Trust, Transparency, and Tips for More Effective Funder-Grantee Relationships

By Lori Bertman |President and CEO, Irene W. and C.B. Pennington Foundation

Ms. Bertman pictured with Leda Khoury of FEMA Region 6, working cross-sector for the Louisiana Disaster Recovery Alliance.

(Note: none of the individuals/organizations pictured are referenced in this article.)

Last year the Executive Director of a local nonprofit came into our office carrying a stack of papers. She was practically in tears as she explained the dire financial situation her organization was facing and emphasized that she had tried to do everything she could before coming to me. This is a nonprofit that the Pennington Family Foundation had helped to start several years prior. I asked why she had not come earlier — our organizations have a close relationship. She said she was embarrassed and felt bad asking for help when so many other “more essential” organizations were floundering due to major floods and tornadoes our community had endured.

At first this seemed like a common issue — philanthropic dollars were being redirected to disaster recovery in Louisiana causing a shortage of otherwise dependable funds for her organization. With an increase in weather-related disasters across the United States in the past several years and recovery efforts costing billions of dollars, the problem of nonprofits being unprepared for their funders redirected resources is not confined to Louisiana.

However, as we spent the next several hours white-boarding a plan for the organization, I discovered that it wasn’t just the floods that set them back — it was also the underutilization of the organization’s founding board. Thankfully, this was a leadership challenge with a solution.

We developed a plan to bring other foundations and strategic partners to the table. We reached out to our local association of nonprofit groups, and immediately got this organization signed up for board training and recruitment sessions. With an agreement to work on developing a more robust board, the Pennington Family Foundation gave them an emergency bridge grant, and we called upon other foundations to help match our emergency gift. In this case, we could salvage the organization through openness, honesty and swift action.

Ms. Bertman pictured with City Year’s new Executive Director, Jada Lewis, and Regional Vice President, Ryann Denham, discussing how to transition out of a capital campaign back to standard giving. Lori co-founded City Year Baton Rouge 13 years ago.

Foundation transparency is a growing trend among the nation’s leading foundations. Efforts like the Fund for Shared Insight and the Foundation Center’s Glasspockets initiative provide foundations platforms to engage, share with and learn from their peers. Lifting the veil on how foundations make decisions, structure programs and evaluate their successes and failures is increasingly viewed as means toward individual and sector-wide best practice, and promotes cooperation among funders that can accelerate progress. Funders recognize that our greatest successes come from mutual partnership and collaboration. We are peers and partners in our mission-driven work.

And yet, there remains a missed opportunity to extend the same level of trust, transparency and collaboration towards our grantee partners who also are supposed to sit on the same side of the table as us in confronting a given challenge. Foundations must get down from their pedestal and act more as partners rather than benefactors.

Lingering progress in the funder-grantee relationship dilutes philanthropic investment and more importantly slows results, impact and social progress. Nonprofits seem scared to open up and share their challenges, failures and missteps. Philanthropy is about the building of honest and fruitful relationships, but often behaves like a “Social Entrepreneurship Shark Tank.” When it comes to tackling pressing issues, grantees and grantmakers must remember they have the same desired outcome.

Both are invested in bringing about change in an area they have identified as worthy of channeling finite human and financial resources. This partnership — between those with financial resources and those with capacity for implementation — is necessary to make that change possible. In practice, it too often feels as though grantmakers and grantees are on opposite sides of the same table rather than sitting next to one another.

To confront this reality, at the Pennington Family Foundation we engage our organizations on the same side of the table, or rather, the couch. We want nonprofits to feel at ease disclosing their greatest challenges to us. We ask questions like,“what keeps you up at night?” and “where did you face an unexpected challenge over the past year, and what did you learn from it?” Since we invest in strong leaders, we also ask “what is your succession plan?” Frankly, I would applaud the grantee who came back to me with the same questions about the Pennington Family Foundation.

It is both reasonable and necessary that funders and grantees take time to get to know one another — their missions, their processes, and their approaches — as they consider entering into a partnership. All too often, the grant application is long and cumbersome. In reality, the grant application itself should only be about 10 percent of the grantmaking/fundraising process. Relationship-building and creating trust is at least 90 percent of the process. Building this trust garners higher impact in collaborative planning (versus pitching), while organically building closer relations and mutual respect.

As an example, an application process can sometimes require nine months of both a nonprofit and funder’s time — however, there is no guarantee the grant will be awarded after such a significant investment of time, capacity and money, and the grant itself may only last for 12 months. When we look at the time invested and consider what impact can actually be accomplished in 12 months (or 18 or 24 months, for that matter), it calls into question the cost-benefit analysis of this practice. It also surfaces deeper symptoms around the lack of trust and transparency. We all know that both foundations and grantees have been guilty of ‘radio silence’ or not being forthcoming with potential risks or competing priorities in such a drawn-out process.

In contrast, imagine a process that operated with full transparency: one in which the applicant and the foundation come to each other on the same side of the table and put the problem, not the organization, in the hot seat. While it is still entirely conceivable that the conversation ends with either or both parties deciding that there is not a reasonable fit to move forward with partnership, the entire tenor of the conversation has changed.

Now the process is no longer about testing the nonprofit as an applicant inherently looking for flaws the way a professor grades a test but rather as two potential business partners who enter the due diligence process to determine fit, not fault. The two (or more) parties can accurately calculate and assess risk involved with the grant and be open about how to handle issues if and when they arise over the course of the partnership.

Without trust and transparency, we will fail to manage risk, and in turn we put billions of dollars invested in impact every year on the line. If we honestly steward our money and invest in leaders and succession, our dollars will multiply in their impact.

So, how do we increase trust and transparency in order to effectively allocate time and funding? It begins with grantmakers. We are in a unique position to build policies and practices to invite nonprofits to be more transparent about possible risks to impact and foster trust between both parties as equal partners. Sit at the table with, not across from your grantees. Be a mentor, not a judge. Be open and fair about foundation policies instead of guarding them like a secret. Return nonprofit honesty with transparency: be open about the likelihood for funding, challenges that may prevent your foundation from supporting them, offer a transition year of lesser funding and help them secure other funding for a smoother break-up. Finally, don’t be afraid to honestly tell an organization the hard truths.

Red Cross of Louisiana, working on ways to find potential common ground for the Pennington Family Foundation and the Red Cross to collaborate and work together.

There are, no doubt, many funder-grantee relationships that are built on trust. But what I’m suggesting here is a philosophical and systemic change in philanthropy that creates clearer channels for honest and open communication between funders and the nonprofits. In doing so, we will more effectively and efficiently utilize our valuable time and capital in our mission to achieve impact.

And the good news is, we are making strides in the right direction. We’re seeing more examples of relationship building as the word ‘transparency’ becomes more at home in the lexicon of grantmakers. It is up to us funders to continue this progress by creating the groundwork for relationships that lead with transparency and brings nonprofits to same side of the table (or couch).

See Tool #10 in the Toolkit below for tips on how to build effective funder-grantee relationships*: http://openroadalliance.org/resource/toolkit/
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Lori J. Bertman | President and CEO, The Irene W. and C.B. Pennington Foundation

Lori J. Bertman is President and CEO of the Baton Rouge-based Irene W. and C.B. Pennington Foundation, Louisiana’s largest private family foundation. The foundation gives millions of dollars in grants annually throughout Southern Louisiana and nationally. She founded and currently serves as Board Chair of the Louisiana Disaster Recovery Alliance and the Center for Disaster Philanthropy. She has been a private philanthropy advisor to donors and a fundraising consultant for nonprofits for over 15 years. She previously taught a class on philanthropy at Louisiana State University. In 2015, The Children’s Health Fund awarded both the Founder Award to Ms. Bertman and the Pennington Family Foundation for her work with the organization following Hurricane Katrina as well as receiving the first Leadership Award from the National VOAD. Share Our Strength honored her with a National Leadership Award of Advocate of the Year for her work during Hurricane Katrina. Additionally, City Year awarded her their Visionary of the Year Award for her role in founding City Year Louisiana. Ms. Bertman is also a speaker at local and national conferences and a former contributor to Fortune and the Huffington Post.