Chairman’s Corner: September 2005

The Importance and Challenge of Funder as Partners

by Mario Morino, Co-founder of VPP

At Venture Philanthropy Partners, the effectiveness of our investment approach, the value we add to our investment partners, and the progress they make as a result of VPP’s involvement are fundamentally a function of the quality of the relationship that we and our investment partners develop. Great partnerships are a result of great relationships, a truth that plays out in so much of life.

Importance of Partnership Confirmed

Partnership is the essential premise upon which our investment approach is based. Our experience with and feedback from our investment partners strongly confirm this principle. And we’re not alone; I suspect that others, like the Edna McConnell Clark Foundation, have found this in their work as well. We’ve learned that in order to deliver the most possible value as a strategic investor, a true partnership must emerge between our team and our investment partners. The most revealing part of our experience to date has been the recognition that our work is most highly valued by those investment partners with whom we have developed a true partnership. This kind of partnership—marked by honesty, directness, and openness, as well as by mutuality of respect, accountability, and shared learning—triggered breakthroughs in new thinking that led to fundamental change. Alternatively, where true partnership did not evolve, change was more incremental and our value, although still important, was much less significant.

Partnership Characteristics

An effective partnership is a function of the degree to which our investment partners and we experience common ground, open exchanges in our discussions, regard for each other’s values and culture, decision-making that is shared vs. pressured, trust, and respect. All of these elements allow both parties to objectively focus on the critical issues and directly affect perceived value and actual results. Key to all of this is the importance of getting good alignment up front on expectations and boundaries, and resetting and confirming those expectations and boundaries throughout the relationship as needs and situations change.

Inherent Impediments to Partnership

The power imbalance. For most of the players we’ve met in the nonprofit world, the relationship between the funder and the recipient is out of balance and skewed to the funder—“he with the gold rules.” So, it’s easy to understand why there is skepticism and “push back” on the term “partnership.” The inherent level of disbelief that we, or others with a similar investment approach, are not coming to the table with our own agenda is deeply ingrained in the field, and it takes a significant effort—with demonstrated performance—to overcome. Indeed, working through this has been one of the biggest challenges in our work with our investment partners.

The DNA of an executive director. It is frightening, even unnerving, for nonprofit leaders to open up to an outsider, especially a funder, about the real problems in their organizations and in their own career development. Such openness makes them vulnerable, and, unfortunately, to many, this is seen as a sign of weakness or even a threat. Yet to really help a leader or an organization advance and grow, one needs to understand the most critical problems.

The difficulty of strong and appropriate execution. We’ve learned that the way we execute can create impediments to true partnership. Thanks to the candid feedback of our investment partners, we’ve learned some important lessons and are now better in our execution.

We must avoid being “supervisory,” and instead be “advisory.” Specifically, we must be advisors and supporters by helping them do what they need to do for their organizations.

Regardless of how difficult or tempting, we can’t impose our vision, goals, or milestones on leaders or organizations—they must operate with their definitions, and the vision, goals, and milestones must be “owned” by the leader and the organization. We must also recognize that it is their life and their organization, and not ours.

A true partnership mandates shared learning. We can’t come to the table with “the answers” or with the attitude that “we know best.” We must be willing to learn alongside our partners, better understand what they face, come to know the communities in which they operate, and then, together, find the best ways to improve and scale their impact.

In the “heat of the battle,” all this is much easier said than done. That’s why our team now spends significant time questioning, pushing, and probing each other to best serve our investment partners: Are we focused on the most critical issues and needs? Are we helping set the conditions for change? Are we helping the leaders think through and execute their plans? And, on our end, are we doing what we need to do to nurture and grow the relationship?

Earning Partnership

Partnership is based on trust, and trust cannot be granted. Each party must earn the other’s trust—and must do so continuously as situations and times change. Trust is earned on our end by not overstepping the bounds of the relationship, by remembering that we are there to help leaders build and strengthen their organizations, not control them or impose our vision. There must be an open “give-and-take,” and a willingness to “bare one’s soul” without fear of retribution or suspicion the other party will “run from the problem.”

The investment partner must also earn respect by putting forth actions to support their words and by doing what they claim they want to do, which often requires making very difficult decisions. Many nonprofit leaders, because of the way the “system” works, have had to be manipulative, even exploitative, to get the funding they need. The biggest challenge many face is setting those tendencies aside in exchange for a productive working partnership. We all know that it’s always “about the money,” but if a funder and recipient can’t get past the usual refrain of “just give me the #&% money and let me do my job,” then the true potential of the partnership gets left on the table. The fact that a number of our investment partners place a higher value on our expertise and strategic assistance than on the funding itself (which is in the millions) has been one of the most significant confirmations of our investment approach.

We’ve Held True to Our Course

When VPP was still being formed and before the first member of the team was hired, I shared the following speech in the summer of 2000, entitled “Venture Philanthropy: Leveraging Compassion with Capacity,” which spoke of the importance of partnership.

“In the commercial world, the most successful investors are true strategic partners to the enterprises they fund. Their work starts with the funding instead of ending there. They develop relationships and build trust with the people of the organizations in which they invest. Instead of intruding and directing, they support and consult. Instead of controlling, they become vested partners that share risk. They provide management advice. They help managers deploy resources that help them achieve their missions. They open up doors. They make long-term commitments that enable businesses to invest in capacity for the long haul rather than simply surviving to the next quarter. More than anything else, they help build great organizations that, in turn, create great value. Our experience suggests that many nonprofits could benefit from a similar approach of strategic investment.”

After five years of experience with our investment approach, the above sentiments apply as much today as they did then. The difference is that we—our investment partners and VPP—have now “walked the walk.” We have a much better sense of the importance of strong, trusting relationships and focus more on relationship-building as a fundamental aspect of our work. And, when our investment approach is well-executed and a true partnership emerges, our investment partners tell us this works and, in fact, that it works well.

Power of Aligned Success

Developing true, effective partnerships offers the field a great opportunity to tip the scales for much greater effectiveness—for nonprofits and funders alike. There is something very important at work here, and the lives of children are at stake. It certainly is not new, but we’re finding it takes an investment of effort that is different than the norm. At a time when everyone is under-resourced, when there never seems an end to the injustice that keeps children from growing into healthy, productive adults, we must not balkanize ourselves as funders, investors, or nonprofits and instead find better ways to work more effectively together, to learn from each other, and to advocate for and advance our common cause. Maybe true partnership between funder and recipient that is built on respect for one another, shared learning, aligned mission and goals, and mutual accountability is something we need more of in this world.