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On the Art of Exiting Well

“As much as we love our students, we want them to leave after they’ve been successful.” The room filled with chuckles as university coordinators resonated with Lynda’s statement.

The mark of a successful student is their ability to be launched from their post-secondary foundation into employment or graduate opportunities. As much as an institution may have loved the student or bonded over the progress made in the past few years, a healthy trajectory involves leaving.

But leaving is difficult. It necessitates adaptation to big changes, perseverance, new support systems and a different way of relying on the old ones. Sometimes it’s uncertain and other times it’s not.Exit sign

But for the most part, leaving for the sake of launching into something new offers exciting opportunities for growth and expansion.

Philanthropy and nonprofits must view exit strategies through this lens. A responsible discontinuation of funding is a healthy step forward, offering opportunities for both organizations to revel in their impact and launch into something new for the sake of growth and expansion.

Exit strategies are an art form; a delicate balance of support and release. We must see them as such and attend to them with the appropriate amount of attention and care. We must apply the Hippocratic Oath to our philanthropy and “do no harm” in our exit or our stay.

A good exit requires wisdom on behalf of both the grant maker and grantee. If the goal is to do no harm, then there can be no one-size-fits-all strategy. Open conversations are to be had to land on an agreement that leaves neither party high and dry. Whether it’s a gradual decline in funding, an increased proportion of matching funds, endowment building or a cold turkey goodbye, the exit must be beneficial to both parties.

What are good exit strategies you and your organization have come across? We’d love to hear from you!

Hands-On Investing

Grantmaking can be likened to investing. The role of strategic grantmakers can therefore be likened to that of a money manager. Instead of a financial return, foundations seek a social change, which is much harder to measure. But the concept is similar. Philanthropy invests in ideas, people and organizations. Good foundations diligently check the people and the organization and debate the ideas and missions behind them. Some investments are relatively safe – matching scholarship programs with universities for example – and others are more risky.

The Johnson Scholarship Foundation’s investment managers use different operating styles and the style is often dictated by the type of investment. At one extreme are index funds which mechanically folopen hands forming a circlelow the market index for whatever assets they are buying. Managers of these funds do not research or make qualitative judgments. Venture capital or specialized hedge funds can be at the other end of the spectrum. In addition to initial research they can take a seat on the company’s Board and an active role in management and operations. Their specialized knowledge and expertise is just as important as the money that they invest.

Most of the Foundation’s investment managers fall somewhere between these extremes. An equity manager might m
eet with management of a publicly traded company and monitor the company’s progress towards stated objectives. But they don’t take an active role. The Foundation’s grantmaking process also falls within this middle ground. We generally don’t get involved with telling our grantee partners what to do. In fact, we usually defer to them on the basis that they understand their business better than we do.

Should the Foundation become a more involved investor?

This question has been raised by a number of our grantee/partners. Some tell us that our advice on strategy and governance, which we continue to give, has been even more valuable than the money we invested. Our experience and assistance, in addition to our money, has been vital in helping grantees develop fundraising and scholarship programs. We continue to work hand in glove with other organizations on strategy and operational issues. One grantee has asked us to sit on an Advisory Committee its national program. Our consultants have taken leadership roles in developing proposals and have written drafts for particular projects. And still other grantees have invited us to attend Board meetings and to participate in discussions regarding programing.

For smaller, edgier projects the argument in favor of our involvement becomes more cogent. We can give badly needed advice on basic governance and strategy issues. Our presence also helps us to monitor our investment. More direct involvement in certain types of investments takes our social investment model to its next logical step.

Hands-on investing surely has its strengths and pitfalls. There is a delicate balance when it comes to supporting grantees and dictating the operations of their program. Philanthropists must defer to their better judgment, offering advice when asked and relying on the expertise of our partners when not.

A Lesson in Humility

When FSDB made the request to use JSF funds for a playground I remember thinking that a new playground would certainly be a nice thing for FSDB, but it didn’t seem very high on the priority scale for educating deaf and blind children. It was a close call, but we ultimately deferred to our grantee’s good judgment. And when Tanya suggested during our site visit that we see the playground I almost told her that it really wasn’t necessary. We only had a few hours and it was cold, but I didn’t say anything.

The playgroublind child climbing a playground rocknd was quite the site. Imagine an interesting, safe place for blind children to experience the physical world. Imagine a place where children can learn the consequences of a misstep or a failure to properly interpret a physical cue. This is a place where a child can stumble or fall and not suffer serious hurt or injury. It is ingenious. We watched the children play. They were in a small tactile laboratory. It was completely different from what we expected.

James, orientation and mobility instructor, hosted our tour and explained the playground. He is a former classroom teacher and is obviously a very bright penny. In order to explain the importance of the playground for the education of blind students he told us about something that happened years ago when he was teaching grade 10.

James is a baseball fan and he had a blind student that year who was absolutely nuts about the game. This kid knew every team, every player and where he came from, batting averages, on base percentages, win-loss records of every pitcher and on and on. This student made James look like a baseball novice.

One day James was sitting at his desk when the student came into the classroom to see him. James was busy and, while he waited, the student indulged his curiosity by feeling around the top of James’ desk. There was a baseball glove and a ball. After extensively and carefully feeling each of the objects the student asked James, “What are these?”

At first James could not believe that the student didn’t recognize a baseball and glove and he urged him to identify them. When he finally understood that the student really didn’t know, James was stunned. He explained the items in detail and the next day he took his student to a baseball diamond, around all of the bases, let him feel each one and took him to the infield and outfield. He is still amazed (and touched) that his grade 10 student, who seemingly knew everything about baseball, could not recognize the basic tools of the game.group photo of parents and children at a playground

This is a poignant story and instructive for us. How much do we really understand of our grantees experience? Are we like James, surprised that a blind student can’t recognize a baseball and glove? Are we like the blind student, knowing everything about baseball but not comprehending the basics of what it is to play the game?

The Intersection of Ideas and Pragmatism

Albert Whitaker’s review of the philanthropic tome, Strategic Giving: The Art and Science of Philanthropy, identifies the conundrum of professional grant making. He describes the book as a “powerful attack on professionalism, written in the most professional terms and style.”

Professionalism is attacked because it robs philanthropy of its passion and innovation: “While grant making professionals may have the best of intentions… something is still lost when the delicate balance of public purposes and private values is tipped in the direction of the former to the detriment of the latter.” According to the author, what is lost is “idiosyncratic” and “provocative” giving. The process becomes so dry and bureaucratic that it loses its passion (and its real value).

Dr. Susan Raymond, a senior managing director of Changing Our World, Inc. makes a similar point when she lamentsillustration of a light bulb the unintended side effects of greater transparency and accountability in our industry and decision making that is increasingly process oriented. She compares many modern philanthropists to mortgage brokers, who make grants solely on the basis of probability of success. This leads them away from the most pressing and difficult issues of the day, which they are uniquely suited to address. Foundations should look up from the safety and comfort of their usual work and “come back to the world of ideas, even though there will be no immediate proof of impact.”

But transparency and accountability are necessary. Anyone who has had even a fleeting glimpse of sloth and self-indulgence in our industry knows that we need to be more than “idiosyncratic” and “provocative” in our grant making. We must have “the faith of fools” without being foolish. We must be disciplined without being conventional. We must strive to accomplish big things and not worry too much about immediate results. This is the essential art of philanthropy and it is more easily described than practiced.

Like our peers, the Johnson Scholarship Foundation must grope for it as we develop new programs and evaluate old ones. One of our Core Values is the power of entrepreneurship. This has been an inspiration for us in the past and we should continue to be guided by it. Entrepreneurship is similar to good philanthropy. It values creativity and risk taking and requires realism and hard work. The entrepreneur must find the intersection between ideas and pragmatism or perish in the market place. If we are to remain relevant, philanthropists and nonprofits must also do so.