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Philanthropy Must ‘Future-Proof’ Nonprofits With Better Shock-Absorbers

April 24, 2020 - By Mae Hong

Philanthropy’s response to the COVID19 pandemic has been extraordinary. Individuals, foundations and corporations have given in ways that were unimaginable even 10 weeks ago:  They’ve given more money, made it less restrictive, and given to new causes than they did pre-coronavirus.  Gestures such as doubling payout, lifting all grant restrictions, and stretching into different funding areas have risen to the needs of this generation-defining moment.

Even as we are “not-nearly-as-close-as-we-hope-to-be” to the end of the immediate crisis before us, there is much anticipation simmering about what lies ahead. In the same way one experiences mixed emotions after a natural disaster – a combination of relief when the storm passes and dread about surveying the damage – so too will donors be faced with letting the magnitude of the damage sink in.

As exceptional and laudable as philanthropy’s response to the pandemic has been, the aftermath will require wholly new and yet-to-be-discovered ways of being and doing.  Donors and funders of all shapes and sizes face a long arc of recovery.  They will need to adopt a mindset of traversing this arc in three phases:

Phase 1:   Funding for survival

This is where philanthropy has shined in recent weeks, and where, historically, it has shown up well when it comes to catastrophic events.  The billions of dollars raised and given to individuals and organizations have saved lives and livelihoods.  The imperative of survival – both physical and economic – became universally accepted as the top priority.  The philanthropic response was swift, straightforward, and unquestioned, as it should be.  Make no mistake: We are still in this phase. We do not know when it will end.

Phase 2: Funding for rebuilding

Philanthropy’s track record here is far less commendable.  Once the urgency of survival passes, we assume everyone can and should pick up their own broken pieces and clean up their own messy aftermaths.  Perhaps donor fatigue sets in as well, depending on the intensity and duration of the crisis. Foundations and donors have traditionally veered away from supporting organizations in need of repair or recovery (both literal and metaphorical), such as fixing broken boilers; climbing back from a rough patch in leadership; replacing old computers; clearing debts; overcoming a costly risk-gone-bad experiment; etc. Many funders think any organization that got itself in a position of needing to rebuild in the first place couldn’t possibly be a good bet for the future. Instead, the funder might quietly euthanize the nonprofit. This Darwinian practice undercuts organizations precisely when they are at critical inflection points that could radically alter their trajectories.

Foundations and donors must invest for a smooth and seamless transition from survival to rebuilding.  Nonprofits will need to be made whole:  expected proceeds from cancelled fundraising events need to come from somewhere; lost revenue from government contracts that went unfulfilled needs to replaced; ticket sales for performances that never happened need to be fulfilled; staff will need to be re-hired; infrastructure and operations that were fragile to begin with will need a jumpstart.

Organizations will need security – both psychological and financial – such that their survival was not for naught. Failing to provide the funds to rebuild is like throwing a lifeline to a drowning man . . . and then letting go of the other end as soon as he catches it.

Filling a fundraising hole due to a cancelled gala or performance or lost contract is profoundly un-sexy. Few foundations or donors would have done such a thing pre-pandemic. And yet, that may be precisely the single most strategic kind of support a funder can give in this phase.

Perhaps it’s worth noting, as an aside, that the very notion of “rebuilding” may be misleading or inadequate to describe what will actually be needed in this phase.  In many cases, nonprofits – once made whole – can and should carry on as before, delivering effective services and programs. In other cases, nonprofits will enter this phase with a need to “build anew” rather than rebuild.  Already, questions are emerging about what this phase will look like: Who sets the terms for rebuilding? Who is asked and who is told how to rebuild?  Or what to rebuild?  How can rebuilding avoid reconstructing what was a broken system?   There will be much, much said and written and debated about these questions and more.  The best thing foundations and donors can do is resist the urge to try to answer these questions and engineer the solutions themselves.  Just because foundations provided support through the “survival phase” does not entitle them to dictate what happens in this “rebuild” phase. They need to fund it, not drive it. This will require painstaking, excruciating restraint. They must ask the questions and then listen.

Phase 3: Funding for resilience

If foundations and donors have never been good at Phase 2 kinds of support, they are astonishingly bad at Phase 3 — providing support to build resilience in nonprofits.  COVID-19 has exposed just how fragile most nonprofits are, many living on the precipice of demise at the slightest unexpected strain.  Organizations that have no financial reserves (because funders won’t support them if they “have too much money in the bank”); poorly paid staff (because funders won’t support salaries); and weak systems and infrastructure (because donors don’t think nonprofits should “have nice offices”) are expected to shoulder society’s most vexing problems.  Over the last 20 years, there has been a steady drumbeat – led by organizations like Grantmakers for Effective Organizations, the Center for Effective Philanthropy and several others – making the case that nonprofits need to be well-managed, financially healthy, properly staffed, and consistently funded in order to fulfill their missions for the public good.  An entire industry of consultants, publications, conferences, and research has been built around capacity-building for nonprofits to develop and maintain organizational capabilities.  Funders have made noticeable strides in their willingness to help nonprofits in this area.

However, the current pandemic has revealed that investing in capacity is necessary but not sufficient for a crisis like this.  Organizations need to build – and funders need to support – resilience in order to effectively be and do what society needs of them. The Resilient Design Institute defines resilience as “the ability to adapt to changing conditions and to maintain or regain functionality and vitality in the face of stress or disturbance. It is the capacity to bounce back after a disturbance or interruption.”  The concept has long been studied and applied in the fields of ecology, psychology/mental health, architecture, and engineering.   It has more recently been applied in disaster response, particularly related to climate change.

Once the immediate urgency of COVID-19 has passed, foundations and donors will need to evolve from a capacity-building mindset to a resilience mindset in Phase 3. Funding capacity helps the organization deliver on its mission today; while funding resilience helps it deliver on its mission in an uncertain tomorrow.  Think of it as “future proofing” every nonprofit that we know we will need when (not if) this happens again.  Chris Anderson, former Editor-in-Chief of WIRED Magazine, said it best: “In an increasingly complex world, we can’t avoid shocks – we can only build better shock absorbers.”

How can funders help nonprofits build the necessary shock absorbers so they are ready for the next crisis?  First, let’s accept that resilience is expensive.  But fragility is more expensive in the long run.  Resilience cannot be built on the cheap.  Nonprofits will need resources to plan and run scenarios; they will need large financial reserves and working capital; they will need the latest and best technology tools; they need talented leadership who can navigate through uncertainty. All of these cost far more than what foundations and donors currently provide.

Second, it takes time.  Organizations will need consistent, long-term support over many years to be prepared for the inevitable, unimaginable “next time.” Building resilience must be constant and unending.  It is not something that foundations can expect to be “finished” in a typical three-year funding cycle.

In order for philanthropy to truly realize meaningful and lasting impact with any of its efforts in the current crisis, foundations and donors must be prepared to support nonprofits through all these phases. It will undoubtedly be more expensive and take longer than anyone can predict.  But the consequences of not maintaining this cadence of support all the way through will only guarantee that we will find ourselves in the same predicament when the next crisis strikes. Is anyone willing to take that chance?

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