Funder exits are inevitable – whether as a result of a foundation’s strategic realignment, a shift in priority countries, budget cuts, poor portfolio performance, or, in the worst-case scenario, opaque top-down decisions. No surprise then that funders, and especially program staff, suffer some uncertainty about how to exit. Certainly, within our funder collaborative – the Transparency and Accountability Initiative – there is repeat demand to discuss exits before they occur.
This demand reflects a desire to create responsible and supportive processes for exiting, and that impulse is a good one. While government donors are accountable to taxpayers, private funders are essentially accountable to no one but themselves despite the dependency of grantee partners. As Luminate grantee research confirmed, ‘It is not only a financial, but also an emotional matter to lose the support of [a funder], and one that can be seen to reflect inherent power imbalances in the funder-grantee relationship’. All the more reason to be thoughtful and transparent about exit decision-making.
While there are some useful resources to draw upon, such as those produced by Hewlett Foundation and Grantcraft, exiting is not a well-codified area. Having a trusted space to discuss the dynamics has frankly helped our members (in our case, those funding transparency and accountability programming worldwide) immensely. Based on our learning, we offer five key considerations for funders.
1. Exit strategy
Exits are hard on everyone, but good planning and execution on the part of the funder can help. Part of the exit may be designed in-house – for example, the general parameters a foundation will use to exit (time, budget, institutional communications) – but the strategy itself is best developed at the program level with the active participation of grantee partners.
An established set of possible exit strategies should be backed by policies and procedures for different types of exits (planned strategy realignment, poor performance, etc.). These give program officers a clear roadmap on how exits should be handled.
In general, our members have found it is best to speak to grantees early and often about an impending exit. To maintain trust, it is crucial that grantees be informed directly and personally before a funder makes a public announcement. When MacArthur was exiting Mexico, for example, staff met or called 80 organizations to share the news and address immediate questions and concerns before going public. Staff also heeded advice from colleagues at Atlantic Philanthropies to ‘repeat, repeat, repeat’ and asked donor partners to openly refer to the approaching exit. This helped to undo the denial of change that grantees may naturally find negatively affects their efforts. These discussions can be incredibly difficult for everyone involved, and despite frequent and clear communications, misperceptions about the reasons behind exiting can persist.
Communications also matter internally within the funder organization. It is important that everyone be on the same page regarding exit process and strategy insights. Funders can conduct regular internal learning events (and may boost morale) while sharing and connecting experiences across programs. Foundation leadership should be sensitive to the burden on program officers who have established professional relationships with grantees and whose professional identities are often in part enmeshed with organizations in the portfolios being exited.
3. Adaptable support
Even if a funder has an exit strategy in place, there still needs to be room for flexibility and responsiveness. As one TAI member Program Director put it, ‘Grantees do not need another workshop or training, but they do want something tailored to help make changes [in response to a funder exit] as necessary.’ Empowering program officers with their day-to-day grantee relationships is valuable – they are better positioned to note and be responsive to grantee needs.
Exits may not pan out as originally envisaged and it can be helpful to have flexibility in support offerings. One option is to survey grantees on what support they would find useful. For one TAI member office, financial strengthening was the most requested type of support. In response, this member worked with Ford’s Mexico office and Spring to design a ten-month training process for grantees that included local coaches for each organization’s priority concerns.
Of course, from the grantee perspective, the first concern is more often than not financial. Among TAI members there is an emerging consensus around providing multi-year tie-off grants complemented by non-financial support. Some donors undertake ambitious exit strategies that actually increase their final annual investments. The Kellogg Foundation created Fondo Baobá when it left Brazil in 2011 while MacArthur set up Acento: Acción Local in Mexico in 2020. Both funds were given generous multiple-year grants and envisioned to continue into the future.
4. Engagement of other funders
In the context of a funder collaborative, it has been fascinating to see the funder-to-funder dynamics surrounding exits. One clear takeaway is communication once again becomes paramount. Other funders in the same field or geographical area appreciate being told of a pending exit early so that they can anticipate field needs. Exit conversations become much more real when discussed among funders with overlapping portfolios and co-grantees. A complex situation arises when the exiting donor provided grantee income used to secure matching funds from other funders. Funders that require matching grants might consider providing a grace period after their partner donor’s exit.
If an exit is due to a funder’s internal shift (as is often the case) and not a reflection on grantee performance or the merit of funding in a certain field, that bears emphasis to avoid a domino effect. Some program staff expressed concerns that a fellow funder’s exit would lead decision-makers in their own foundation to question programming. Proactive and open communication across programme, management, and board levels can help stave off harmful misinterpretations.
A clear rationale for exit can also help the exiting funder rally support from other funders to fill resulting financing gaps for grantees. It tends to be easier to mobilize other funders when starting out a portfolio than closing one, but the effort can still pay off. One TAI member conducted a financial survey of grantees in a portfolio they were exiting to determine which were at most risk for financial distress. They then flagged these high-risk grantees to other funders.
5. Documenting and learning
Funder exits at times may be uncomfortable for all concerned, but it is important to document and learn as we go. No exit will play out in exactly the same way. Data points are needed to guide future exits. A grantee exit survey, combined with the program officer’s personal reflections and ‘exit interviews’, are good feedback mechanisms. Several TAI members attest to the value of commissioning evaluations of the program or portfolio being shuttered.
One thing that we haven’t seen is funders taking the opportunity to go back and assess the impact of a funder field exit one, two, even five years after departure. Such reviews could provide invaluable lessons for exiting.
Here again, funder collaboratives have a role to play in offering platforms to compare notes, learn together and push each other to exit responsibly. There should be no room for complacency – the next strategy review and potential set of exits is never far off.
Sharon Bissell is an independent writer and the former director of the MacArthur Foundation’s Mexico Office. Richard Christel is the programme associate at the Transparency and Accountability Initiative (TAI), and Michael Jarvis is TAI’s Executive Director.
This article was first published on the Center for Effective Philanthropy blog on 10 June 2021. It is being re-published in Alliance with permission.