Breakups are always unpleasant. That’s true not only for marriages, but also for funder-grantee relationships.
The worst divorces occur without notice or when a partner isn’t honest about the reasons behind the dissolution.
The best splits are still painful, but certain practices can make untying the knot easier to bear. Honest communication, empathy and a healthy dose of financial support can all help the bitter medicine go down a little easier.
In the knowledge that few relationships with foundations last indefinitely, here are some examples of the best and worst ways to deliver the message and soften the blow.
Out of the blue
Irresponsible funders give no warning when they pull their funds, and do nothing to help their grantees absorb the news or find other sources of support. Consider the demise of Pacific Standard, a small publication that for more than a decade had produced award-winning stories on social and environmental issues.
Pacific Standard relied almost entirely on SAGE Publishing, and its controlling owner, Sara Miller McCune, for most of its $3.5 million annual budget. The publication had a unique relationship with its funder, who was also its founder. Indeed, in 2017, McCune’s Social Justice Foundation, a nonprofit supported by SAGE Publishing, actually became Pacific Standard’s publisher. Around this time, the magazine expanded the number of issues it published a year, and added a digital edition, reaching 1 million readers in total.
But in 2019, McCune abruptly shut down the Social Justice Foundation, which in turn announced that SAGE was “unable to continue to offer the very considerable financial support that the magazine requires to be viable.” SAGE needed the money to invest in its “core business,” and the foundation’s board had no alternative, according to a statement at the time.
Nicholas Jackson, the magazine’s editor-in-chief when it shut down, was stunned. “[W]e were repeatedly and enthusiastically told we were over-performing … and that we had a long-term commitment,” Jackson wrote in a series of tweets. Jackson announced that its primary funder intended to shut down the publication within days. The announcement was made August 7, and the publication’s last day was August 16.
There was no time for a reprieve. So after 10 years, tens of thousands of stories and two National Magazine awards, Pacific Standard died. Jackson confessed to being “heart-broken and devastated.” He hoped he could at least save its archives, which the environmental publication Grist was able to acquire.
Mixed signals
Warren Buffett’s son Peter Buffett and Peter’s wife Jennifer founded the NoVo Foundation in 2006, funded by a donation of shares of Berkshire Hathaway stock. Over time, it earned a reputation as one of the largest and most loyal global funders of women and girls’ empowerment. But in 2020, as other funders were stepping up during the pandemic, NoVo, which had given $700 million in grants, suddenly shifted gears, putting every grant under review and winding down key streams of funding in support of women and girls. The foundation’s entire staff was halved.
If you’re going to turn your back on scores of grantees, it would seem that the least they deserve is a straightforward explanation. But that didn’t happen with NoVo, as the Buffetts offered muddied, sparse communications that seemed to blame the downsizing on the dip in the value of its stock, while also referencing a “project of deep reflection” and a “move into our next chapter.”
Stock fluctuations aside, the Buffetts were dramatically changing their approach to giving and placing greater focus on community projects. “We believe NoVo will be most catalytic in these times by resourcing a network of small communities everywhere that are incredibly diverse but rooted in acceptance, compassion and transformation,” they wrote in a postscript to a blog post published around the time of the controversy.
While the donors’ motives were far from clear, the impact on grantees was immediately apparent, sparking a swift backlash and waves of uncertainty. Alicia Sanchez Gill, whose Emergent Fund was a NoVo grantee, charged that NoVo was “divesting from the lives and safety of women, girls and GNC youth of color, while whitesplaining the stock market.” She called NoVo’s head-spinning changes “reprehensible.”
The foundation is now investing heavily in U.S. communities that are emphasizing solidarity, worker-owned businesses and cooperatives. It’s been giving generously in Kingston, New York, where the Buffets own a home, and in Jackson, Mississippi.
More care for grantees, but still some trauma
In 2021, Open Society Foundations announced a dramatic restructuring that would cut about 180 jobs and consolidate programs.
Since OSF spends about $1.2 billion annually on grants, administration and reserves, the disruption would have huge ramifications. But OSF acted responsibly, expecting to spend $400 million in tie-off grants to groups on the chopping block, offering up to 18 months of support. About 150 staffers took buyouts.
Nevertheless, there were complaints from staff that they had not been sufficiently consulted, and groups assisting refugees or supporting public health lamented the withdrawal of funds at a time of even greater need.
The Legal Action Center, which works on criminal justice and drug policy, received about $350,000 a year from OSF. Paul N. Samuels, who heads the group, told the New York Times that it would be hard to replace the funds, which represented about 5% of its budget, given the lack of philanthropic interest in these issues.
The following year, however, MacKenzie Scott stepped in with $8 million in unrestricted funds for the organization, allowing it not only to survive, but to expand and thrive.
How many other OSF grantees were so fortunate? Samuels’ group may have gained Scott’s attention because he was the only nonprofit leader quoted by name in the Times story about the restructuring.
Dramatic change, but done mindfully
If funders want a lesson plan on making funding withdrawals as painless as possible, they should consult MacArthur’s playbook.
In 2015, Julia Stasch, then MacArthur Foundation president, dramatically restructured the foundation, jettisoning some major funding programs such as housing, juvenile justice, conservation, and population and reproductive health.
Stasch, who stepped down from MacArthur in 2019, had a long tenure with the foundation as its vice president for major programs before assuming the top job in 2014. She’s now a distinguished Brookings Institution senior nonresident fellow and chairs MacArthur affiliate Lever for Change.
Knowing the implications of this “narrowing” of the foundation’s focus to “a very few target areas,” in consultation with her leadership team and with the agreement of the board, Stasch was determined not to “just wing it” when it came to ending funding relationships.
The goal was to “make sure that we’ve got solid, strategic, well-thought-out, consensus-based principles that would underlie an exit,” Stasch said. Program officers were involved in constructing a framework that had “four different approaches” for unwinding foundation support.
Stasch involved MacArthur program managers in devising a strategy for addressing grant recipients based on the type of support they had been receiving and for how long.
Some support would simply end. That likely would be the approach for grantees that wouldn’t face “catastrophic disruption” if the funding ceased, Stasch said. Those grants likely would affect work at “an early stage” or grants for specific proposals, not general operating support.
A second category of groups with longer relationships with the foundation would receive tie-off grants over a number of years to mitigate disruptions to grantees and their organizations, she said. The number of years and amount of money MacArthur offered “would be determined in close consultation with the grantees,” she added, and would require “an intimate understanding of the effect of bringing that support to a close.”
The third category — what Stasch terms “legacy grantmaking” — would address situations in which a longstanding MacArthur-supported initiative or strategy would come to a close. The goal was to “secure the progress that grantees had made,” to “celebrate” their achievements and to help them plan for their future by introducing them to new funders. Unwinding these types of program commitments could take three or four years. “It’s not a call out of the dark [to say] ‘OK, we’re done.’” MacArthur could actually spend more on its legacy grantmaking than it had previously.
For certain grantees, MacArthur would also make a time-limited “capstone” investment, Stasch said, to help a grantee prepare for the future. For example, the foundation’s focus in Mexico was narrowed to “a giant push behind grantees that were eager to ensure that midwifery had a prominent supported place in a national healthcare strategy.”
Stasch said the process tried to avoid the impression that MacArthur was judging grantees. The foundation stressed that decisions to end a funding relationship were based on discussions about where to invest their resources, with the focus on time-limited “big bets” that could make a difference in a few issue areas. Ending support in no way signaled that the grantee had not performed well.
She praised MacArthur program officers for doing the hard work of communicating the changes to grantees and helping them adjust to the new reality.
While MacArthur supported fewer programs, the foundation’s spending did not contract. Nor were there drastic cuts in staff. Many staff members, Stasch said, had expertise that accommodated the foundation’s new priorities. For example, staffers who had worked on conservation programs could use their environmental passion and expertise in MacArthur’s new climate solutions program.
Likewise, juvenile justice program staff had the appropriate knowledge and background to work on the foundation’s new effort to reform jails.
When she announced the changes, Stasch got high praise from IP for her decisiveness, an approach that saved grantees the agony of waiting as foundation boards engage in lengthy deliberations about their future plans.
Nevertheless, Stasch said, “if I were in a foundation today, I’d pay a little bit more attention to” program officers and how major change affects them. “We are very focused on the implications for grantees … and helping them secure their future, and not being hurt by this decision.”
But what is sometimes lost is the psychological impact on the program officers as they wind down relationships that they’ve developed over the years with grantees. Foundations should probably give program staff “a little room to grieve,” Stasch said.
Preparing for the inevitable
At the Kataly Foundation, grantees are told to expect that their first grant will be the largest they receive and may be the only grant they get. Founded in 2018 by Pritzker heir Regan Pritzker with an infusion of $445 million of her fortune, the foundation intends to spend out its funds over a period of 10 to 15 years.
The foundation wants to give people the help they need right away, without the need for grantees to “prove themselves,” said foundation Executive Director Nwamaka Agbo. “She added that foundation staff communicate with grantees “early and often” that Kataly support is finite.
Kataly’s net assets now total about $334 million, with the level of spending dependent not only on planned giving, but on rapid response spending, which “increases our rate of spend-out,” Agbo said.
To reinforce that message, beginning this February, Kataly will launch an annual webinar series keeping grantees up to date on “the status of our spend-out in each of our program areas.” Nonprofits receiving multiyear grants, many of which extend seven years and longer, have an annual check-in reminding them of how much time is left in their grant and whether there is any possibility of a grant renewal, Agbo said, adding that even if a grant is renewed, it likely would be for no more than three years, given where Kataly is in “the life of our foundation.”
Kataly’s flexible funding is meant to help grantees use grants to find other donors and foundation support. Kataly also tries to foster relationships with new funders. She added that the foundation will do tie-off grants as needed.
Agbo says she’s spent most of her career in nonprofits. So she’s acutely aware of the inherent power dynamics between funders and grantees. She advises that grantees be clear with funders about the funding relationship they want to have, including knowing what channels for communication exist.
And she says that all foundations should give their grantees at least a year’s notice if they plan to change direction, as well as an explanation for the end of the funding relationship. “When a foundation … won’t even engage in a conversation to really help the grantee understand” the reasons behind the change, it’s easy for organizations to blame themselves, Agbo added.
Conclusion
Most foundations are chasing the dream of doing good and want to see results that deliver substantial, tangible change. That pursuit can mean changing direction at times — canceling programs that aren’t yielding impact and shifting to new issues or approaches that are more promising.
This dynamism is a good thing and calls abound for foundations to take more risks and move with greater speed. But such flux means uncertainty for most grantees. If they’re lucky, they’re told honestly and early when programs are going to end, and assisted in transitioning to other sources of support.
But as the old adage goes, “The more things change, the more they stay the same.” When one foundation drops its interest in an issue, another foundation may discover it. Or an old priority may be revisited when a foundation’s board or leaders change. A longtime nonprofit leader says she has learned over time that nothing lasts forever, so it’s wise to build up reserves and not to overspend. She no longer panics when a funder leaves, she said. “They come back, or new ones show up.”