Avoiding Leaky Pipes: Enhancing Collaboration Between Donors and Grantees

Editor’s Note: In this month’s FGN, Thomas J. Tierney and Richard M. Steele of The Bridgespan Group offer thoughts on how donors and grantees can overcome persistent traps to true collaboration, and get better results for society. The below article is adapted from their longer piece “The Donor-Grantee Trap: How ineffective collaboration undermines philanthropic results for society, and what can be done about it.” For more on this important topic, make plans to join us on October 11th for our webinar, “Avoiding Leaky Pipes: Enhancing Donor-Grantee Collaboration.”

If you had a leak in your water line, would you repair it? What about if you lived in a dry area where water was especially precious, would you invest to avoid wasting a scarce resource? And if your garden was withering as water leaked away, would you care?

Of course you would.

The central premise of “The Donor-Grantee Trap:  How ineffective collaboration undermines philanthropic results for society, and what can be done about it” is that philanthropy’s pipe is leaking—that scarce resources (both money and time) are routinely wasted in the critical linkage between donor and grantee. And as a consequence, our communities—the causes and constituents we are trying to serve—are being unnecessarily shortchanged.

In times of relative abundance, we may elect to overlook this misfortune—we may tend to accommodate our leaky pipe by simply pumping in more water. Today’s harsh realities, however, demand the opposite approach. In an era of severe government cutbacks, modest economic growth, and escalating social needs, we need to repair our pipes:

Philanthropists and the nonprofit organizations they support must learn to get the absolute most from every scarce dollar they invest.

How might this be possible? While more thoughtful and disciplined strategies are certainly part of the answer, an even more significant opportunity may lie in better execution around those strategies—specifically, in more effective donor-grantee collaboration. [1] Some donors are relatively hands off with the nonprofits they fund (and make no mistake, a large, unrestricted gift from a supportive donor can be a boon to a nonprofit and its performance). But others, especially foundations, tend to be extremely involved. Such active engagement creates a tremendous opportunity to add value. Far too often, however—and despite the best of intentions on both sides—donors and their grantees “collaborate” in a manner that shortchanges beneficiaries. Donors talk of achieving “leverage” with their gifts—of generating ten dollars of resources for every dollar they contribute. But leverage can be negative as well as positive. Absent effective collaboration, a dollar may yield only ten cents worth of value, undermining the results society desperately needs.

How can donors and grantees learn to work well together? Reduced to the essentials, there are three imperatives of effective collaboration—for which both parties must share responsibility. [2] They are :

• Resource it Right: Donors find it difficult to apply the necessary level and mix of resources, for enough time, to get the results they aspire to achieve. They tend to offer smaller, shorter-term grants and avoid funding “overhead” that doesn’t appear to them to link directly with program results – even though such funding may very well help a grantee develop into a stronger, more effective organization, better able to deliver over the long term.What can donors do about it?  One idea: resource your grantees for results. Try to help nonprofits identify what overhead costs will really drive their success, and support them in paying for it. One example of a nonprofit doing such work is the Lumpkin Family Foundation:

The Lumpkin Family Foundation has long recognized the importance of building capacity in the nonprofits it funds. The foundation, which does most of its grantmaking in east central Illinois, began to make grants to build nonprofit capacity in 2004 with its Nonprofit Excellence Program. Lumpkin embarked on an evaluation of this work in 2010 and researched other like-minded projects. It learned from the Flint Funders Collaborative’s BEST project (focused on “building the adaptive capacity of nonprofits in Flint and Genesee County, Michigan”). The result of Lumpkin’s extensive research was to launch two nonprofit capacity building strategies that, in the words of Program Officer for Organization and Leadership Development Annie Hernandez, allow Lumpkin to “go deeper with fewer [nonprofits] and, through the other, go wide with many.”

The first program, called Digging Deeper to Enhance Performance, awards funds to a small selection of local nonprofits to “complete a comprehensive organizational assessment.” The assessment includes all the usual “overhead” suspects:  technology, core capacity, financial sustainability, etc. The organizations receive a prioritized set of recommendations for investment to boost their effectiveness. While funding this type of diagnostic is unusual enough, Lumpkin goes a step further and will frequently fund participating nonprofits to tackle the opportunities uncovered. In addition, Lumpkin is sponsoring quarterly sessions for participants to come together and share their learnings.

The second strategy – creating and launching the nonprofit network and online resource center website goodWORKSconnect.org – offers a way for all nonprofits in Lumpkin’s region to connect, learn and collaborate. The website boasts a forum for discussion, a calendar of resources on topics like applying for federal grants or proposal budgeting, and job listings among other offerings to its 1200 members. Lumpkin has involved other funders on the Steering Committee, and has done a formal evaluation of the website and is updating the site based on feedback as well as expanding the site to serve nonprofits statewide.

Lumpkin’s broad and deep strategies demonstrate its commitment to “resource it right” and support grantees to meet the full set of challenges they face.

• Pursue Partnership: It is challenging to create clarity on what “success” will look like, and to reach agreement on the strategy for achieving those goals with a grantee, while collaborating in a productive manner. Given the inherent power imbalance between donor and grantee, it is difficult for donors to create any semblance of a level playing field, and to get grantees to ‘come clean’ about what’s truly needed to achieve their goals. How to do this?  First, donors need to be aware that they always have the “upper hand” given their financial position and, like it or not, this is never far from the nonprofit leader’s mind. In our experience, strong partnerships are comprised of two things:  shared goals and a productive working relationship, as illustrated in the following simple graphic:

One such example of a funder pursuing strong partnerships is the Case Foundation:

Nothing in life is static, and donor grantee relationships are no exception to this rule. Even when donors and grantees have created the basis for an effective partnership—through careful mutual selection and by “right-sizing” a grant (resource it right)—it will require continuing care and vigilance to remain effective. It also will require a commitment on both sides to share what management expert Jim Collins refers to as the “brutal facts.” [3] Why? Because the goals that donor and grantee jointly agreed to will likely evolve over time, as the strategy is implemented and evolves. And because the relationship itself will ebb and flow as new information emerges, new needs take shape, and/or new players enter the picture. Consequently, the more clarity there is, the better: Clarity about the funding strategy and goals; about how and when go/no-go decisions will be made; about milestones and expected outcomes; and about application and reporting requirements.

At the Case Foundation, for example, every commitment has its own grant document, which is short on legalese and long on expectations. “No lawyers work on [these documents],” Co-founder and CEO Jean Case observed. “There are written expectations on both sides around what we’re each going to bring to the party, and what we hope to see in return, and what we’ll do to evaluate that along the way. We try, with due diligence, to make clear what each side is and is not going to do.” [4]

• Get Better Together: Too often, donors’ reporting requirements of grantees are more like “scorekeeping” than measures to enhance learning and better serve the causes or constituencies they’re passionate about helping. The idea behind scorekeeping is to focus on results, but in reality, that’s not at all what happens. It’s important that donors and grantees find common ground on what to measure. These measures should be strategic (informs your strategy or helps you reflect on your strategic assumptions), situational (context is important), and actionable (what decision will you make with this data? If you cannot connect a measure to a decision, you probably don’t need it).

One example of a funder’s desire to be in true “learning mode” is the William and Flora Hewlett Foundation’s effort to post its so-called “failures” on its website. The Robert Wood Johnson Foundation publishes an annual volume sharing lessons learned from unsuccessful ventures. What might your organization do to encourage such a learning mentality?

These imperatives appear simple; experience has shown, however, that following them almost always requires confronting—and overcoming—some deeply ingrained dynamics, assumptions, and behaviors.

See here for the more detailed paper that the above highlights are excerpted from. This paper explains each imperative in more detail, and highlights how better execution can increase the impact of limited resources. It’s important to note, however, that although we present the three imperatives one at a time, what we’re describing is rarely a linear process. In practice, donors and grantees often approach all three imperatives at once, iterating back and forth as their understanding deepens. Most funding situations are messy and evolve over time as donors and grantees toggle from issue to issue. The key is that all three imperatives must eventually be addressed to achieve effective donor-grantee collaboration.

The Donor-Grantee Trap is written for nonprofit executives, their boards, and their major donors. It is based upon and excerpted from the book Give Smart: Philanthropy That Gets Results, by Thomas J. Tierney and Joel L. Fleishman, and supplemented with content from several related Bridgespan articles, which reflect The Bridgespan Group’s extensive field experience working with both donors and their grantees.[5]  For more guidance for donors, see www.GiveSmart.org.