How Do Funders Navigate the Power of the Purse?

Too often, grantees do the asking, reporting, and proving, while donors sit in positions to say yes or no, how much, when, and what’s required. Navigating the complex grantee–grantor relationship takes more than just good intentions—it takes flexibility, finesse, and a sincere desire to balance the power dynamics at play.

Katherine Lorenz, president of the Cynthia & George Mitchell Foundation, knows about the dynamics between funders and grantees. Before becoming a funder, Lorenz spent years as a fundraiser and grantee. In 2003, she cofounded a nonprofit in Mexico to advance food sovereignty in rural Oaxaca. That experience gave her perspective on the challenges grantees face.

As a fundraiser, Lorenz always felt “like we were asking for a favor: ‘Would you mind’ or ‘Would you maybe consider giving to us?’ ” In addition, she found that many funders were opaque in what they wanted; it was never that clear how to get in the door. “Every funder had different rules and requirements, how they wanted the proposal and budget to be,” she says. Especially with small funders, the process seemed impossible to navigate.

Build Transparency and Trust

Lorenz says the greatest gift funders can give upfront is clarity about what they do and do not fund. “When you have a focused strategy,” she says, “it enhances the relationship with the people you say yes to, as well as the people you say no to. This kind of transparency helps ease the power dynamic.” To this end, one of the first things Lorenz did as president of her family’s foundation was create a website. “Even in the midst of transition, we’ve tried to be as transparent as we can about what we fund, the program areas we think we’re moving into, and the timing of it all.”

Although the Mitchell Foundation doesn’t tend to fund many unsolicited grantees, it nonetheless offers an online grantee portal, where any organization can engage with the foundation. “This is an entryway for organizations to apply and be seen by program staff, and it helps us, as funders, to know who’s out there.”

“There’s a lot of talk in the funder world about grantees being partners, but it does not feel like that in the grantee experience,” she says. “To be able to be honest with a funder and be treated as a true thought partner—that’s a rare and wonderful experience.”

Lorenz tries to acknowledge this dynamic in her foundation’s relationship with grantees. “We have ongoing conversations with them to try to understand what’s working and what’s not. We don’t look at it as a report card; we want to help them think through their strategic direction.”

“It really comes down to giving grantees the space to honestly share their struggles and look to donors as one more person to help them find a solution,” she says. “This takes trust.” 

Give More Than Money

“We try to minimize the power dynamic by giving grantees the money and letting them decide what to do with it,” says Arbor Brothers cofounder Sammy Politziner. “We then spend 200 to 300 hours of our time with each grantee, building management systems we all [funder and grantee] agree are necessary for their growth and success.”

Arbor Brothers supports “second stage” organizations (i.e., those beyond the start-up phase) by providing capital and business planning through direct technical assistance.

“Like in private equity,” says Politziner, “we sit on the same side of the table as grantees, and both of us, together, have to prove to ourselves that the work we’re doing is adding value. We’re asking them to make a big commitment of their time, and, in return, it’s incumbent on us not to waste it.”

Arbor Brothers tries to balance the requests they make of a potential applicant with the chances of getting a grant. “We try to be mindful of people’s time and get cash out the door quickly,” says Politziner. Arbor Brothers accepts the New York–New Jersey Common Grant Application and keeps its three-stage decision-making process intentionally short: no more than 70 days from the time an application is received.

And, for grantees, “we make it a point to be extraordinarily clear and explicit about what’s expected of them and what they can expect from us,” says Politziner. “It’s important to recognize that grantees feel they can’t say no to you. If you ask something of grantees, make sure it’s actually adding value.”

Listen to Grantees’ Needs

The Russell Family Foundation was founded on core values that guide its relationships with grantees and with one another. One is to serve as a humble steward of change. Living this value, the foundation engages community members and develops strong local leaders as a pivotal way to promote a sustainable environment and clean water.

“We realized if we were to make any change in the environment, in the water, in the place, it’s going to be because the people who live and work there will cause that change to occur,” says Henry Izumizaki, director of programs. With that in mind, the foundation, as part of its Puyallup Watershed Initiative, has made a 10-year commitment to civic engagement that they call Communities of Interest.

According to Izumizaki, the initiative’s hallmark is its flexibility. “We threw out all the rules that are typical in philanthropy, including deadlines for proposals. Our board meets face-to-face three times a year, but we remain on a flexible schedule schedule—with the board convening by teleconference within 60 days of proposal submissions to make timely grant decisions. We want to stay responsive to the community at its own pace, rather than subject them to the foundation’s process.”

Many funder initiatives have rigidly held rules, he says. “We have chosen to be fluid and to have patience with ambiguity, extreme faith in the good intentions of our partners, and the courageous constitution for change.”

According to Richard Woo, executive director of the foundation, “What makes philanthropy work is the quality of relationship you are able to establish with grantees. We treat them as partners and colleagues. Yes, there is a power differential, but, without grantees, we have no way of meeting our mission.”

Elaine Gast Fawcett helps foundations tell their story, educate their stakeholders, and move their mission forward. For 12 years, she has worked nationally to strengthen the philanthropic and nonprofit sectors as a communications and grantmaking consultant. She blogs at PhilanthropyWriting.com, and you can reach her at elaine@fourwindswriting.com or on Twitter @4WindsWriting.