The world is unpredictable, funder-grantee relationships don’t have to be
In an analysis of over 100 real-life examples of “what goes wrong” for nonprofits during project implementation, the most common challenge was funder-created problems. These roadblocks — such as a delay in disbursement, change in strategy, or bureaucratic inflexibility – account for an astounding 46 per cent of impact-threatening obstacles.
As a foundation executive myself, the findings from Open Road Alliance’s Roadblock Analysis are sobering to say the least. However, this result also means nearly half of these obstacles to impact are in our power to remove, and I challenge myself and my foundation peers to view this data as an opportunity for impact.
Below are three top causes of funder-created roadblocks — and some suggestions on how to avoid them.
Change in Funder Strategy
Defined as: “a change in the funder’s theory of change, asset allocation, strategic new direction, etc., that impacts an existing funding partner.”
This is the most common offender. However, when you talk directly with the affected grantees, the problem isn’t that funders change course; it’s that they don’t offer sufficient communications or time to allow grantees to make alternate plans.
To better equip grantees and avoid becoming the number one cause of lost impact, try:
Giving advance notice of changes in funding — ideally 12 months. Most foundations make grant decisions only once or twice a year. So even giving three months’ notice (let alone three weeks) is not enough time for nonprofits to research, apply for, and secure alternate funding. Also consider providing a “wind-down” grant to organisations that have received regular funding, but no longer fit your new strategy or approach.
Communicating honestly around potential strategy changes. Often we hear of conversations that go something like, “it’s not a guarantee, but your renewal should be fine” or “I can’t confirm it until our fall Board meeting, but this shouldn’t affect you.” Although these statements include qualifiers, the baseline message conveyed is, “You can plan on us.” And here’s the thing; nonprofits do plan on it. This communication stance makes then the Board’s strategic change feel like a bait and switch.
Delay of Disbursement
This self-explanatory definition includes examples that are intractable, like a government’s bureaucracy delaying funding for months, as well as avoidable scenarios like a donor forgetting to sign the papers before going on vacation. And certainly, some delays are unavoidable. After all, sometimes foundations have their own internal roadblocks too. But here’s one practice that can help prevent even unavoidable hiccups in disbursement from becoming fiscal crises:
Adjust to grantee cashflows. Inadequate cashflow is a major source of roadblocks for nonprofits. Ask your grantees about their annual cashflows, what their pain points are, and then try to align your disbursements with when they need the funds. Even if your own cycles can’t change, understanding your grantees’ will help identify potential risks before they become crises.
Defined as: “a funder’s inability to adapt to/make exceptions for situations outside of the funding recipient’s control,” the preventative suggestion is obvious:
Be Flexible. Whenever possible, build flexibility — or the option of flexibility — into your grant process. Such steps can include:
- When offering multi-year or renewal grants, build in a mechanism to offer advances.
- Soften grant restrictions (or better yet, make your grants unrestricted).
- Anticipate that one in five grants is likely to encounter an unexpected roadblock. Set up an emergency grant-making protocol or set aside contingency funds.
In short, accept that there will be changes and course corrections during grant implementation.
Fifty-four percent of the roadblocks in our dataset are caused by external, real-world risks that no matter how much we cross our fingers, we just can’t control. But we can control disbursement policies and communication practices, and take tangible steps to reduce 46 per cent of obstacles that our grantees face — what an opportunity!
The world is unpredictable, but funder-grantee relationships don’t have to be.
Maya Winkelstein is executive director of Open Road Alliance, a philanthropic organisation that provides contingency funding to nonprofits and social enterprises that encounter impact-threatening roadblocks during project implementation.