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Smarter Giving: How to Invest in Nonprofits for Impact

A question I get asked a lot is, “As a nonprofit, what is the best way to get funding to support our work?” As you can imagine, I have a lot of thoughts on that topic. If you want to read a few of them, you can click here for grant-writing tips or here for foundation relationship tips. But today, I want to focus on a different, but related question: “As a foundation or philanthropist, what is the best way to give funding to support impact?” Please find below my top-ten list of how to give smarter. And for our nonprofit readers, each item on the list comes free of charge with a specific tip just for you!

Items one and two on my list fall under the general theme don’t waste nonprofits’ time:

  1. We don’t issue grant applications to everybody. Filling out our application is intensive and time-consuming. If there is not strong alignment between our goals and a nonprofit’s goals, or if we know a grant would have little or no chance of being approved by our board, we don’t issue an application. We give nonprofits the courtesy of a “quick no” so they can spend their valuable time pursuing funding sources that are more likely to yield fruit. Tip for nonprofits: Find funders whose missions align with yours. Don’t change or contort what you do just to get a check — that never works out in the long-term.
  2. We “right-size” our application and our reporting requirements. We have several versions of our application, each varying in length. One size just doesn’t fit all. Our program officers determine which version to use for a given opportunity. We are currently streamlining our application to only ask questions meaningful to our decision-making and to eliminate redundant, repetitive, similar, and duplicative questions. We then work with many grantees to co-design reporting requirements we agree are most important, add value, and are minimally burdensome. Tip for nonprofits: Be honest in your reporting. We read every report and use those reports to learn alongside you and better support your work.

Items three to six are about structuring the grant for greatest success:

  1. We fund general operating grants. Unrestricted funding is the best way to support nonprofits. Period. General operating grants recognize that our nonprofit partners are effective and professional organizations who can determine how to best apply grant dollars for maximum impact. They also recognize that nonprofits have to pay utilities and rent, provide competitive salaries and benefits, and buy office supplies. We still make program and capital grants, but since 2013, we have tripled the percentage of our general operating grants. For a great overview of this topic, read this piece from Grantmakers for Effective Organizations. Tip for nonprofits: For those funders who have consistently supported you over the years with program grants, talk to them about shifting to general operating grants and explain why that helps you. Don’t be shy!
  2. We make multi-year commitments. We have also tripled the percentage of our grants that provide multiple years of support. This type of funding supports nonprofit sustainability, shifts our grantees’ time from fundraising to actually doing the work, and recognizes that the issues we care about are not going to be solved in a year. Tip for nonprofits: When you talk with your funders about general operating grants, talk to them about this as well! That’s a great “twofer.”
  3. We pay for overhead. We look at a nonprofit’s true costs and structure our grants to cover them. After all, we would never tell a restaurant we are only going to pay for the ingredients in our meal but not the salary of the chef, or the cost of the gas used to cook the food. We also don’t rely on artificial ratios or limit the percentage of our funds that can go to overhead. Instead, we look at each nonprofit’s overhead to make sure it is in line with their industry and their business model — that might mean 10% for one organization and 60% for another. Check out this piece written on this topic by the CEOs of five national foundations. Tip for nonprofits: Read this piece about how to better present your overhead to funders.
  4. We are adaptive. Our grant documents are written as digital documents, not chiseled on stone tablets. Over the course of the grant, the grantee’s circumstances may change, the work may change, the policy environment may change — so our program officers often need to work with grantees along the way to change the terms of our grants accordingly. That might mean extending the timeline, paying out early, altering reporting requirements, or shifting how the funds can be used. Tip for nonprofits: Communicate major changes to your funders and ask for the flexibility you need. After all, our common goal is impact, not compliance to terms in a grant agreement that may no longer be applicable.

Items seven to nine focus on adding value.

  1. We provide feedback. We used to have a policy not to provide feedback to applicants, under the general belief that if we did, nonprofits would argue with us or just do what we tell them to get a grant. First off, our program officers are professionals and can see through that. Second off, our nonprofit partners are professionals who don’t do that. So we now do our best to provide feedback to applicants before, during, and after the grant application process. We do so in an effort to use our knowledge and broad view of the fields we support to help strengthen the work of our partners. Tip for nonprofits: Don’t argue with us about our grant decision — that’s a bad idea. And, please consider our feedback like a sweater you get from a distant relative at Christmas — you thank them for it, but you don’t have to wear it!
  2. We help grantees succeed. We constantly look for opportunities to connect our grantees with new partners and funders; to share data, research, and best practices that could improve their outcomes; and to build their capacity through training, conferences, and technical support. On this theme, check out the blog post I wrote on foundation/grantee partnerships for the Center for Effective Philanthropy. Tip for nonprofits: Expect more from your funders than just being ATM machines. Call on them to use their networks and knowledge to help advance your work.
  3. We seek to improve the environment in which our grantees work. While most of our efforts to add value focus on individual organizations, we also look for opportunities to help improve the policy, funding, research, or regulatory environment impacting our grantees, and to use our voice in our newsletter, on social media, and in the community to amplify and advocate for the issues and grantees we support. Tip for nonprofits: Having trouble getting a meeting with a policymaker or drawing attention to a systemic problem? Get your funders to do it with you. People tend to return our calls.

And finally, item ten is about transparency.

  1. We communicate critical information with our grantees. You can find information about our mission, guiding principles, impact areas, strategy, and grantmaking process on our website. Every nonprofit that applies for a grant has a conversation with a program officer first. We openly share lessons learned from successes and failures. Want a thought partner on a new idea? We’ll sit down with you and talk it through. This is a topic I would love to write a blog post about for the Center for Effective Philanthropy. Oh yeah, I did, and you can find it here. Tip for nonprofits: Follow this link and you can find a database of our past five years of grants. That will give you a sense of the kinds of projects we fund and the size of the grants we’ve made for those types of projects. You can search by year, issue area, geography, and keywords.

Do we always get it right? Nope. Are we able to follow all ten of these principles all the time? Nope. But do we do our best every day to structure our grantmaking and our partnerships toward deep and lasting, positive impact in our community? You betcha.