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Is Grantmaking Getting Smarter?: An Update

November 20, 2014

Headshot_j_mccrayOver the past fifteen years, research by Grantmakers for Effective Organizations has demonstrated that certain grantmaking practices support nonprofits' capacity to achieve results. To track how these practices are changing, GEO conducts a national survey of staffed grantmaking organizations every three years. As we prepared to release the results of our most recent survey, I wondered: How would experts in nonprofit management interpret the results? To find out, I asked CompassPoint CEO Jeanne Bell, co-author of the reports Daring to Lead and Underdeveloped: A National Study of Challenges Facing Nonprofit Fundraising, and Don Crocker, executive director and CEO of the Support Center, which advises nonprofits and foundations in the areas of leadership and executive transitions, board performance, and nonprofit/foundation effectiveness, to share their thoughts on our key findings as well as how funders can best support nonprofits to achieve more impact.

Long-term grants are inspirational. Multiyear support (grants of two years or longer without the need to reapply) is returning to pre-recession levels. Most funders now give at least some multiyear support. "Multiyear grants are powerful," says Bell. "If the foundation and the nonprofit are in sync around core programming, multiyear grants give you sustainability and predictability." Crocker agrees, adding, "Even if you look at small businesses and social entrepreneurs, they'll tell you it takes four or five years for the rubber to meet the road and for really good results to start emerging. I think multiyear grants are inspirational, in that they allow the nonprofit to have a greater sense of security."

Unrestricted support enables creativity and responsiveness. After being flat for many years, the average share of annual grantmaking budgets devoted to unrestricted support showed a small but meaningful increase (from 20 percent to 25 percent). Why is this important? As Crocker says, "General operating support opens the door to much more creative thinking, allowing nonprofits to be more nimble and a lot more responsive to things that have changed in their community and the needs of their clients."

Boosting leadership capacity requires a collective approach. More than a quarter of the funders surveyed reported an increase in the dollar total of their grants for capacity-building efforts, which include leadership development, governance, and evaluation capacity. "Nonprofits are collections of leaders, including development directors and program directors and policy directors — it's not just executives," says Bell. "The foundations that do it well not only pay for leadership development, they also act as ambassadors and champions for individual leaders as well as networks. That’s something special that foundations can do but typically government and major donors can't."

Funders need to "get in the zone" of listening to grantees and asking good questions. Over the past decade, we've seen a sea change in the way funders think about engaging nonprofits. GEO found that the majority of funders are now seeking feedback from grantees and asking for their input on key decisions. However, while our research revealed that funders believe they are open to discussing key financial issues, a recent Nonprofit Finance Fund study found that nonprofit leaders don’t believe funders really want to hear about their financial needs. The way funders set the table for these conversations is important. As Bell says, "I don’t think that most program officers ask the kinds of questions on the way into a grant that would lead an executive director or development director to think she had more than one option."

The power dynamic between grantmaker and grantee makes it difficult for nonprofit leaders to be totally open with their funders. "Given the power dynamics," says Bell, "the foundation representative would have to say, 'You're a strategic grantee; I want to hear your answer to the question. What's the most valuable grant I could make to you?'"

Funders can start to build stronger relationships with their grantees by admitting that they don’t have all the answers. As Crocker says, "You need to get in the zone of saying, 'I want to talk to you about what I see because I have some questions. But I’m also assuming there are a lot of things about your finances I just don't understand. If you could help me to understand it, I think I could be more supportive to you.'"

Supporting collaboration is an important role for funders. No matter what you call it — collective impact, leveraging networks, or movement building — collaboration is an idea whose time has come, and funders are asking themselves how they can better work with each other and support greater collaboration among their grantees. At the same time, while our research found that funders overwhelmingly agree it's important to collaborate with other funders, the majority say they never or rarely support the cost of collaboration among grantees. Bell and Crocker agree that funders need to cover the cost of collaboration.

What's more, they both agree that the key to a successful collaboration is letting the community drive the decision-making process. Bell gives an example from her own organization's work that is supported by grant funding: "We're doing work in the domestic violence field in California," she says, "and we're about to do some work in the youth racial justice space, and it will be the participants who will determine how that grant is deployed."

A time for reflection. We are making important progress in the way we support nonprofits. But we could be doing more — and better. Whether you are a funder or a grantseeker, we want to hear from you. What are the small steps you can take to ensure that your organization is having the right conversations about how to best support or model nonprofit success?

J McCray is chief operating officer at Grantmakers for Effective Organizations where he is responsible for strategic planning, financial management, internal learning, and field research on grantmaker practice.

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