed them in and set up a regular meeting time. But this individual often “dropped in” on funders for an unannounced chat.

Few of us have this kind of chutzpah, so we have to think more systemically. We have to take up questions of stewardship, governance and accountability in a more rigorous way,  ensure that standards are adhered to in our own organizations and those around us, including in our  funding organizations. What will it take for us to break out of the awkward and un-fun dance we are in? Whatis the dance, for that matter, that we really want to be in? As it is, the whole situation is as uncomfortable and fraught with potential danger as a chronically offtrack parent/adolescent relationship.

1. The names of people and organizations in this article have been changed to protect their identity. Any reference to real people and organizations is not intended.