A Sector in Crisis: CEP’s Elisha Smith Arrillaga Exposes the Dangerous Disconnect Between Foundations and Nonprofits – Transcript

Let’s Hear It Podcast Transcript

Guest: Dr. Elisha Smith Arrillaga, Center for Effective Philanthropy

Kirk: Welcome to Let’s Hear It.

Eric: Let’s Hear It is a podcast for and about the field of foundation and nonprofit communications produced by its two co-hosts, Eric Brown and Kirk Brown. No relation.

Kirk: Well said, Eric. And I’m Kirk.

Eric: And I’m Eric. Let’s Hear It is sponsored by the Kenneth Rainin Foundation, which enhances quality of life by championing the arts, promoting early childhood literacy, and supporting research to cure chronic disease, online at krfoundation.org. We are also sponsored by the Previs Foundation, a foundation creating an inclusive, equitable, and dynamic future for all San Diegans. Check out their amazingly good podcast, Stop and Talk, hosted by Grant Oliphant and Crystal Page. You can find them at stopandtalkpodcast.com.

Kirk: You can find Let’s Hear It on any podcast subscription platform.

Eric: You can find us online at letshearitcast.com.

Kirk: And if you like the show, please rate us on Apple Podcasts so that more people can find us. Let’s get onto the show. Are we doing this? We’re doing this. Oh man, this has started.

Eric: I had no idea.

Kirk: Can we stop for a second and say Happy New Year, even though it’s gonna be well into the year when this airs? I think this is a whole new season for Let’s Hear It.

Eric: Well, actually our Kristin Grimm episode was the first episode of the year.

Kirk: Yeah, but did we pause and say welcome to our brand new season? Celebrate? High fives? See, because this is just becoming old hat.

Eric: It’s just a continuous season. A continuous 140-episode season or whatever it is.

Kirk: No celebration, no pause, no reflection, no thank yous.

Eric: We’re too busy to celebrate.

Kirk: I don’t think we should lose the newness though. I can’t believe we pulled this off. This was the best idea of your entire life—doing this podcast for all these years.

Eric: This was your stupid idea and it continues to be a labor of hate. Happy New Year, well, once removed.

Kirk: You’re welcome to our labor of hate. So, Dr. Elisha Smith Arrillaga from the Center for Effective Philanthropy, thank you for coming on Let’s Hear It. I know what’s ahead is a bit of a bummer conversation, just to give a little bit of a hat tip. But I think this is so important that we’re talking about this. I feel like our next couple conversations are actually a very nice sequence of what’s ahead. But will you please set up this conversation because this is so critical? I don’t know if we’re just lucking out that this is landing where it’s landing in the calendar, but this is absolutely what we should be starting the year talking about. And I know there’s gonna be a lot more conversation about these topics going ahead. Set up what we’re about to listen to here because it’s sobering. I’ll be honest. It’s sobering, but it’s really important that we’re doing this. I’m really glad that you guys had this conversation.

Eric: I guess I would say if you are participating in Dry January, this sobering conversation with Elisha Smith Arrillaga of the Center for Effective Philanthropy comes at a perfect time. Not only that, but I believe that this episode will drop—by the time you hear this episode, you’re almost ready to drink again in February, which I will also recommend. I spoke with Elisha, who’s an old colleague of mine from the Hewlett Foundation. She’s now Vice President at the Center for Effective Philanthropy, and they have just put out this report called A Sector in Crisis: How US Nonprofits and Foundations Are Responding to Threats. And what it really should say is how US nonprofits are attempting to respond to threats and how foundations are thwarting them. I know that sounds like a rash statement, but this report reveals that foundations are falling short of their responsibility to serve nonprofits and the people that they support. Full stop. As I say in my conversation with Elisha, I used to work at a foundation. Some of my best friends are foundations. But this report reveals that we have a big, big problem in philanthropy. Now, one more thing—kind of a listening guide or listening assistance. As you listen to this episode, we continue to talk about the so-called ‘current context,’ but every time either one of us says ‘current context,’ I would like you in your mind to replace the phrase with ‘shit show.’ And that’s all I will say.

Kirk: I’m glad we can laugh because there’s not a lot to be laughing about. And I also love this discussion because it’s a real-time time capsule in how a bunch of super smart people that have wide capacity to reflect on and understand the world around them make sense of a moment that frankly doesn’t make sense to any of us. And I have to say, for the Center for Effective Philanthropy, we’re so grateful that Dr. Arrillaga and her team can do this work. And also, let’s call out the co-authors for this report. The report is A Sector in Crisis: How Nonprofits and Foundations Are Responding to Threats. So Sierra Granter is a co-author, Ellie Buteau is a co-author, and Christina Inn, along with Dr. Elisha. This is sobering. It’s important. There’s a lot to digest and think through. But the thing that struck me as you were talking about this, Eric, is that this notion of threats and context and pressure—this is a really historically difficult time to be in this field trying to operate in any way that makes sense. And again, massive thanks to the Center for Effective Philanthropy, this team and all of your work to try to help make sense out of a period of time that frankly doesn’t make sense to any of us.

Eric: The one thing that I’ll say is that for folks who just have a tendency to listen to the interview and then turn it off—and I’m sure you know who you are out there—

Kirk: Yeah.

Eric: I would recommend that you hang around for my conversation with you, or your conversation with me, what I lovingly refer to as ‘the blah blah,’ because the top of my head is coming off.

Kirk: This is Dr. Elisha Smith Arrillaga from the Center for Effective Philanthropy. Let’s Hear It. We’ll listen and we’ll come back.

 

[INTERVIEW BEGINS]

 

Eric: Friends, listeners, people, we have a problem. Nonprofits are facing record demand for their services right now, and I don’t need to tell you why. This demand is higher than it was during COVID, and at the same time, many of them are losing funding—and now not just from government, from philanthropy. A new report calls this moment an existential crisis, but here’s the disconnect: Foundations, by and large, don’t see this moment as an existential threat to themselves. They recognize the pressure on nonprofits, but they don’t feel the same kind of pressure. So what is going on here? Today, I am talking with Elisha Smith Arrillaga, co-author of a new report from the Center for Effective Philanthropy that digs into who’s stepping up, who’s hesitating, and why the gap between foundations and nonprofits feels uncomfortably wide. Elisha, thank you so much for coming on the show.

Elisha: Thanks so much for having me, Eric. Excited to be here today.

Eric: I can’t wait to talk about this report that you folks did. Now, I should also mention that you are a co-author with Ellie Buteau, Sierra Granter Hoffer, and Christina Inn over at the Center for Effective Philanthropy. I want to give them credit as well.

Elisha: Yes.

Eric: First of all, how are you doing? It’s been a while.

Elisha: I’m doing well. It’s nice to see you, Eric, after some time.

Eric: Sometime—that might be measured in decades, but yes. We used to work together at Hewlett a while ago, and I’m glad to see that you are on the phenomenal rocket ride, as in the ascension in philanthropy, while I make my long, slow—what would we call it? Dignified? It’s not so dignified—decline. So congratulations. I was also told to be nice to the people you meet on the way up because you’re gonna meet the same people on the way back down. And I can prove that. Listeners to this show may know a thing or two about the Center for Effective Philanthropy. We’ve had some of your colleagues on it. We’ve also had the great and good Phil Buchanan, the CEO, on the show. I consider it the premier research institution studying philanthropy. Of course, what do I know? But let’s talk a little bit about your work at the Center for Effective Philanthropy. What do you focus on?

Elisha: My team at the Center for Effective Philanthropy has the great privilege of doing independent research on the sector. We produce anywhere from four to seven reports a year that are publicly available on everything from topics like MacKenzie Scott’s giving and the organizations who received those grants, to a regular annual report on the state of nonprofits, to also, in this moment, we’ve been doing a lot of work looking at the current context and how this political moment has impacted nonprofits and foundations.

Eric: I like that you have coined this term, or you decided to use this concept, ‘the current context,’ when referring to the insanity that is happening out of Washington, the threat that foundations and nonprofits are under. It’s almost quaint that we’re talking about it as a ‘current context,’ but what is underneath that phrase is the crazy show. Is that fair enough?

Elisha: Yes, it is fair. In fact, when we—the data we’ll get into later when we talk about the survey and the interviews—the way we define the current context to respondents is a series of executive orders and other legal actions that have taken place since January 2025 that have specifically targeted the nonprofit and philanthropic sectors.

Eric: Right. No surprise what the current context is. It’s a nice, gentle way of talking about it, but I get it. It might as well not go crazy here. Alright, let’s get into the report. What were you hoping to learn when you conducted this research?

Elisha: We had a couple of big questions. The main ones were really: How are nonprofits experiencing this moment? Both the staff at organizations and the fiscal impacts, given that we knew there were a lot of government funding cuts happening. And then, how were nonprofits perceiving the reaction of foundations? And then for foundations, we were wondering: How are foundations responding? Are they thinking about changing their grantmaking? How are they working with their boards? Those are some of the questions that we dug into as part of this research.

Eric: And let’s just get into the findings. What were the headlines?

Elisha: There were a couple of big headlines. First is that nonprofit leaders who we surveyed—overwhelmingly, and it was a representative sample of nonprofits across the US, nonprofits that received foundation funding were those in the sample—they unequivocally see this as a moment of threat, a really existential threat to their organizations and the communities they serve. And the reason for that is because, similar to what you said at the beginning of our time together, there’s an increased demand for their services. At the same time, there have been significant cuts to their funding.

Eric: And I also want to get at—I don’t want to get too wonky about statistics. This is a representative sample, you said. A representative sample of nonprofit organizations. And to be clear, you excluded certain religious organizations and certain health organizations, I’m assuming because they might have viewed the data relative to the social-serving organizations. Is that a generally fair assessment?

Elisha: Yeah. That is a fair assessment. That is correct, yes.

Eric: And you did a representative sample of all foundations that made more than a couple million dollars a year worth of grants.

Elisha: That’s right. All foundations that do more than $5 million in grantmaking were surveyed across the US.

Eric: And since you folks over there at CEP are extremely good statisticians, I have confidence that these responses are representative, and I assume you do too. Correct?

Elisha: That is correct, yes. It’s one of the things that we pride ourselves on.

Eric: I’m just stipulating for the audience that this stuff is not made up. You didn’t put your hand on the scale. You didn’t decide who to talk to and who not to talk to.

Elisha: Exactly.

Eric: This is true. People, if you’re listening, it’s true. Don’t scream about the research. People often go into the ‘Oh, I don’t like the methodology, so therefore I’m not gonna listen to what you said.’ I would say just listen to what we have to say here and believe it. Okay?

Elisha: Yes.

Eric: Let’s start. I have so many questions for you, and the top of my head is coming off, but I’m gonna do my best to keep my act together here. Let me see if I got this right. You say that nonprofits are facing record demand, so higher than COVID. This is DEFCON whatever. And yet a significant share of the respondents reported that they’re getting reduced foundation funding. Did I read that right? Are foundations actually pulling back at this moment, or am I missing something?

Elisha: You’re right, Eric. What our data show that we gathered from nonprofits is that 56% either have experienced some reduction in funding or anticipate experiencing some reduction in funding from federal government. But then if we look at their foundation funding, 60%—61% actually—have either already experienced a reduction in funding from their funders or are anticipating some reduction in funding. So that’s 61% of nonprofits reported that when we gathered this data.

Eric: Wow. Okay. That’s really bad. Thing number one: there’s a greater need.

Elisha: Yes.

Eric: And for whatever reason, foundations are not delivering to support that need.

Elisha: That’s right. Yeah.

Eric: Okay. Now, the other side. You obviously talked to foundations. Foundations are telling you that they’re not nearly as affected by the current context as their grantees. And if I have this right, about half the foundations say the current context has made it harder to achieve their goals, and the other half don’t. So half of the foundations out there say, ‘Eh, not so bad what’s going on.’ Is this a specific set of foundations that you can read into, like ‘Oh, I understand why they say that’? Or do we just have this really weird problem?

Elisha: Really, what we see in the data is that there are really mixed reactions on the side of funders. Just like you said, the data shows that there’s some percent of folks who are saying, ‘Hey, we’re not able to do the work that we normally do to achieve our goals.’ And then there’s another group that says, ‘Actually, we are. We’re not experiencing that.’ What we do know is that 80%—81%, actually—of foundation leaders who we interviewed, they really were clear that foundations have a significant role to play in supporting nonprofits. But then when we look at the data, that’s where it becomes really ambiguous about how much that’s actually happening on the ground right now.

Eric: So if you’re a foundation and you’re in the business of supporting nonprofits to achieve your goals, and your own nonprofits, your grantees, are saying they’re in a world of hurt, and yet you say, ‘Eh, we’re doing okay’—how does that even connect? I’m having a really hard time understanding how it—I mean, look, I used to work for a foundation. You used to work for a foundation. I love foundations. Some of my best friends are foundations. But if we’re going to generalize around this institution, how can they possibly say that? If their grantees are doing worse and they are in greater need, and they are not meeting that need, that they’re doing okay? Or is it just that they don’t understand their own grantees’ perceptions?

Elisha: Well, I think that’s a big part of what’s happening. One of the things that we did when we gathered the data was to ask the same set of questions of foundations and of nonprofits around things like, ‘How well do you understand the challenges your grantees are facing?’ And then we asked nonprofits, ‘How well do you think foundations are understanding your challenges?’ And for instance, what we see on that question is that 93% of foundations say, ‘We understand the challenges our grantees are facing.’ Whereas when we ask that same question of nonprofits, only 54% of nonprofits think that foundations understand the challenges that they’re facing. And then we see those same sorts of discrepancies when we ask about communication. What it looks like is that there is some communication really that needs to be happening between funders and grantees about what’s actually happening in this moment and what it is that nonprofits need to better align around those things.

Eric: For those organizations or foundations that seem to be in alignment—now, needless to say, you’re not interviewing grouped pairs, because these things are anonymized, so you have to draw some inferences—but are you able to see any lines in which the grantee is reporting that ‘my funders do a good job of communicating with me, and I do have a sense of them, and they have a sense of me’? Are there ways in which this line of communication is working? Are there any glimmers of hope about how foundations and nonprofits can better communicate in order to be able to meet each other’s needs?

Elisha: Yeah, there are. There are a lot of examples of that also in the data. One of the things—we talked about all the quantitative data that we gathered, but one of the things I didn’t mention at first, but I referenced it a little bit earlier, was that we did these interviews, 30 interviews of nonprofits, 30 interviews of foundations from around the country to supplement that quantitative data. And what we heard in a lot of the interviews, because we could really dig in more and understand what was happening in some of these situations, was that we heard from nonprofits who were having more success working with funders during this moment. They were doing things like having regular conversations with their foundation partners, being able to ask for things like space to meet as a collective of organizations that might be thinking about collaborating together, being able to have conversations about things beyond the grant in terms of capacity building. What came through really clearly in the interviews was the need for just being in really close communication and understanding what’s happening in communities at this moment too.

Eric: I also have seen a lot out in the field about foundations that are very worried that the government is gonna raise their excise tax. They’re very worried that they’re gonna be investigated for one thing or another. They don’t seem to be nearly as worried about the effectiveness of their grantees. This not only feels really tone deaf to me, but it also suggests to me that many of these foundations don’t understand how to actually get change made. What are you hearing about in those interviews with foundations? Can you try to characterize the tone of their own sense of risk?

Elisha: Yeah, we asked both in the interviews and in the quantitative data about risk, and the results were super interesting. When we asked foundations, ‘How willing do you perceive that your foundation is to take risk?’ 69% said, ‘Oh, we think we’re willing to take risks.’ But when we asked nonprofits that same question about their funders, only 30% of nonprofits reported that their funders are willing to take risk. And I think too, there’s a lot—this came out in the interviews—there are a lot of questions around when we say ‘risk,’ what do we mean? And whose risk? And who’s at risk? For instance, many nonprofits that we interviewed talked about the risk of having to close or to merge or to not be able to provide services to the communities that they’re working with, whether they’re providing meals or shelter—not being able to provide those services, the risk of individuals not receiving those services. And then on the foundation side, when we talk about risk, many of the risks that came up in some of the interviews were like the risk of being in alignment with compliance for legal issues, the risk of spending more than having planned out of an endowment—those kinds of examples—the risk of not being able to execute on a strategy that had been set. I think when we’re talking about risk is one of the other reasons that communication is so important, because whose risk and who’s at risk and what we mean can be very different depending on where someone is sitting.

Eric: All right. Here’s another one. I would like you to just check my math. Here’s a statistic that caught me short. About two-thirds of the foundations made emergency or rapid response grants. Okay, great. Good for you. But only about a third increased payout. So if you made these emergency grants, but you didn’t increase your payout in the same number, then are you just robbing Peter to pay Paul? Are they just taking away from other areas to fund these emergency grants? So somebody’s getting the short end of this. Did I do the math correctly?

Elisha: That is a great question, Eric, and one of the same wonderings that we had. In interviews, we asked actually foundations that talked about setting up emergency response funds what that looked like, how they made that decision. Some of what we heard in the interviews was that for these rapid response grants, even though folks were doing them, they were often small—whether that’s $5K or $3K or $10K, a grant to help accelerate some of the work an organization is doing. But depending on the size of the organization, not necessarily a transformational grant to help them move through what was a really big moment of crisis. I think this point you raise around—if only 30% of folks are increasing payout, but they’re doing rapid response grants—to your point, the math there somewhere is noting in terms of where those funds are coming from or if they’re from the regular pot. We didn’t ask specifically every organization that question, but I think you’re onto something there in terms of the discrepancy that seems to appear.

Eric: Alright. I’m proud of myself for the math. We’re gonna take a very, very short break and we will be right back with Elisha Smith Arrillaga of the Center for Effective Philanthropy right after this.

 

[BREAK]

 

Kirk: You are listening to Let’s Hear It, a podcast about foundation and nonprofit communications hosted by Eric Brown and Kirk Brown.

Eric: If you’re enjoying this episode, you may just be a rule breaker. Check out season three of Break Fake Rules with Glenn Gallic, CEO of the Stuckey Foundation, as he chats with inspiring leaders in philanthropy, government, media, and more about breaking the fake rules that don’t work so that we can build a future that does. Check them out wherever you get your podcasts.

Kirk: And now back to the show.

 

[INTERVIEW CONTINUES]

 

Eric: And we are back with Elisha Smith Arrillaga of the Center for Effective Philanthropy. She’s the co-author of a new report, A Sector in Crisis: How US Nonprofits and Foundations Are Responding to Threats. If you haven’t figured it out, I’m very energized about this report and kind of gobsmacked, I have to tell you. Here’s another one, another statistic, and maybe you have an answer for this, maybe not, but I just wanted to raise it anyway. 20% of the foundations that you spoke with said that they don’t believe that foundations have much responsibility to help nonprofits navigate this moment. Now, in the interviews that you did, do you have any insight into how or why they could make this statement?

Elisha: There were some interviewees that we talked to, foundations around the country, where their sentiment at this moment was, ‘We’ve been in conversations with our board. Our board is really asking us questions around, is it really a crisis moment? Is this moment really that different from COVID? Is it a moment where we need to really shift things in some transformational way?’ I would say there’s definitely some disagreement in the field in terms of what this moment calls for for the sector.

Eric: My brain first goes to: okay, board members have a tendency to have a different life experience than the people, than the foundations even that they support or that they serve on their board of, and most certainly from the people who those organizations are meant to support. So this is just a call to action about let’s make sure that our boards reflect the communities that you’re hoping to support, so that these people are not out of touch.

Elisha: Yeah.

Eric: Alright, here’s another argument that has been—this is a typical thing in philanthropy, which is, ‘Oh, our job isn’t to replace government funding and we don’t have the resources, we don’t have the whatever.’ But does the logic break down in a real crisis when people are losing access to food and safety and healthcare? And the way I think about it is, okay, if the levy breaks and FEMA doesn’t show up, do we really say, ‘It’s not our job to stop the flood’? Or do you just say, ‘Okay, it was FEMA’s job, they didn’t do it, and the place is flooding now. What are we gonna do?’ Does that logic break down? Does the government-philanthropy thing break down right now? Because right now it seems to be the moment of all moments.

Elisha: I would agree, Eric. And actually, many of the quotes that we include—there are some really powerful quotes from the interviews that we include in the report—where there are some funders who are calling others to task, and they’re saying—there are some quotes, and I don’t remember the exact wording, but one foundation CEO who says, ‘If you’re waiting for the existential moment, if you’re on the sidelines waiting for the existential moment, that moment is now. Now is a moment to act.’ But based on what we see in the data, the majority of organizations—foundations aren’t reacting in that way with increasing payout. And there are a lot of folks who are changing some of their practices. They are doing more general operating support or changing their application or reporting requirements. But we’re seeing, as you said before, only around 30% of foundations have increased payout at this moment when we know there’s an increased need on the nonprofit side.

Eric: This is another interesting thing, because I’ve been participating with grantee perception reports for a really long time. Actually, when I was at Hewlett, we were one of the first foundations to publish our GPR online. And people were like, ‘Oh my god, I can’t believe you’re telling people how badly you did on communications!’ When I was a communications guy, I might have been able to talk my boss out of that. But in general, it feels to me—and again, please correct me if I’m wrong—that the grantee perception report has helped grantees and foundations understand ways to align, ways to learn about each other, and that it has brought organizations together. But this suggests to me that we’re about to see a rift. We’re about to start to see some distancing. And given that you’re conducting grantee perception reports every day—without naming any names, without telling anything out of school—are you starting to see the gap widening rather than tightening?

Elisha: That’s a great question, Eric, and actually one that would be great for future research, because we have not looked at the grantee perception report data, at least on our team, in that way. But I think it’s a great point and a great thing to look at. I personally remain ever hopeful that this data and what we’re seeing in communities around the country will help folks really in 2026 hopefully rise to the moment of doing the things that nonprofits need to be able to serve those folks who they’re serving in communities everywhere. Whether that’s increasing payout or shifting grant requirements or talking with boards in different kinds of ways to help them understand what’s happening, my hope is that those things will start happening at a faster pace than they have been, and we’ll see more change. And to that end, one of the things that we’re doing actually with this report is we’re releasing a two-page supplement just for boards. It’s a two-page summary of the report that’s called a board insert that we’re hoping that funders can use to insert in their board books as a helpful tool for just level setting for folks. ‘This is the context in which we’re currently operating, so if you have questions about that, let’s at least all get on the same page. This is the current state. There’s increased demand, less funding. Now what do we do?’ We’re gonna be trying to think about more resources like that this year that just really try and help do some level setting for folks so then they can get into a conversation about, ‘Okay, what actions do we now need to take?’

Eric: Now, a lot of these actions—to be fair, there are no miracles here. And it’s no secret either. During COVID, we most certainly saw foundations and other funders step up with general support and reducing their requirements and things like making it easier to give and get a grant. And yet it seems like these lessons either didn’t carry over, or the sense of threat isn’t obtaining for many foundations. Again, I don’t wanna belabor this, but any sense of why they don’t get that?

Elisha: It’s been interesting. It’s one of the things too that we are—we’re actually about to put a survey out in the field in a few weeks, our State of Nonprofits report, our annual State of Nonprofits report, where we’ll actually follow up on some of these same questions again too, so we can track them over time. Because I think we also have a similar question of why has the response been so different? And one of the things too that I think, just in terms of the total context that’s really different, is during COVID, there was actually a lot of federal funding being poured into nonprofit organizations with the short-term loans or the forgivable loans. And now there’s the opposite, right? There’s funding being taken from organizations at the moment where also because of other funding cuts, there’s more need in communities, whether that’s to SNAP or healthcare or other kinds of things. There’s just—it’s a really—we are facing a lot of the same challenges, but the response has been—it just has looked different.

Eric: And here’s one more. I hate to do this, but these are things that I’m smacking myself in the head to make sure that I’m still alive and reading this stuff. 40% of nonprofit leaders say funders have shifted priorities or requirements in ways that are less helpful right now.

Kirk: [laughs]

Eric: That one may be the cherry on top of this nasty little cake of feedback from grantees about their foundations. Any idea what that’s about, where that’s coming from, and what anyone can do about it?

Elisha: Yeah. When we asked grantees—when we asked nonprofits in the study what were some of the things that had been happening during this moment, whether that was foundations or other funders asking them to shift the language on their websites, or actions that they’ve had to take to mitigate risk, whether they were being asked to or not, they have had to change the language they use, shift programmatic work, shift their communications. And then when we ask funders some of those similar kinds of questions, we see the same kinds of things. I think the interviews provide a lot more color around some of the stories about how this is happening, but we definitely are seeing these discrepancies here.

Eric: All right. Now here’s the great big $99,000—whatever trillion-dollar—question: Is philanthropy, as it’s currently designed, actually built for moments like this? Is our system kind of broken?

Elisha: That is the multimillion-dollar, hundred-million-dollar—the big question. And my reaction is: when we interviewed nonprofit leaders and foundation leaders around the country, one of the things that, even in the midst of all the challenges folks were facing, there is such a spirit of resilience and people doing really creative things that you would never have even thought of as a solution. I think the solutions are there. The individuals working in philanthropy and in all kinds of nonprofits, they are doing the work in communities every day that could be possible solutions. And I think some of it is just around—it’s not really ‘Is it the right structure or not?’ But are we really activating in the way that we need to in this moment?

Eric: Well, thanks for bringing it into the positive, because I was actually going to go there, believe it or not, even though I sound like one of those Muppets up in the balcony. What are three or four things that you would encourage foundations and maybe their grantees to do right now or to think about right now that can help us through this moment?

Elisha: Well, one big one—and I think the data definitely points to this—is just: communication is always important, but it is more important than ever now. And I don’t mean the ‘let’s do a check-in call,’ but really: What’s actually happening in the community? How has the nonprofit that usually provides food—how has their clientele shifted? What is happening in that community and what are people who are being served by that organization saying they need? Really having a deep understanding of that I think is more important than ever. That’s one. Two is getting really creative about funding strategies and having courage and being willing to take risks. And when I say risk, I mean risk in terms of being creative with different sorts of legal strategies or financing strategies or whatever that may be. Because I think the real risk is to communities and individuals who may not get the services that they need. That’s actually the highest risk, and centering that in decision-making I think is super important. Both of those things are gonna be really key in terms of moving forward in some more productive ways than we currently are.

Eric: Well, your work has shined a really important light on what’s happening. I’ve always said that statistics and survey research like this, it puts a number on the zeitgeist. I think we all had a sense that there’s a disconnect, but being able to actually articulate it in this way is a phenomenal service to the field, and it validates the sensibilities that you get just from talking to people. I think that’s one of the real gifts that CEP has been able to provide over the years. A phenomenal tool and resource for foundations, but also it gives the grantees a chance to communicate in a safer way. So thank you so much for your work. Thank you for this incredibly valuable report. I do hope that we have the opportunity to make sure that all the foundation folks and their grantees and their trustees and their board members read this and take it in and understand that they cannot be effective if their grantees are not effective. That we are absolutely all in this together. I thank you for your work, congratulate you on this amazing thing that you’re able to do, and Elisha Smith Arrillaga, you’re amazing. Thank you.

Elisha: Thanks so much, Eric, and thanks so much for having me. It’s been great talking with you today.

Eric: Well, it’s been a pleasure. Thank you again.

 

[INTERVIEW ENDS]

 

Kirk: And we’re back. Okay. So I think—

Eric: Can you believe what you just heard? Can you believe—

Kirk: I’m trying to read you, Eric. So here’s my question, because I’m trying to create a little space, a little compassion, a little empathy for what’s going on—that there’s something very powerful that’s underneath here that’s difficult. But here’s my honest question: Do we actually know what is happening right now and why it’s happening and how it’s happening?

Eric: Please be more specific.

Kirk: I don’t want to be, because that—well, then the answer is no.

Eric: No.

Kirk: Because I totally agree. I don’t think we know what’s happening. I don’t think we know why it’s happening. I don’t think we know how it’s happening. I don’t think we even know what ‘it’ is. So I just want to make that pitch as we roll up our sleeves and get into this. There’s a hidden context for this conversation, which is, well, somebody somewhere should know the answer to those questions—what’s happening, why it’s happening, how it’s happening. The answer should be double down on your giving. So all these nonprofits that are bearing the brunt of trying to soften the blow, this whole thing that’s going on—those dollars should be available. And I guess I just want to say: I get that critique. I think I share the critique. And yet this piece of—that we don’t actually know, even though it’s unfolding all around us, and to us, and in us every single day—the fact that we actually don’t know what’s happening, why or how it’s happening, maybe is part of the reason that it’s so hard, even if you’re sitting on a massive endowment, to mobilize resources. Because what does even a good response look like? So that’s the one empathetic, sympathetic thing I wanted to say. Eric Brown, you’ve got the floor.

Eric: Well, the Center for Effective Philanthropy is helping us understand what’s happening.

Kirk: Yeah.

Eric: They’re asking the grantees, ‘How are you doing?’ And the answer is, ‘We’re not doing good.’ And they’re saying, ‘Well, what’s the problem?’ And the answer is, ‘We don’t have enough money. We don’t have enough support from our funders, we don’t have enough—whatever you want to call it—capacity building. We don’t have anything. And the money’s not flexible enough. They’re requiring too many conditions, all that stuff.’ The answer is: give us more money so that we can deal with these crises. And we know what the crises are. Federal funding is being cut. People are getting into our business and trying to legislate on things like diversity and stuff like that. All of that stuff. We know that. And we have this way of learning about what grantees need. And then you ask the grantees, ‘Do your funders understand your challenges?’ And half of them say yes. Then you ask the foundations, ‘Do you understand your grantees’ challenges?’ And all of them say yes. This is like ‘he said, she said.’ Foundations are from Mars and nonprofits are from—this is a total disconnect. And how can this possibly be? And when you have the 20% of foundations that say that actually funders don’t really need to help their grantees succeed—so what’s the point? Why are you in business? So this disconnect is astonishing to me. I will grant you that, let’s say, 50% of the grantees seem to think that 50% of their funders are 50% okay. Or some version of that. So there are good funders out there. They want to do better. They’re putting more money out. They are understanding the risks and all that other stuff. But there is a big swath of them out there who don’t seem to get it.

Kirk: I think we’re here. I don’t think I’ve ever seen you completely beside yourself.

Eric: If there was video, there would be two of me. I would be me and I would be the one that’s beside myself.

Kirk: And again, I try—because you get to occupy that ‘I’m so angry’ space. I get to try to occupy the empathetic space. But can I tell you, I think this is even worse than what’s here.

Eric: Oh, good.

Kirk: Because it—I’m not gonna name names—but at least in the world that I’m within and some of the work that we see, it actually gets even worse than this.

Eric: Don’t name names. And by the way, I saved your job. I edited out this terrible thing you said a couple of episodes ago. You’re welcome.

Kirk: You save me regularly.

Eric: Everything you’re doing, the cutting room floor will be—

Kirk: Under Earth, that will never work again. But I think this gets even worse, because this conversation is about the foundations that are staying in the game. There’s a whole other set of foundations that have said, ‘Oh, things are so bad in the United States, we’re just not gonna work there anymore.’ And it’s like—wait a minute. That’s your answer? Your answer to this moment is—and from a foundation logic model standpoint, it makes perfect sense, because it’s like, ‘Well, we’ve got limited resources. We’re gonna invest dollars where we can get big outside gains. The issues we work on have global relevance anyway, so let’s attack these battles where we’re able to win.’ And that thinking is part of what’s created this inevitable black hole trying to pull all this down. So it gets even worse, I think, than what the Center for Effective Philanthropy is able to show.

Eric: Yeah, you’re right. And just to put a finer point on some of these statistics: 40% of nonprofit leaders say that funders have shifted priorities or requirements in ways that are less helpful right now. 40% say that funders are shifting money in ways that are less helpful. So if they just did everything the same, that’s better. And then that 20% statistic—I pulled it back up again—20% of foundations say they don’t believe foundations have much responsibility to help nonprofits navigate this moment. Well, what are they in business for? It’s—again, ah, okay. That’s my answer.

Kirk: This moment that we’re in makes no sense. So here’s the question, because I thought it was so interesting, this question of risk. 69% of foundations say they take risks. 30% of nonprofits say foundations take risks. So if you’re in the foundation seat, you’re like, ‘Oh no, we take risks.’ Well, here’s my question: In a world that makes no sense, and you’re sitting on top of a multi-billion-dollar endowment—or endowment of any size—and you’re trying to make decisions to navigate a world that makes no sense, you might rightfully view any proactive decision that you made in this time as actually an enormous risk, because you have no idea what threats are coming at you. So this notion that there’s this deep conservatism to kind of protect something from being completely eradicated—I can kind of empathize with that from the standpoint that, as the nonprofit, yes, you’re broke, you need resources. As the funder, you’ve got tons of resources, but you don’t want, in this world that doesn’t make sense, somebody to show up and go whack-a-mole with your capacity to try to help make the world a better place.

Eric: Yes, but in the words of the immortal Don Draper, ‘That’s what the money’s for.’ That’s what the money’s for. It is to deal with terrible, crazy, nutty situations. Ostensibly, philanthropy is there to deal with crazy things to make them better. And again, this is almost the levee-breaking idea. Let’s just say FEMA doesn’t do its job. The levees break, and we’re flooding. Do we throw our hands up and say, ‘That’s not my problem’? No, you fix the problem anyway. And I think these very large foundations can be a bulwark against the craziness. They can help provide some gravity and some stability and some sense, and help these organizations make it to the next administration, make it to the next thing, push back. That’s what they’re there for. They’re there for crisis as well as building for the future and all those other things. But you cannot build for a future that may not exist. You have to defend against the things that are the biggest threats. If these organizations go out of business because the funders say, ‘Oh, we live in this crazy world,’ they will not be here when we need them. And that is just a fact.

Kirk: It made me wonder how much of what might be happening within philanthropy at scale has to do with the notion that we’re all rightfully committed to systems-level change. So, ‘I don’t want to fix one levee. I want to create the rule that gets every levee fixed and creates massive resources, because I don’t have the dollars to do that.’ And again, in this world where the system—what our conception of even the system is—is being completely upended. I wonder again if that’s also partly what freezes the response, because it feels like all you’re doing is trying to put fingers in dikes, and you’re like, ‘Well, that whole dike is coming down anyway. Maybe I can’t actually—I could just push all my money to the center of the table and it’s all gonna be as bad or worse anyway. So what’s the point?’

Eric: Well, if everybody drowns in the flood, then creating the system to build better levees will be too little, too late.

Kirk: You’ve mentioned in the past, somebody said we should be working on Project 2029 or whatever the right number would be. So this is the only thing—because again this question of ‘What’s happening? How’s it happening? Why is it happening?’ is so fundamental. Our world is being so upended, it’s being so tipped over. Do you believe that there’s a game plan somewhere that some party of people have been party to that anticipated what is coming and then said, ‘Here’s a game plan for how to respond’? Because that’s the other thing that I pick up from this conversation—that all of our partners in philanthropy, let alone our partners in nonprofits, everyone’s kind of trying to deal with this in the context of their own perception of reality. Is there—and I’m sure it’s happening at the field-level organizing where there’s a hundred foundations coming together saying, ‘Hey, here’s systematically what we’re seeing happen across the field. Here’s how we can pancake and leverage our resources.’ Don’t you think that’s happening somewhere? And yet is the net of that being, ‘Yes, but we’re still not seeing enough dollars coming to the field’?

Eric: God, I hope so. I really, really hope so. But if you think about it, the answers on the foundation side to these questions in this survey suggest to you that it is not happening.

Kirk: Yeah.

Eric: Because it suggests to you that foundations do not understand the gravity of the situation.

Kirk: Yeah.

Eric: Or they understand—and this is even worse—they understand it and they don’t care.

Kirk: Mm-hmm.

Eric: Or not enough of them care. And both of those things are very, very troubling. But if they said, ‘Yes, there’s a problem, we all need to be a part of the solution. Our grantees are essential parts of that. If they are not effective, then we are not effective.’ If you had that coming out of this survey, saying, ‘We are all together on this. We haven’t articulated what the plan is specifically, or even if we have, we’re not gonna tell you because we don’t wanna show our cards’—that would be different. But by this reading, this is such a canary-in-the-coal-mine report.

Kirk: Mm-hmm.

Eric: Anyone within the sound of our voice needs to read it. If you work at a foundation or a nonprofit, you need to know either what you’re up against or what you’re up against. Because this really does signal to me that there’s this phenomenal disconnect happening between foundations and nonprofits that appeared to have been narrowing—

Kirk: Mm-hmm.

Eric: For a while. But—and I asked Elisha this question at the very end—which is: Does philanthropy even work anymore? Is the model broken? Does it not do what ostensibly I think we had all hoped that philanthropy was supposed to do, which is come up with good ideas, build for the future, help change systems, and be responsive to the needs of the folks that they hope to be able to serve? And I can’t say with total confidence—I can’t say with minimal confidence right now—that philanthropy is meeting this moment. Some of them are for sure. MacKenzie Scott, God bless her. Some of the big foundations have been stepping up, and some of them haven’t. And the question is, for those who haven’t: Is it really because they think there’s no problem?

Kirk: Yeah.

Eric: Do they think this is an overblown crisis? And someone said, ‘Actually, is this really a crisis? Is it that different from COVID?’ Oh, what? Like COVID was nothing? COVID was a big thing.

Kirk: Well, actually, the disconnect with COVID I thought was so interesting the way you guys were talking about that. Because, COVID—the nonprofit sector emerges as an incredible channel of resources to help provide basic needs and services at a time when governments were being overstretched. So there was a financial influx to support all these nonprofits providing basic services. And the upside-down reality now is that those dollars, at least from a federal standpoint, are being pulled back. They’re being pulled back in so many different areas because this notion that there’s gonna be some kind of support mechanism required to navigate the world that we’re in—that notion itself is completely under threat. So I keep going back to this question: We’re saying, ‘Is philanthropy built for moments like this?’ Well, what is the moment? And I think that’s part of the problem here, is that the moment is being inadequately defined for all of us.

Eric: Okay. So there are a couple of other layers to this thing. And I don’t have all the answers, but on the one hand, Elisha talks a lot about the service-providing organizations.

Kirk: Yes. Mm-hmm.

Eric: Right? So these are folks who are dealing with hunger, they’re dealing with health crises in communities—services. She doesn’t talk a lot about the strategic, the long-term—the climate change, the other stuff, democracy, you name it.

Kirk: Right.

Eric: And I’d be curious to know whether there was much of a statistical difference in the responses of grantees based on whether they are providing day-to-day or responsive services or—

Kirk: I have the same question.

Eric: —long-term strategic organizations. Yeah, that is a question I will ask them, and I hope that we have that conversation in the future. My hypothesis is that the differences are probably not as stark as you would think, but I’m curious about that. That is a part of the question. I would dial back my criticism by, nah, 21%, if I find out that there is a big difference between the service-providing organizations who say that their funders don’t understand them and the other long-term strategic ones. However, you are a funder and you are in the service-providing business—let’s just say you’re a community funder or whatever, you’re dealing with homelessness or housing or health or that kind of thing—and your grantees say that you don’t get them. Well, that’s a problem too. It’s almost like you cannot win in this one. This disconnect is so profound that it must suggest that there is some kind of fundamental lack of understanding between these two sets of institutions.

Kirk: No, I think that’s a great point. And I had the same question in my mind too. It’s like, yeah, how much of this is being felt by the service providers versus what you would maybe call the strategic philanthropy part—the big strategy plays that go on. And I did think that conversation you guys had about the grantee perception reports and ‘Do we see this rift between haves versus have-nots?’—it sounds like Center for Effective Philanthropy might pick that up and do a little bit more work with that. So this gets me back to that: Do we know what’s happening and why and how? What I hope happens is that very soon somebody will come forward and say, ‘Well, actually, here’s our critical, unflinching, sober, and transparent assessment for actually what’s happening, why, and how it’s happening.’ I believe that that story would challenge us very deeply in terms of our understanding of how this world has been working for a while. That could unlock two things. It could create a different strategy for the strategic philanthropy folks to say, ‘Oh, actually, this is the game we need to be playing in, so let’s invest in all the things that we think can make change as far as our understanding of what’s going on.’ And then it will create more space for the service-provider philanthropists to say, ‘Oh, I get it. There’s a five-year—X-year—arc here where we need to double down because this basic service need is not being met. Here’s the gap we can fill.’ And I think that until you have clarity about those two things, it’s hard for philanthropy to move. Because again, if I just try to put myself inside the room of, ‘I’ve got billions of dollars around me that I don’t know what to do with,’ I actually feel like I’m at a high-risk space. I actually feel like I’m doing everything that I can do. And until you can, in an evidence-based way, show me how many dollars get me from here to there—actually show me how I can get through this moment—I’m probably gonna feel like doing less, even though I feel like the little bit I’m doing, I feel like is more than enough. And then—but that’s my own… I don’t know if that’s right or wrong, what I just said, but that’s what I feel like is what’s needed in this moment that we’re in, whatever that moment is.

Eric: I don’t think that’s bad, but the evidence thing almost always happens retrospectively, and we can’t operate like that right now.

Kirk: Yeah, fair. Very fair.

Eric: You have to kind of do all of the above, which is: you have to make sure that your grantees survive. You have to make sure that they’re able to meet the basic needs of their constituents, however you define them. And then you have to go back and look and see what happened. Because these things happen. They run in cycles. We will have another crisis moment where foundations can do a ton to step in and make things better in the short term. And yes, they may have to spend more than they had hoped. Instead of going out of business at never, they’ll go out of business in 150 years. Those are the kinds of things that I think we need to do. I agree that we need to do a lot more thinking, a lot more analysis, a lot more of this type of work that Center for Effective Philanthropy does, which is both quantitative and qualitative, so that we better understand what folks need. If you are in the business to make change, then make change. And that’s the most important thing of all. And this suggests to me that something is not working, and we have to figure out what that is, or we should just blow up the system.

Kirk: Can we just say a big thank you to the Center for Effective Philanthropy for being willing to do this work? The fact that there’s a report here at all is only possible because they have so much credibility and trust in the field that they can ask questions that people respond to. So there’s a quantitative part—they did surveys. There’s a qualitative part—they did interviews. That means that people picked up the phone. They were off the record, but they were willing to speak honestly. This kind of introspection, self-reflection, transparency—this is what’s absolutely crucial for making the field work more effectively. And so Ellie, Sierra Granter, Christina Inn, Elisha—

Eric: Christina.

Kirk: Sorry, Christina. Sorry, Christina Inn. That team deciding to do this work at this time, it’s so crucially important, and we’re grateful. We’re grateful that you are giving us this insight into what’s going on. And the next phase of this couldn’t happen quickly enough. The next phase of this, where the answer to ‘How do we deal with this?’—we need that. A year ago. Years ago. No, we need it urgently.

Eric: Also, to be fair, and I hear those of you out there about to make this point, this wasn’t funded by fairy godparents—it was funded by philanthropy. And like I said, philanthropy has been my career and my life for the last 20-something years. I totally understand the organizations that are working hard to do the right thing, and we need more of them, and we need them to be doing more of it. And that’s what this is all about. It would be a boring conversation if we didn’t care about both of these types of institutions. So I want to make that clear. I’m not just screaming at all philanthropy in the abstract, but in the specific, we need to do better. We need to figure this out. For those out there who really want to do this, this is the type of report that you need to spend a lot of time with, to ask and answer the question: What role am I playing in helping to improve this situation? What can I do to make these things better? And that’s what this is here for. I’m really grateful. So grateful to Center for Effective Philanthropy. I’ve loved this organization for a really long time. And this is exactly the kind of work that they do so well, that helps us all improve.

Kirk: So the report is A Sector in Crisis: How US Nonprofits and Foundations Are Responding to Threats. Elisha Smith Arrillaga and her team at the Center for Effective Philanthropy. You can find it on their website. Eric, great conversation. Elisha, thank you for coming on Let’s Hear It. And there will be more. We’ll be back with more. Thank you all for doing this with us.

Eric: Okay everybody. That’s it for this episode. Please let us know if you have any thoughts about what you heard today or people we should have on this show.

Kirk: And that definitely includes yourself. And we’d like to thank John Ali, the tuneful and inspiring composer of our theme music.

Eric: Our sponsor, the Lumina Foundation.

Kirk: And please check out Lumina’s terrific podcast, Today’s Students, Tomorrow’s Talent, and you can find that at luminafoundation.org.

Eric: We certainly thank today’s guest, and of course, all of you.

Kirk: And most importantly, thank you, Mr. Brown.

Eric: Oh, no, no, no, no. Thank you, Mr. Brown.

Kirk: Okay, everybody, till next time.