August 9th, 2017
Why the “Fund for Success” Series
To “fund success” is not the same as to “fund for success.” Many funders are very risk averse, and are only are willing to fund the most proven, evidence based projects, or the most prestigious institutions. While there is nothing necessarily wrong with that approach, that is not what is intended by “fund for success.” It means that funders should assess what would be necessary for the highest likelihood of a program or project or organization to succeed. One should look at financial and non-financial requirements, fund what is realistically adequate and not simply fits a funding formula, and create an atmosphere of openness with grantees that guarantees that realistic information is shared in a timely fashion. The purpose is not to avoid failure; that inevitably happens sometimes. But it shouldn’t happen because a funder’s funding practice makes it impossible to succeed.
During a recent car ride, a client recalled a project by a mutual friend, a well-known philanthropist, that had been a great success for a while but failed ignominiously. He asked what I thought about that project, why it failed, and what might have been done differently.
Enough years have passed since that happened that few readers would know of what we were speaking but since the funder hasn’t given permission to identify him/herself or the project, we’ll keep this piece as vague and general as possible. If you ask, I will neither affirm nor deny that you are correct. In any case, what will matter the most is the lessons learned and not the details.
This funder believed in funding “game changers.” Today we might call them “big bets” or “high impact”. Willing to put substantial money on ideas and see them implemented, the funder thought big, was ambitious and well meaning, and very risk tolerant.
The project in question was a rousing success and perceived by many to be a nationally replicable model. People came from other cities to observe it, it was written about in local and national periodicals, and in its time, it gave great satisfaction to the funder, the foundation, and the staff of the project.
The funder, directly and through the eponymous foundation, gave many millions of dollars to this project every year for a number of years. This was certainly not going to be a project that failed because of a financial shortfall.
Or so it seemed.
As it happened, the funder got a little bored – and was ready to move on to the next “game changer” project. The philanthropist and the foundation staff went to a group of other funders in the field who gave token amounts, largely as a courtesy. They all said, this is X’s project. If they wanted our funding or our involvement, why did they wait until he/she was bored? And besides, what kind of business model is it that it was totally dependent on the bottomless pockets of a single donor?
When it became clear that no other funder or foundation was going to step in, the program and its facility were gifted to another, much older and larger, nonprofit. They, in turn, sold the building, moved the program to a smaller site elsewhere, and radically reduced its ambition and scope. After a couple of years, it quietly and with no fanfare, closed its doors.
It is an oft quoted bon mot that says that success has many parents but failure has only orphans. Here, though, it was easy to point fingers at a very small number of parents: the funder, the funder’s foundation, and the program’s executive director. And as the program was shrinking, moving, and disappearing, there were plenty of fingers pointed at them collectively and individually. Was the funder too ego driven to recognize the need for partners? Were the funder’s foundation people so caught up in taking bows that they didn’t invest their time or resources wisely? Was the executive director blind to the reality that sustainability required a firmer and broader financial base, and actual board governance? Probably a bit of all three.
Might it have been avoided and would that entity still exist if it had followed a wiser path? Well, of course, hindsight is always 20-20 but there are lessons to be learned:
1. There is nothing wrong with being the sole or primary funder, but if one wants the program or project to outlast your funding, it isn’t a very wise or practical long-term strategy.
2. Engaging other current or potential funders late in the day hardly engages them in a commitment. They may be willing to do a favor with a token gift, but rarely a regular or meaningful one.
3. If the goal is to establish longevity for an organization or project, an organization has to plan for a sustainable future from the very beginning. It may be a rougher start, but a better chance of a smoother future. The initial or lead funder’s energy, enthusiasm, and financial willingness do matter and they should be capitalized upon: suggest matching or challenge grants, decreasing or increasing term limited grants, an endowment, capacity building support, to mention just a few examples. But resist sole funding support.
4. Do everything possible to establish a viable governance system for the project. This does not mean a group of sycophants intimidated by a deep pocketed philanthropist who are willing to sit in a token advisory role, but a small group of knowledgeable and thoughtful individuals whose judgement matters.
5. Organizations must be willing to have honest planning with a funder. Yes, that risks losing the grant or gift, but in most cases, it won’t and will likely lead to a more engaged and thoughtful set of decisions. [There is a tremendous difference between “over-reach” when an organization pushes beyond what is reasonable because of an enthusiastic donor vs “under-reach” when the organization knows, up front, that the project cannot succeed with the funds offered but is too intimidated to say “no” to the funder. This issue will be discussed in more detail in blog #289]. In the above-mentioned case, I honestly don’t know whether the professionals were too intimidated or too blinded, but the red flags were evident to anyone who was committed to longevity and sustainability. It certainly appeared from the outside that any attention to that was given much too late in the game.
6. Constant growth can be illusory. It is why metrics alone never tell the full story no matter how impressive they seem. The organization in question undoubtedly had year over year increases in every area of program, but that only represented part of the analytics that should have been on the table. If one asks the wrong questions, one gets the wrong answers – even if those answers are seductively impressive.
7. Open ended funding eliminates the need for planning and budgetary discipline. Because the funder in this case was willing to provide whatever was asked each year, neither the funder nor the relevant professionals were forced to ask the long-term questions that might have extended or saved this otherwise successful project.
Indeed, it was a time when giving too much was not enough.