Suspending reporting requirements. Converting project grants to general-operating support. Giving more than 5% of assets. Approving applications faster, with less paperwork, or even giving additional funds to grantees without being asked.
Thanks to a big shove from the pandemic, a long-needed revolution may be happening in foundation grantmaking. Foundations—infamous among nonprofits for their rigidity and the narrowness of their funding—are finally flipping the script and considering what their grantees truly need at times like this, and whether the way they operate as grantors matches up with that need.
They may not yet be comfortable admitting it in exactly these terms, but many foundations are finding that their special processes—their 9-month application review process, their reams of paperwork, their metrics and measurable objectives—that none of that was really necessary to the act of giving away money to do good. What grantees have been griping about furtively and mostly behind the scenes for years may finally have the opportunity to go mainstream.
I want to challenge every foundation: when this crisis is over, however you want to define “over” for your grantmaking purposes, set some time aside to really think about whether your temporary measures might be an improvement even for normal times. Look at what other foundations did in response to the pandemic that your foundation did not do, and consider whether you should go even further in changing your grant application and review processes.
Today I want to discuss how foundation requirements can be a net financial drain on the overall nonprofit sector. Tomorrow, I’ll be back with four specific recommendations as to how foundations can become more grantee-friendly.
IF YOU MUST CALCULATE SOMETHING, CALCULATE WHAT YOU AS A FUNDER ARE COSTING NONPROFITS
Some foundations get very carried away with metrics. It is quite difficult for nonprofits to deal with some of these requirements, since rigorous evaluation and metrics tracking can be extraordinarily difficult, time-consuming, and resource intensive to pull off. And your foundation’s requirements might be different than that of other funders of the same project—even in such a maddeningly small way as asking for certain outcome metric, budgets, or timelines over, say, a three year timeframe vs. a two year timeframe. Moreover, there is no reason to suspect that your metrics are good measurements of this project.
If you have trust in an organization’s leadership, ask yourself the hard question: is any of this really necessary? Does it ever actually lead to the improvement/self-evaluation that it is supposed to be driving? Or am I just shoehorning my grantees into time-consuming but ultimately pointless exercises in justification that, at best, simply expend resources to prove what the nonprofit already knows?
Now think about this problem in terms of the common fundraising calculation of “cost to raise a dollar.” How much time do grantees or prospective grantees likely spend on working with your foundation? Grant writing, meetings, calls, site visits, reports, and so forth.
Does your grant size and acceptance rate account for that? Or are you actually a net drain on the resources being targeted at a social problem or mission you believe in?
To see how that might be the case, imagine your foundation issues a $1 million open prize for the best solution to a problem. You advertise this prize far and wide, you build a site for it. You assemble a review committee, etc.
Salivating at the dollar amount, let us say that 1,000 organizations think seriously about applying, 600 apply, and 50 are given very serious consideration and participate in a more detailed application, a video presentation, and extensive interviews with the grant committee.
At the end of the day you gave away $1 million. But how much did you take? Let’s say between fundraising staff and executive review, it costs on average $40/hour to work on getting your grant. The 400 organizations who decide not to apply, or do not finish an application on time, spend about 4 hours on average on the project. Those 550 that do apply but are not selected as finalists spend on average 50 hours of total time. And those 50 finalists spend on average 125 hours of time going through all your requirements.
Considered as a whole, this grant prize will have “cost” the nonprofits as a whole nearly $1.2 million in time and talent—more than you gave away. And that’s not including any amount for the opportunity costs of what they could have done with that time instead.
PURSUING SHARED GOALS
There’s no denying that there will be a cost associated with raising money. But grantmaking foundations with endless and burdensome requirements actively increase that cost—while requiring a lower cost to be able to win a grant! Grantmakers and grantees are both advancing a shared mission. While the nonprofits are envisioning how to advance that mission effectively through their programming, the foundations should be envisioning how to streamline the grantmaking process from the perspective of the grantee.
Check back tomorrow for part two with four recommendations for foundations to consider in order to strengthen the relationships between them and their grantees and become more effective funders.
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