Exit Strategy

Some sage once remarked, “It is easier to put your hand into a machine than it is to remove it.” Grant relationships are much like that machine. A foundation should never get into one without an idea of how it will get out. More strictly speaking, a foundation needs exit strategies tailored to fit the many different kinds of grants they make. For some grants, the commitment is for a single year for a defined project, and that is that. For others, the commitment is the first in a series that may stretch for dozens of years, with the exit occurring only when a significant societal change has occurred. And there are all types of exit strategies in between these two extremes.

The most important piece of advice when it comes to exit strategies is “Do not promise to buy frogs when you are shown tadpoles.” A tadpole may develop into a frog. It also may die, get eaten, or disappear without a trace. Foundations should be very careful about making long-range commitments before they have even short-term outcomes to guide them. In fact, it is wise always to leave the exit door ajar in case the hoped-for results come a-cropper. This is not to say that a foundation should abandon a project just because it gets off to a slow start; it is to say that no foundation should ever put itself into the position of perpetually supporting a project that will never deliver the desired outcomes.

The exit strategy usually consists of a number of coordinated substrategies. Among them might be a substrategy for promoting financial sustainability of the project; a substrategy for communicating news of its accomplishments to key audiences; a substrategy to help the grantee develop its leadership; or a substrategy to develop supportive public policy. The total exit strategy should be developed in consultation with the grantee and should be monitored constantly for progress.

The foundation should have an actual date of exit in mind, but it is not always necessary, or even wise, to share this date with the world. If a set date is announced prematurely, it can cause panic among the grantee's employees and other funders. A date set quietly can just as quietly be extended if the project is not ready for the transition, or it can be moved up if the project is successful in diversifying its support sooner than expected. But it is always wise to have an exit date in mind. The longer a foundation supports a project, the more it discourages the grantee's attempts to broaden its funding base. The exit strategy thus helps the foundation to avoid fostering a dependence that will hamper the development of the project.