The View From the Other Side: How Nonprofits Interpret Funder Responses to Current Challenges

In relationships with significant power imbalances, research shows the weaker partner must be highly attuned to the behavior of the stronger partner to ensure their own safety and stability, while the reverse is not true. For nonprofits interested in what their “stronger partners” (i.e. funders) are thinking, the Center for Effective Philanthropy’s new report, “A Sector in Crisis: How U.S. Nonprofits and Foundations Are Responding to Threats” is a treasure trove of mostly depressing information.

Here are my main takeaways.

Let the Hunger Games Begin

To survive, nonprofits are looking for new donors (86%) and trying to get existing ones to give more (77%). While 64% of private funders are making emergency grants, I presume that more than half of these must be a reallocation of existing grants since only 30% of funders are increasing payouts. As a result, nonprofits are competing for money that will largely come out of the hide of other nonprofits.

Moving the Goalposts

Almost half (45%) of foundation leaders believe that the current context has not had a negative effect on their ability to make progress toward their goals. How can this possibly be true when the only mechanism through which foundations make progress — nonprofits — report pervasive negative effects? These foundations have either moved the goalposts or are delusional about the difficulty of making real progress.

Fish or Cut Bait

The good news is that 40% of foundations have done something — emergency grant funds, higher payouts, multiyear grants — in response to the current context, but another 20% are still considering it. If these funders have not yet decided to do anything, then for planning purposes nonprofits should assume that they never will.

Investment Committee Purview

The CEP report suggests to me that many investment committees are actively working against the desire of foundation leaders to spend more. A foundation’s reason for being is to make grants — not to invest. What grants to make and when to make them (e.g., the balance of how much to spend now versus in the future) are strategic, full-board decisions outside the purview of the investment committee. (Would the investment committee of Atlantic Philanthropies have told Chuck Feeney that he could not spend down?) Investment committees that won’t stay in their lane should be bullied back into it by the rest of the trustees.

Supporting Collaboration

It is great that 40% of foundations are providing new forms of assistance beyond grants, the most common of which is “new collaborations/partnerships with grantees.” SeaChange has been working to support nonprofit collaboration since 2008. We’ve seen about 1,750 situations and made more than 350 grants, yet I have no clue how a funder would “provide” a collaboration. Funders interested in “providing collaborations” must think carefully about how to do it in a supportive, not prescriptive, way and might learn from the experience of their peers in the Sustained Collaboration Network.

No Time for Trinkets

What nonprofits most want from foundations is cash money. Money pays the bills; a pat on the back does not. While it was heartwarming to read about one funder’s “small wellness grants,” I suspect its grantees would have preferred cold, hard, unrestricted cash. A funder who feels that “affirming the worth of leaders and letting them know we believe in them is just as important as money” has never worried about making payroll.

A Friendly Invitation to Funders

Across the board funders rate themselves almost twice as favorably as nonprofits do. This is to be expected. (As Seneca said, “Who dares to tell himself the truth? Who, though he is surrounded by a horde of applauding sycophants, is not for all that his own greatest flatterer?) But some of the quotes in the report are nonetheless jarring for nonprofits to read:

In response, let me be clear: nonprofits know that life is good for you. They know that even in these tough times, only 10% of you feel at risk or have experienced any backlash. They know that you have no “requirement” to do anything other than give away 5% of your money each year and avoid self-dealing.

However, very few nonprofits are struggling because they tried to grow beyond their means. They are struggling because of the unprecedented actions of the federal government overlaid with the pre-existing precarity that their often-restricted, zero-margin funding imposes.

They appreciate that you don’t have the money to fill more than a smidgen of the hole caused by reduced government funding. They know that you feel powerless and even frightened at times and are just trying to make the best of a bad situation. If there is one silver lining to this mess, it could be to bridge the empathy chasm that often separates nonprofits from funders. To do that they need more of you down in the programmatic trenches, not up in the philanthropic clouds.

John MacIntosh is managing partner of SeaChange Capital Partners. Find him on LinkedIn.