Grantmaking, NGO Interest

Leaving with grace – when grantmakers say goodbye

8 April 2010

An explicit exit strategy can be an essential aspect of the relationship between the donor and the grantee.

Claire Hugo is a CSI practitioner at Tshikululu Social Investments.

Grantmakers almost inevitably find themselves having to exit funding relationships with NGO partners.  Doing this carefully and with consideration for a project’s viability can become a process of benefit to both funder and grantee.  Indeed, exit strategies are a touchy subject in the corporate social investment space, particularly as grantmakers wrestle with the need to develop exit strategies before a funding relationship even begins.

While acknowledging that the social development problems NGOs seek to resolve are complex and deep-rooted, needing a long-term vision and therefore a long-term commitment, it is also a reality that donors cannot fund an organisation into perpetuity.  Thus, the inevitable exit needs to be planned for and adopted by both donor and grantee.

There are numerous reasons for exiting a funding relationship.  These include changes in the market, declining assets, changes in the thinking or composition of foundation leadership, change in project officer or the desire to keep the strategy fresh and flexible.

Discussing the realities of time-limited grants can be difficult.  Grantmakers might be hesitant to focus on exit strategies in the hope that strategic, targeted interventions, even in the face of economic downturn, will have the necessary impact. Grantees value long-term support to provide space for planning, undertaking innovative models and focusing on their objectives without worrying about fundraising or basic administration costs.

Unfortunately, exiting a funding relationship will always be a disappointment to the beneficiary organization, even if the strategy is clearly communicated.  A certain degree of reputational risk is to be anticipated.  Can there be such a thing as a successful exit strategy?

The Community Fund, based in the United Kingdom, conducted research in 2002 to investigate exactly this, in an effort to identify key factors resulting in an exit strategy that has more positive outcomes than negative.

The success factors identified include good business planning, a passionate champion, continuity of staff and volunteers, an organisation that has several sources of funds, and the involvement of potential continuation funders at an early stage. Conversely, factors that work against project survival include poor business planning, changes of staffing and leaving consideration of continuation funding to the last year of a three-year project.

An explicit exit strategy can be an essential aspect of the relationship between the donor and the grantee. It adds value in numerous ways, including:

• A focused discussion of shared priorities at the outset of the relationship can ensure clarity on how best the donor can invest in the grantee’s sustainability, whilst bringing a healthy discipline to an organization;
• It may encourage both parties to be more specific around their capacity-building efforts and needs;
• The transparent discussion allows for a closer working relationship between the donor and grantee; this is most likely when realistic targets have been set, including realistic time frames and adequate funding, allowing for a shared view of progress and an alignment of effort; and
• Wider and more consistent application of exits could similarly assist in greater cohesion between funders, resulting in greater efficacy of donor funding and increased advocacy on behalf of the grantees.

The ideal is to “œthink upfront” when it comes to establishing a funding relationship, in terms of timelines and outcomes.  In this way, grantmakers can manage expectations and ensure discipline in identifying realistic objectives and priority needs for capacity-building.