Donovan's contract expired at the end of the campaign and both sides decided against pursuing a new deal. Oklahoma City's eventual transition toward a rebuild made it a challenge for the team and Donovan to continue forward together, according to ESPN's Adrian Wojnarowski.
"We had planned to sit down at the end of the season and discuss the best way to move forward for both of us," Thunder general manager Sam Presti said. "After those discussions, it became apparent that we couldn't provide him the information on the future direction of the team over the next several seasons to give him the level of clarity that he understandably desires at this stage of his career."
The Thunder were widely viewed as an overachieving team in 2019-20, finishing fifth in the Western Conference and taking the Houston Rockets to seven games in the first round of the playoffs. Chris Paul, who turns 36 next spring, owns the largest contract on Oklahoma City's books.
The 55-year-old Donovan will be a hot commodity on the NBA coaching market, according to Wojnarowski.
He took over the Thunder in 2015 after a successful 19-year run at Florida, where Donovan won two NCAA championships. He went 243-157 in Oklahoma City, reaching the playoffs in all five seasons.