Funders, your “wait and see” approach is killing nonprofits during leadership transitions

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[Image description: A gray mouse with a long tail, its head bowed, its paws covering its eyes and nose, on a white background. What does this image have to do with this post? Who knows, maybe it is a profound metaphor for funding dynamics. Image obtained from Pixabay.com]

This week, I read the Road Block Analysis Report by the Open Road Alliance that shows that the biggest barrier nonprofits face is…our very own funders. In fact, according to the executive summary:

“Funder-Created Obstacles make up 46% of the roadblock dataset and include specific obstacles such as a Delay of Disbursement, a Change in Funder Strategy, and Funder Policy Inflexibility. With only a few exceptions, Funder-Created Obstacles are the most frequent roadblocks across all sectors, funder types, project types, geographic focus, and organization size. Thus, funders are frequently – if unintentionally – contributing to disruptions to project implementation and, in doing so, threatening the impact of their own investments.” [Bolded-line emphasis mine]

I know we are all thinking the same thing: Where is Septa Unella, the severe nun from Game of Thrones, when we need her? This is the perfect time for her to walk around ringing a bell and chanting “Shame! Shame!” every three or four steps.

While this revelation is distressing, it is hardly surprising. There are many amazing foundations and program officers out there, but honestly, we all know that funders create the biggest headaches for us nonprofits (The list is 1. Funders 2. Boards 3. Staff 4. #OfficeMiceProblems). It’s nice to get some empirical evidence that we nonprofits are not exaggerating. We need to acknowledge that this is a serious issue, that funder behavior is hurting nonprofit work and also driving effective leaders out of the sector.

Please read the full report, as it provides lots of good suggestions on what funders can do to counter this problem, including being more communicative with grantees and more flexible on how and when funds can be used. And of course, I would emphasize, by providing Multi-Year General Operating Dollars (MYGOD!)

For this post, though, I want to highlight one particular funder practice that is extremely harmful. This is when a nonprofit is undergoing a leadership transition, and funders freak out and go “Eeeeeek! They’re going through a time of turmoil! We don’t know if they’ll make it out OK. So let’s pull back funding, or not start funding them just yet. We’ll wait and see. Once they’re stable, we’ll re-engage!”

That’s like encountering someone who is choking and going “Oh no! They’re choking! I’ll wait to see if they survive before I do the Heimlich Maneuver.”

A colleague, a funder, tells me “we’ve been hearing from a lot of EDs about the bad habit funders have of withholding support during executive transitions, defaulting to a ‘wait and see’ position.” 

Another brilliant colleague of mine, who left being an ED, probably for good, in great part due to these funding dynamics, told me that a foundation pledged a significant one-year grant to his org. Later when he gave this funder, and everyone else, over a year of notice that he was transitioning out of his role, the funder revoked the grant, even though the grant would have been spent way before the year was over. 

Please, funders, including donors, we’re begging you, don’t do the “Wait and See” thing. Your hesitation and risk-aversion create a self-fulfilling prophecy, significantly increasing the organization’s likelihood for failure. Then, when the nonprofit fails, it falsely affirms your belief that doing nothing was the right thing to do. You may then feel like you dodged a bullet, when in reality your actions or lack thereof may have been the straw that doomed the nonprofit.

All nonprofits go through leadership transitions. We all go through periods of turmoil and uncertainty, even crises (and remember, according to the report above, a lot of that is caused by funders). Some, probably many, of these transitions are good for the organization and the community. What funders do or not do in these situations not only affects our organizations, but the millions of people we serve. Instead of engaging in the frustrating and destructive Wait-And-See death spiral when a grantee or prospective grantee is going through a transition, please do these things:

Examine the past and potential effectiveness of the nonprofit: Has this nonprofit been effective at its work? Has it been around for a while doing awesome things? Does it have potential to do amazing things if it had the resources and support that it needs? If a nonprofit is effective, do you want to make sure it keeps doing it?

Examine its role in the community: Does this particular nonprofit play an important role? Is it one of the few nonprofits led by communities of color, people with disabilities, LGBTQIA folks, or other marginalized communities? Does it address a need that few other orgs are tackling? What would happen to the community if it folds?

Assess its board and staff’s commitment: Talk to the board and staff. Do they seem committed? Are they willing to work to protect critical programs and services and keep the team together during the transition?

Remind yourself that you fund missions, not individuals: Your relationship may be through a leader, and now that this leader is leaving, you may be feeling uncertain. But most of you are not funding individual leaders; you are funding the organizations they work for. For many of us nonprofit leaders, one of the most heartbreaking things to happen is seeing the organization we have worked so hard to build collapse because funders and donors end their support when we leave.

Double down: If an organization has done or has potential to do amazing work, especially if it’s led by marginalized communities, and its staff and board are committed, then you need to double down on supporting this organization during this time. Be vocal. Be flexible with funding and timelines. Increase your investment. Fund the transition process itself, as another funder colleague recommends. Bend the rules if needed. This is when an organization most needs your support, and you can play a significant role in ensuring its important work continues.

Team up with capacity builders and other funders: Contact other funders, capacity builders, or others who may be able to help this organization through this time of uncertainty. Communicate with one another and with the organization, and coordinate support, taking lead from the organization.

I want to end with a plea to funders. If you have been reading the news, you know that a lot of things are not going well right now. A lot of people are hurting, and we nonprofits have our hands full. We know that funders are not trying to make things difficult for us, but the reality is that many of you are. And because of that, many of us are leaving our positions. We love our work, but we can only spend so much time and energy trying to justify our work, fighting to be allowed the trust and the autonomy to do our work in the first place. So then we transition out.

And during these transitions, many of you freak out and stop funding our organizations. In summary, we are leaving our jobs, often because of the frustrations with funders, and then our organizations get punished by funders because we are leaving. This is a terrifying dynamic that ultimately hurts the people and communities all of us, funders and nonprofits, care about.

It has to end. For us as a sector to be able to effectively address the challenges our community is facing, we have to be equal partners, and equal partners support one another, especially during times of transition and uncertainty.  

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