Earlier this year, my colleague Dawn Wolfe reported that roughly three years after the pandemic hit, funders appeared to be walking back from trust-based philanthropy practices like providing unrestricted support and multi-year grants. It was a frustrating takeaway, although not all that surprising. Despite our constant handwringing and occasional forays into armchair psychology regarding why funders are so reluctant to loosen the reins, I, for one, don’t feel much wiser than I did in 2019.
Needless to say, I was thrilled when the folks at the Mozilla Foundation asked me to moderate a panel, “Redistributing Power Through Trust-Based Philanthropy,” as part of MozFest’s 2023 Funder Track Panel Series. Presented in partnership with All Tech is Human, the series convenes philanthropy professionals to share insights, find new projects and build partnerships.
The panel featured three of philanthropy’s thought leaders on the topic — Trust-Based Philanthropy Project Executive Director Shaady Salehi, Bridgespan Group partner Kathleen Fleming, and Siegel Family Endowment President and CEO Katy Knight. Over the course of an hour, the trio discussed how the approach can be an improvement over the predominant “compliance culture,” why funding leaders still remain skittish about taking the plunge, and much more. (I also provided some commentary around how participatory grantmaking aligns with the values of trust-based philanthropy.)
For a little background, Salehi said the project defines trust-based philanthropy as “an approach to giving that addresses the inherent power imbalances that exist between funders, nonprofits and the communities served.” At an operational level, it includes a set of practices like providing multi-year unrestricted funding, streamlining applications and reports, and a commitment to building relationships rooted in dialogue, learning and accountability.
“More than anything, it doesn’t look identical in different organizations,” Salehi said. “The core of the approach is really about aligning values and aligning those values with how we show up in relationship to nonprofits and communities.” Here are four key takeaways from the discussion.
There’s growing evidence that trust-based practices work
Last December, the Center for Effective Philanthropy (CEP) published a report showing how MacKenzie Scott’s large, unrestricted grants transformed recipient organizations. (Bridgespan is Scott’s key philanthropic advisor and a grantee, but it was not involved in CEP’s effort.)
I walked away from the report with the hope that if groups produced more data-driven insights attesting to the impact of multi-year, unrestricted funding, maybe more funders would experiment with the practice. So I was pleased when Bridgespan’s Fleming kicked off the talk by referencing a new addition to this growing body of research.
In 2017, the Ballmer Group made large, unrestricted five-year commitments to 21 U.S. nonprofits focused on advancing economic mobility. Last year, Fleming and two of her Bridgespan colleagues interviewed leaders at 18 grantee organizations to gauge the impact of the funding. The CEP published its findings earlier this year, and as was the case with Scott’s grants, she and her team found that donors’ theoretical concerns about allocating large amounts of unrestricted support never materialized.
For instance, Fleming said that donors worry nonprofit leaders may be unable to effectively allocate the huge windfall or that the organization’s fundraising will dry up once other donors realize it received a huge gift. But Fleming found that once the “donor guardrails” came off, the exact opposite occurred. “Leaders were able to shift in their language from a mindset of scarcity to more strategic abundance,” she said. “They would tell us, ‘This is the first time I can lead my organization holistically with this kind of flexibility.”
Leaders thoughtfully allocated funds in accordance with their strategic plans or drew up new plans to guide their decision-making. They also used the support as a talking point to engage other funders. “The anticipated risk didn’t materialize because these leadership teams wouldn’t let them,” Fleming said. “They imposed strategic rigor.”
(Unrestricted) money is power
I suspect few readers will dispute Katy Knight’s contention that “people with capital have the power to take risks.” But as more funders talk about shifting or transferring power, Knight reminded us that not all “money” is equal.
Project-based grants are a manifestation of funders’ priorities and an exertion of power, with organizations serving as partners advancing that work. Unrestricted funding, on the other hand, removes the impulse to address specific priorities from the equation, and transfers power to organizational leaders to allocate funding as they see fit. As a result, funders can’t transfer power without providing at least some unrestricted support.
This idea animates the grantmaking of Knight’s organization, the Siegel Family Endowment. “When I think about power transfer, it’s a matter of, ‘How can we be thoughtful partners who share what we’ve learned out in the world… but not overcomplicate the way that we think people in communities should solve the challenges that they are most familiar with,’” Knight explained. “If we can transfer resources so that people who don’t have the breathing space to take risks have that opportunity, that’s an important step toward power transfer.”
Panelists weren’t sold on the prevailing “compliance” evaluation mindset
Another big obstacle to implementation — beyond the reality that many funders simply refuse to relinquish control — involves measurement. Funders that are strict adherents of strategic philanthropy will always bankroll projects where outcomes can be measured. This argument is predicated on the assumption that strategic philanthropy is the best way to drive impact. Panelists weren’t so sure about that.
First, consider the parameters for measuring impact. Under the prevailing compliance-based model, funders identify the priorities that are ultimately evaluated. But as Fleming put it, trust-based proponents argue that nonprofit leaders with “a record of delivering impact and who have expertise about the problem and the community that they are serving” should be empowered to take flexible support and allocate it as they see fit.
In the absence of such an arrangement, nonprofit leaders adopt what Salehi called a “proving stance,” in which they are continually checking off boxes to justify existence, all while being reminded that the funders still hold the power. Conditions for transparency and candor “are not created when we’re defaulting to these transactional, compliance-oriented practices,” Salehi said.
In contrast, measuring the impact of unrestricted support — and make no mistake, funders can measure the impact of unrestricted support — requires program officers to listen and build collaborative relationships with grantees. “It’s engaging in a ‘learning’ stance over the ‘proving’ stance when it comes to evaluation,” Salehi said.
Lastly, funders can’t measure impact in a vacuum. “Some of the basic things that might get in the way of impact are related to things that are not necessarily being measured in a lot of traditional philanthropic evaluation,” Salehi said. For example, an organization’s lack of reserves can inhibit its ability to innovate, hire staff or expand a program.
Fleming’s research found that, equipped with the Ballmer Group’s unrestricted dollars, over 70% of respondents reported investing in organizational resilience, as reflected in their average cash reserves, which increased from about 3.5 months in 2017 to 6.5 months in 2021. I’m sure even the most hardened strategic philanthropist would acknowledge this as an important form of impact.
Trust-based philanthropy isn’t “blank check” philanthropy
Salehi alluded to yet another misconception holding back funders — the idea that trust-based philanthropy is like “writing a check and walking away and never knowing what happened with it.” Ironically enough, this myth has been unwittingly perpetuated by one of trust-based philanthropy’s biggest proponents.
“What MacKenzie Scott has done has been historic and significant in our sector,” Salehi said. “She expressed that she trusts these leaders by giving large, unrestricted gifts to organizations all over the world. It has also perpetuated this false understanding that trust-based philanthropy is just about writing a big check — unrestricted and not necessarily being in relationship.”
Salehi’s take underscored that unrestricted funding is but one of many trust-based practices that funders can adopt in a piecemeal or holistic fashion. Knight concurred. “It’s a mix-and-match where you figure out the right ways to support the strategies that make sense alongside grantee partners,” she said, while noting that “it takes time to build relationships to understand what an organization is doing.”
This methodical learn-as-you go approach goes a long way to calm risk-averse funders. Fleming said that “one of the biggest myths” about trust-based philanthropy is that it requires funders to recklessly blow past their risk tolerance thresholds. In reality, “it’s actually very active in risk mitigation — it just does it relationally.” She encourages funding leaders to ask themselves two key questions: “What practices are we engaged in that may be constraining the expertise and brilliance of those who are closest to these issues? And what practices aren’t we engaged in that could amplify their impact?”
And what can nonprofit leaders do to shape the conversation? Salehi suggested they should encourage current funders that deploy trust-based practices to explain the work to their peers and join the Trust-Based Philanthropy Project’s Peer Exchange to share best practices. Leaders can also provide funders with constructive feedback on ways to improve their practices. “I think a lot of funders are more open to listening and evolving,” she said. “It’s going to take all of us collectively to be a part of that.”