The Power of Candid and Open Communication between Funders and Grantees

In an iconic scene from the film The Princess Bride, two characters engage in a battle of wits. One must determine which of two goblets of wine contains a tasteless, odorless fatal poison. He will drink from the goblet of his choosing and his opponent will drink from the other, at which point it will be clear “who is right, and who is dead.”  There proceeds a dizzying tumble of logic, in which he attempts to solve the puzzle by reasoning through what his foe may be thinking. He reasons: “Now, a clever man would put the poison into his own goblet, because he would know that only a great fool would reach for what he was given. I am not a great fool, so I can clearly not choose the wine in front of you. But you must have known I was not a great fool. You would have counted on it, so I can clearly not choose the wine in front of me.”

What ensues is fantastic cinema.  It is also an illustration of what happens when philanthropy proceeds without trusting relationships and candid open communication.  The funder and the nonprofit leader sit to discuss the field they are both committed to improve. The funder asks what the leader’s organization’s needs are, without revealing their funding priorities, or preferred funding approach.  Before responding, the organizational leader does a calculus on what is most likely to resonate with the funder, and responds accordingly.

And so, the funder makes a gift to the project that speaks to the perception of the funder’s priorities rather than the current needs of the organization.  In a perfect world, this resolves beautifully. The funder’s priorities are accurately perceived by the organization (or perhaps even explicitly articulated by the funder, eliminating the guesswork). A diversity of funders with diverse interests comes together to each fund the part which resonates with them most, resulting in a robustly funded organization and funders each devoted to the project they nourished. But in the real world, we too often find funding earmarked to pet projects that pull organizations away from their strategic course and leave insufficient funds for the core needs that one can’t put a naming plate on – the electricity bill, the operations staff, the proven program that works but is no longer innovative.

These convoluted conversations prevent both sides from knowing the other – what truly are the challenges? What does the organization need from the funder beyond money? If the funder wants to target their gift, where should they target it to help the organization most? (The most effective use of the funds is likely not the funder’s pet project. In fact, it is likely not an earmarking at all, but rather a general operating support gift.)

When we build open trusting relationships between funders and organizational leaders, truly high-impact philanthropy can be achieved.  Organizational leaders who have the kind of trusting relationship with a funder that allows them to reveal their organizational vulnerabilities open up funding opportunities. Often the vulnerability is the highest impact lever for philanthropy. For example, understanding that an organization struggles to retain great staff can lead to new investments in the pain points that are driving high staff turnover. These might be a lack of professional development, career pathing, mentoring, or sufficient compensation. It is important for the funder to listen with humility to understand the true problem and provide the appropriate resources.

The power dynamic between funders and agencies can create an atmosphere that makes vulnerability on the part of the organization difficult, even perilous. For this reason, the burden lies with the funder to diffuse this problematic dynamic, creating trust and making vulnerability possible. Funders can take concrete steps to enable more trusting grantee relationships. The most powerful way to achieve this is to provide multi-year funding. A multi-year grant frees the organization from the obligation to “sell” the organization to the funder each year, enabling the kind of trusting long-term relationship from which candor can arise.  Of course multi-year funding is very helpful in other ways. It enables organizations to plan over a longer horizon, and enables more efficient uses of resources, with less time needed for the annual solicitation of the gift.

A step both sides can take to foster trust and candor in relationships is to first strengthen the relationship itself.  Increasing the number of touchpoints an organization has with the funder lowers the stakes of any one touch point. The organization should follow the funder’s lead regarding what frequency of touchpoints is preferred – some funders fund large numbers of organizations and have limited bandwidth, and may find increased numbers of meetings unwelcome. Those funders who have more time or a more focused funding purview may welcome opportunities to get to know their grantees better, understanding their work more fully.

With trust, candor, and depth of relationships, we can build the kind of strong relationships between nonprofits and funders that enable the powerful impact we all seek to achieve.