Five Lessons for Funders From the Implosion of a Nonprofit News Site

On June 30, the criminal-justice-focused news site The Appeal ceased operations, closing down less than two months after its editorial staff announced their intention to form a union. Minutes after the union drive was made public on May 10, The Appeal laid off a number of staffers and announced that key members of the organization’s leadership, including Executive Director Rob Smith, would be stepping back into advisory roles.

That same day, The Daily Beast published a story detailing many of the staff’s grievances regarding their treatment by Smith and other leaders at The Appeal, which was followed two days later by an even more thorough expose by the news site Defector. The stories paint a picture of a toxic and unstable workplace, where Smith overhauled the organization constantly, often forcing staffers into menial and confounding assignments that bore little resemblance to their job descriptions. Other anecdotes paint The Appeal’s leadership, specifically Smith and editor Ethan Brown, as belittling, controlling and downright cruel. Accusations include insulting employees’ intelligence, berating them over the phone and firing or pushing out staff members for arbitrary or unknown reasons.

Over the last several months, I was one of a handful of reporters working on the story of The Appeal’s mistreatment of staffers, talking with more than two dozen former and then-current employees in both the newsroom and the organization’s progressive advocacy wing, the Justice Collaborative (TJC). My own reporting found similar themes and anecdotes as The Daily Beast and Defector, revealing a toxic culture emanating from Smith to all corners of the organization. Concurrent to those stories coming out (and possibly in connection) was the collapse of The Appeal’s funding sources, a series of events that took the young nonprofit from planning an ambitious expansion to complete implosion in a matter of months.

Smith’s poor behavior and mismanagement are an extreme example of an all-too-common reality at even the splashiest and best-funded nonprofits, where lower-level employees can face mentally and emotionally taxing work, long hours and demeaning treatment. Worse still, far too many of the people responsible for reining in bad behavior in today’s nonprofit world—namely, boards of directors and fiscal sponsors—are either inactive, disinterested or overly loyal to the leaders they’re meant to oversee. For many nonprofit employees witnessing abuse or mismanagement, funders are the only actors capable of enforcing meaningful accountability.

Nonprofit employees, philanthropists and foundation officers may cringe at this idea, and understandably so: The traditional fear at nonprofits has been too much funder involvement and interference, not too little. And funders themselves don’t want to be seen as manipulative or feel obliged to take on responsibilities for which they aren’t qualified. But refusing to acknowledge the reality of funder influence may only make things worse, while viewing the situation with clear eyes may prevent future breakdowns like that of The Appeal. Below are five key lessons that funders should take away from The Appeal’s tumultuous saga.

“Investing in leaders” needs to mean something more

At The Appeal, Smith’s employees and colleagues described him as a talented fundraiser and a font of ideas, but someone who lacked the attention span or motivational skills needed to achieve his goals. The Appeal may have been a more successful endeavor had Smith focused his talents where they were most useful and relinquished management duties to someone better suited for the job. Instead, like many founders following the Iron Law of Institutions, Smith clung to power and his organization suffered.

For many funders seeding new nonprofits, the investment is often less in the organization itself than in the vision of one or a few leaders. “Investing in leaders, not ideas” has become a mantra across multiple sectors. But far too often, “leaders” are simply seen as charismatic and charming people with an exciting vision. In practice, an effective leader also needs the practical skills, knowledge and commitment to keep up the difficult day-to-day work of institution-building. This may not translate well in a founder’s pitch to donors, and requires more thorough and thoughtful vetting on the part of prospective funders. Funders must also move beyond viewing their investment as largely in the top brass, and take into account the staff responsible for an organization’s daily work.

Build channels to the rank and file, not just to management and board members

In the course of my reporting, I reached out to a handful of the foundations previously listed as current or former major supporters of The Appeal, including the Chan Zuckerberg Initiative, Open Philanthropy and the Ballmer Group, among others, asking them what they knew about Smith’s questionable management. None of the funders who responded would comment on the record about the issues raised in my reporting. As a fiscally sponsored project of Tides Advocacy, The Appeal was never required to publicly disclose a full list of supporters or file tax information, which also meant that Smith could run the organization without a formal board of directors.

Despite the millions of dollars flowing from donors into The Appeal through Tides, employees felt they had few to no options when it came to seeking accountability or oversight. Funders and fiscal sponsors need to build relationships not just with nonprofit leaders, but with rank and file staffers and administrators, as well. These workers often have far better insight into the day-to-day needs and shortcomings of their organization than the C-suite leaders and development officers with whom funders primarily interact.

At the Ford Foundation, for instance, grantee staff are asked to complete surveys and participate in group discussions about their work, mission and goals, providing valuable feedback to both Ford and management. Aside from building these direct channels, funders should also keep an eye on websites like Glassdoor, which often act as a canary in the coal mine for workplace grievances.

Encourage and support unions and worker empowerment

At The Appeal, staffers were well-compensated but worked long hours, often on tedious tasks assigned by Smith for projects that might be abandoned weeks or even days later. Many staffers were also in nearly constant fear of losing their jobs, and witnessed colleagues get reassigned, fired or otherwise forced out of the organization after disagreeing with managers or complaining of mistreatment. The fear of reprisal led talented staffers to quit or simply keep their heads down, doing work they found meaningless and unproductive.

At other nonprofits, workers often face equally long hours and a lack of job security, though that’s usually paired with lower pay but less peripatetic assignments.

Many workers in the nonprofit world, media and other sectors are increasingly seeing unionization as the best path to a better work life. While some nonprofit leaders may fear unions as a barrier between themselves and their workers, the reality is that unionized employees are on average more satisfied with their jobs, resulting in higher productivity and less turnover.

In addition to helping workers deal with their grievances and root out bad bosses, supporting unionization could help build trust between staffers, management and funders, leading to more honest conversations about how to align goals and be more effective. Conversely, efforts to shut down organizing or oppose unions often backfire, driving a further wedge into the organization.

Understand the dark side of metrics

One truth in philanthropy is that whatever gets funded tends to be what gets done. If a funder sets out goals or specific metrics in order for a grantee to receive funding, the grantee may drop other, more vital work to chase those dollars. If a funder wants lower overhead costs, for example, a nonprofit leader may just reassign fundraising to already overworked program staff. At The Appeal, Smith often tasked policy experts and lawyers with cold-calling dozens of people a day in the hope of producing “citations” of The Appeal’s work among journalists, activists and policymakers. Staffers came to believe that these “citations” were a nonsensical metric that originated with one or more of the organization’s funders.

Much like project-based funding, tying grants or renewals to specific metrics is an often ineffective and potentially disruptive way for funders to support social change work. General support grants make life easier for nonprofit leaders and workers, while helping funders become more trusted collaborators. For funders still devoted to metrics, emphasizing their role as a measurement rather than a requirement is helpful, as is seeking input from staffers on how they themselves would quantify success.

Demand accountability for others, too

As the downfall of The Appeal demonstrates, accountability is desperately needed at many nonprofits, and not just startups. Even at well-established organizations, governance bodies like the board of directors may be mostly inactive or overly loyal to an over-the-hill executive director. While funders may often feel like outsiders, they can, in fact, exercise an immense amount of power over a nonprofit’s daily operations, often driving what kind of work a grantee pursues or how money is spent.

Funders who really want to make an impact shouldn’t just pursue accountability for how their dollars are used, but use their position to demand accountability for a grantee’s workers, constituents and small-dollar donors. For funders, this means more than asking for feedback. Program officers need to seek out staffers and ask about their workplace; they need to visit the places where a nonprofit operates and talk to people in the community; they need to solicit feedback from small-dollar donors who feel invested in an organization but can’t make their voices heard.

In some cases, acting on these lessons may require funders to invest in new structures built from the start to function more smoothly and treat their staff with dignity. Ironically, one such possible investment may be a resurrected version of The Appeal itself. After closing last month, the publication’s staff announced that they had acquired the site’s intellectual property themselves and were working on a relaunch with the journalism nonprofit Scalawag. They’re currently seeking funding, and pledging to run an equity-focused, worker-led newsroom.

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