Social distancing is already disrupting needed services for clients and choking off revenue for thousands of other nonprofits. Many nonprofit leaders are now preoccupied with the brutal math of dividing their operating reserve by the amount they are losing each day to predict how long they can keep going. For most, the answer will be not long enough. Others may not have reserves at all, but will continue to serve their clients and mission, in many cases without salaries, until they can’t.
Nationally, half of all nonprofits have 90 days or less of operating reserves. Lost and delayed revenues are leading to cash-flow crises that will first result in furloughs and layoffs (of a workforce that is disproportionately women of color in many places) and then lead to organizations permanently closing within months.
Faced with the sudden calamity that social distancing is creating for the revenue so many nonprofits expected to receive, organizations need their grant makers to make smart moves that can help them keep more money now, free up time, and reduce costs. This is about more than just the money foundations give. It’s also about how they give the money.
I have been encouraged this week by seeing so many foundations shift their practices in light of the crisis. Kudos especially to large foundations like Ford, Weingart, Barr, and the Mellon Arts Program, whose responses have included offers to loosen restrictions on grants, remove or delay reporting obligations, and pre-pay future commitments. And a shout-out to local foundations like Bonfils-Stanton in Denver and Robert Sterling Clark in New York that went so far as to send unrestricted funding to grantees before anyone asked for help because they realized nonprofits should focus on their work, not writing grant proposals.
A new normal seemed to have emerged by early this week that flexibility is now an expectation of good philanthropic practice. What an exciting development. But if the crisis for our communities and grantees gets deeper, moves that seem bold and a bit uncomfortable today could seem quaint in a week. This philanthropic new normal will need a new new normal.
So, what if we took the advances of this week as the first, not-final steps toward new norms? Three steps that build on some of the announced changes this week would help address the immediate crisis, enable more organizations to recover, and lay the foundations for more trusting relationships between donors and grantees that will be essential to build the resilience for the next inevitable crisis:
Flip the default. It’s great to see and receive emails from grant makers telling grantees to “call us if you need flexibility on the deliverables of your restricted grants.” But that offer is another well-intentioned, color-blind policy with the potential to exacerbate racial inequity. Big organizations with deep institutional relationships and affinity with grant makers will be more likely to seek and receive flexibility, while smaller community-based grantees are likely to consider it risky to take the offer, fearing it may make them seem weaker and jeopardize future funding. Flip the default by pre-emptively converting all funding to unrestricted, as the Mellon Arts Program did for all expenses incurred from March through May.
Pay, don’t delay. It’s also good to see grant makers offer grantees the flexibility to delay meeting their project commitments. But many organizations will need to spend the foundation’s money now to survive and will then have to deliver on what will be unfunded expenses later. I worry that many foundation staff and nonprofit leaders do not have the experience and training to understand how this is helpful only in a small set of circumstances and are unwittingly sowing the seeds of continued financial distress. It’s easier just to recognize this work will not happen because of the crisis.
Create the basis for trust and insight. In a crisis, grantees will do what they can to serve their mission and survive. Many are going to repurpose your restricted funding if the project you agreed to is not the community’s most pressing need. The foundation’s choice is this: Watch grantees channel their resources to the most pressing need without telling the foundation because they fear the consequences, or acknowledge that is going to happen anyway and remove the useless red-tape restrictions.
Only the second choice liberates the grantee to respond to community needs without reservation, builds mutual trust, creates the basis for a strong partnership, and lets grant makers really know what is happening to the organizations they fund and the communities they serve.
I have tracked more grant makers embracing trust-based philanthropy policies this week than in the previous decade. That is one piece of good news in a dismal time. But we cannot rest or retreat. Let’s build the new norms for good philanthropic practice on a realistic understanding of how power dynamics affect relationships and a deeper commitment to flexibility and mutual respect.
