Avoiding Success Disease: Building Trust in the Grantmaking Process

This week, the Doris Duke Charitable Foundation announced that, in light of the recession, it is open to renegotiating terms of previous grants in order to allow arts organizations to spend the funds on more immediate needs. At around the same time, the Gates Foundation was releasing a statement by CEO Jeff Raikes saying that the behemoth grantmaker needs to create a “culture of listening” to its grantees. I think these are both positive developments and a step toward promoting more positive, open communications in the field.

One of the biggest lessons I’ve taken away from my study of philanthropy over the past two years is that poor communication between funders and grantees can create a lot of problems. My class on philanthropic foundations demonstrated the point rather vividly by showcasing one of those horror stories you sometimes hear about: a high-profile funder with big pockets encourages the president of a university to develop a new program for curriculum reform; the dean submits a proposal despite reservations about the program’s feasibility; sure enough, the program, while funded for a pilot round, is essentially a failure; but in order to preserve the relationship with the funder, the program is spun in the report to seem like a success; therefore, the program is funded again and the foundation’s board members pat themselves on the back for a job well done. The names were fictionalized in the materials we read, but anyone who has been in the nonprofit trenches knows that situations like this happen far too often.

What’s really going on here is that each of the parties has a strong incentive to delude themselves into thinking that a poorly performing program is successful. Organization leadership wants to secure more money for the institution and preserve its relationship with the funder. Development and program personnel want to keep their jobs, which means doing what the people in charge tell them to do. The funder’s staff and board, meanwhile, want to believe both that they have designed the right kind of programs and that they have done a good job by selecting the right partners to carry them out. Pretending that the program is successful, even if it’s not, is the easiest way to keep everyone happy. It’s a dysfunctional culture that enables mediocrity and rewards effective grantsmanship over effective outcomes. I call it success disease, and sadly, the people who ultimately get hurt by it the most are a) the organization’s constituents who have to deal with subpar programming, and b) innovators who come up with better ideas but can’t get support for their implementation because of commitments already made.

Now, it should be said that plenty of funders don’t act this way. Some, like the Hewlett Foundation where I worked last summer, sincerely want to do the best job possible, and understand that that necessarily means being honest about their own failures as well as those of their grantees. But even if some funders adhere to this philosophy, their grantees have been trained too well by all of the other funders and donors who just want to feel validated in their investment. Not to mention, there’s a hell of a lot of money at stake. So instead of honesty, we get these complicated guessing games, with the funder wondering: are they telling the truth? What are the numbers hiding? What haven’t we asked them that might crack this nut? And on the grantee side, it’s: what are they really looking for? How do we measure up? What can I tell or not tell them that will make a difference? It’s all very inefficient, and does more than perhaps anything else to get in the way of long-term, productive, truly satisfying partnerships.

Think about other kinds of relationships that involve close collaboration toward shared goals. (Because they are shared, are they not?) Would this be any way to treat a trusted employee? Or a student? Even business-customer relationships are often more open and straightforward than this, in the sense that there’s usually not a whole lot of doubt about what each party is looking for. Having had experience now on both sides of these conversations, I can appreciate that promoting trust in the grantmaking process is easier said than done. With that said, here are some suggestions that any funder can use to encourage healthy relationships with their applicants and grantees.

  • Cut down on unnecessary procedures. Make sure that everything you’re asking for will actually be used during the proposal review process. If you haven’t read the Project Streamline report, Drowning in Paperwork, Distracted from Purpose, please do yourself a favor and download it now. It contains numerous cogent recommendations for reducing the cumulative administrative burden faced by nonprofits who operate in a sea of heterogeneous grantmaking requirements and procedures.
  • Be transparent about criteria and process. While most grantmakers are pretty good about publishing eligibility requirements for their programs, quite a few are secretive about the actual considerations used to make decisions. If some criteria are more important than others, say so! If there’s a scoring system involved, why not publish it? The more information applicants have about how they’ll be judged, the more likely they will be to apply for the right opportunities and not for the wrong ones.
  • Require a letter of inquiry or preliminary application for any new grant. Many funders already do this, but it’s worth mentioning because of the incredible timesaving device it can be when used well. You don’t want to waste energy reading uncompetitive applications, and neither do organizations want to waste energy preparing them. A simple, no-fuss form designed to screen for eligibility and general fit with program goals can save everyone valuable time.
  • Incorporate feedback along the way. Wouldn’t it be great if, after the initial pre-evaluation of new grants, applicants got back not just a “yes” or “no” but some meaningful information about their chances? Why not divide responses into, say, four categories, with some applicants being strongly encouraged to apply based on their materials, others encouraged with reservations (specifically noted and communicated to the applicant), still others told that they are welcome to submit but would not stand a high likelihood of success without a substantial reworking of the application, and the final group strongly discouraged from applying?
  • Encourage communication between applicants. One of the most creative strategies I encountered in my fundraising days came from Rockefeller Philanthropy Advisors during their administration of the New York State Music Fund. Apparently, many of the pre-applications in a particular category bore a number of similarities to each other, so RPA created a voluntary exchange by which applicants could share abstracts of their pre-applications with all of the other participants in the exchange, with the goal of forming partnerships and potentially combining bids where appropriate. It was kind of an awkward experience, but getting a peek at the competition gave us a better understanding of our role in the field and helped us decide that a full application would not be the best use of our resources.
  • Provide feedback to unsuccessful applicants. These people just spent quite a lot of time preparing a proposal, only to have it all come to naught. Particularly if they haven’t received feedback earlier in the process, they deserve to understand why their application was not successful and what they might do to improve their chances in the future. Make sure systems are in place to record notes of discussions or investigations of the proposals as they’re happening, so that advice given later won’t be of the off-the-cuff variety.
  • Stay active during the grant period. And I don’t just mean active in the sense of, “are you doing everything you said you would do?” Ask them if they need any help. Ask them what aspects of the project are going well, and what aspects aren’t going so well. Do site visits if you can. Interests are never more strongly shared between funder and grantee than they are during this stage – never forget that their success is your success, and vice versa.
  • Use the reports! This is also mentioned by Project Streamline, but I wanted to call it out specifically because it absolutely flabbergasts me how times I have heard about reports from previous grants never even being read, much less used in the evaluation process. Ideally, I would think, a report should look much like the final paper one hands in for a class – in other words, it should be more detailed than the application, not less. And then that report should receive a grade: actual feedback from the funder, both quantitative and qualitative, on how successfully their efforts advanced the funder’s overall goals, including specific suggestions for improvement. This report should then become part of the track record for the organization when considering future investments.
  • Reward intelligent failure. Ultimately, most of the problems basically come down to this: the disproportionate impact of grants on the grantor and grantee. Failing to secure a big grant can be life-or-death for an organization, but for a funder, not awarding that grant just means the money will go to someone else. Funders drive success disease by being unwilling to accept failure from their investments, or from the investments of others (when considering new grantees). But this is silly: failure can be extremely useful when it results in a learning experience for an organization or, better yet, the field. The trick is to distinguish between failure that is handled with intelligence and dignity from the kind of failure that tears apart an organization at the seams and renders it unable to operate effectively going forward. In fact, one of the most important things a funder can do is to spot potential troubles on the horizon and help the organization to avert them, rather than leaving its grantee to fend for itself.

This little list is only the beginning, I’m sure. Certainly, the little things count as well: telling applicants when they can expect to hear from you, for example, or making sure that board and staff members have a consistent understanding of eligibility requirements and review criteria so that applicants aren’t told different things at different stages of the process. A general attitude of respect is similarly essential. Issuing public requests for proposals instead of maintaining an invitation-only policy can help applicants feel that they are being judged fairly and based on objective criteria. What other strategies can build trust in a funding relationship and combat success disease? I welcome further ideas in the comments.

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One Comment

  1. Maryann Devine
    Posted June 8th, 2009 at 10:34 am | Permalink

    Great, great recommendations.

    I think one of the key points is the acceptance of "intelligent failure." I understand why organizations are reluctant to report what didn't work, but it would be so helpful if funders could encourage this practice. Failure is one of the best ways to learn, and groundbreaking programs are not created without the risk of failure.

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