Philanthropy & Funding

Improving Corporate-Nonprofit Partnerships

Three ways corporations can more effectively partner with nonprofits.

Corporate leaders have long influenced philanthropy, from Rockefeller to Gates to the "hacker philanthropy" recently espoused by Napster co-founder Sean Parker. Corporations have aimed to apply business strategies to philanthropic efforts with varying degrees of success. Now, new survey findings suggest that giving nonprofit partners more freedom in how they use gifts is an important part of building the strength of the social sector. Just as many corporations rely on the ability to direct flexible resources in pursuit of ultimate outcomes, loosening restrictions on gifts and focusing on supporting strong nonprofit enterprises—versus specific programs—is critical to making progress toward shared social goals. 

Nonprofit Finance Fund's 2015 State of the Nonprofit Sector survey highlights systemic funding challenges facing nonprofits and offers concrete lessons on how businesses can partner with nonprofits in ways that will help overcome these challenges.

While the economy points to recovery, an estimated 76 percent of nonprofits across America still face overwhelming demand for their services. Half of nonprofits we surveyed said they couldn't meet demand, and of those, 71 percent said that client needs go unmet when they can't provide services. 

We must think carefully about how to make nonprofits—which play a critical role in strengthening our communities and economy—more sustainable if we are to ultimately move the needle on today’s critical problems. Corporations are particularly suited to address this issue, because they are intimately familiar with the importance of building strong, adaptable, and well-capitalized enterprises. A “doing more with less” mentality doesn’t set the stage for nonprofit sustainability and meeting social challenges. A nonprofit with a skilled, fairly compensated staff that operates in a maintained physical space with appropriate equipment and some financial cushion is better positioned to innovate, adapt, and operate in ways that best serve its clients. 

Our research indicates that corporate partners can better support nonprofits by:

  • Focusing on shared outcomes. The emergence of outcomes-based funding is advancing the alignment of funding with shared goals. Pay-for-success agreements, for example, are designed to bring critical services to people in need and measurably improve their lives. In Cuyahoga county, Ohio, the Partnering for Family Success Program will deliver intensive 12-15 month treatment to 135 families over five years to reduce the length of stay in out-of-home foster-care placement for children whose families are homeless. Corporate support is crucial to the development of pay for success, and more broadly, outcomes-based funding. Bank of America joined New York State and Social Finance Inc. in a pay-for-success program that raised $13.5 million to fund proven workforce reentry services for 2,000 formerly incarcerated individuals in New York City and Rochester, NY. The program aims to increase employment by providing participants work experience and supportive coaching, reducing the social and financial costs associated with prison recidivism, and providing a positive impact on family support and public safety.

    As a starting point, corporations and nonprofits must work toward gaining a shared understanding of the costs of achieving social change. Many times, supporters don’t cover the full cost of providing services and achieving mission; 89 percent of nonprofits report that funders ask them to collect data to capture the effectiveness of programming, yet nonprofits say that 68 percent of funders "rarely" or "never" cover the costs associated with measuring program outputs or outcomes. 

  • Releasing restrictions. Corporations should consider providing flexible or general funding that gives nonprofits the freedom to align resources with organizational and community priorities. Often, new funding comes with the expectation of a new service or program, or hindered with reporting requirements that are outsized for the gift amount. Expectations must match the level of investment. 

  • Just six percent of nonprofits feel they can have an open conversation with their funders about flexible capital for organizational growth or change. Only eight percent are comfortable talking about working capital needs. Coming from a corporate perspective, where adaptation, flexibility, and financial stability are accepted characteristics of strong organizations, this may seem surprising. 

    Corporate leaders are best positioned to change standard practices by providing types of funds that other supporters are unlikely to provide. Bank of America’s Neighborhood Builders program is one example of how a corporation has sought to pioneer this approach. Recognizing the need within the sector, Bank of America supports leading nonprofits with unrestricted funding so that they can strategically invest in their staff and their own long-term development. 

  • Helping make nonprofit partners more attractive to other funders. Most nonprofits rely on a large community of supporters. Corporate partners may be uniquely positioned and free to invest in efforts that position nonprofits to attract additional support. Investments in leadership, technology, financial education, and strategic planning are often difficult for nonprofits to secure, but have tremendous impact on an organization's long-term ability to serve its community. This flies in the face of common practice, which is to provide funding that connects directly to specific programs. 

Ultimately, if we want better social outcomes, nonprofits need room to evaluate existing efforts, responsibly experiment with new approaches, invest in scaling proven services, and undertake other bold efforts to move the bar. Corporate partners can help set the sector on a path toward greater financial health and better social outcomes. But they must draw on experience and research to reject standard practices, and improve the way they fund nonprofits, with the ultimate goal of positioning nonprofits to do their best work for the benefit of all. 

Tracker Pixel for Entry
 
 

COMMENTS

  • BY Simon Prahm

    ON July 24, 2015 02:07 AM

    Thanks for a very interesting article. Scaling without the necessary backbone organization is definitely a dangerous cocktail. I’ve just read an article by Darren Walker (President @ Ford Foundation) about how they wish to grant more unrestricted funding and invest in leadership in the future. Just like you describe.

  • BY Antony Bugg-Levine

    ON July 24, 2015 12:19 PM

    Thanks for the comment, Simon. Darren was my boss at the Rockefeller Foundation and remains a mentor. We’re very excited to see the move Ford Foundation is making to provide more unrestricted funding—not surprising given he and his team have first-hand experience leading nonprofit organizations. You may also be interested in a recent interveiw I conducted with Ford Foundation VP Hilary Pennington that touches on similar themes: http://nonprofitfinancefund.org/blog/funder-dialogue-hilary-pennington-ford-foundation

  • Karen Pak Oppenheimer's avatar

    BY Karen Pak Oppenheimer

    ON July 24, 2015 07:01 PM

    This is spot on, thank you (from someone at a non profit who have experienced all the problems you’ve noted here)! True impact will rely on effective partnerships between the private, public and NGO sectors.

    Restricted funding and the current way grants are set up and managed take grantees away from what they are really good at doing and in worse cases, move organizations away from their mission. I have always found it puzzling that most funders do not recognize the important role they could play in furthering the organizations they fund.

  • BY Simon Prahm

    ON July 26, 2015 08:38 AM

    Thanks for the link, Anthony. And what a great mentor to have! When it comes building strong non-profits I’ve also done some research on my own in this field at Henley Business School. If you’d like you can find it here: https://simonprahm.wordpress.com/2015/02/10/nonprofits-from-good-to-great

    Looking forward to reading more from your hand.

  • Restricted funding is not the issue here, it is about the mission of the organization being funded being achieved?  because at the end of the day the question is,  was the ‘toilet constructed and the community able to use it, or was the schools constructed and children able to go to school or was the boreholes completed and the community able to get water , so that the community livelihood is able to improve because of these deliverable.

  • BY Mark Kramer

    ON July 27, 2015 10:57 AM

    Great blog Antony and Kerry!  We also see increasing use of flexible funds when companies and NGOs partner on shared value initiatives.  When companies and nonprofits are clear about the business value—as well as the social value—they create together, companies look at the cost relative to the returns as they would with any other investment and do not try to micro-manage or constrain the nonprofit.  It’s all about a mindset focused on longer-term results, as you suggest, rather than on what the grant “buys” in the short-term. NFF has played a pivotal role in moving the field forward in this thinking, but we still have a long way to go.

  • JEJones's avatar

    BY JEJones, Counterpart International

    ON July 29, 2015 02:16 PM

    Even beyond providing resources that others are unlikely to offer is the need to commit a percent of all funding resources to capacity building. Once the toilets are constructed, to use Paul’s example, has the community group improved their capacity to deliver services beyond that one project. What has been the capacity gain that will ensure the next project exceeds expectations?  And the next?

  • BY Antony Bugg-Levine

    ON July 31, 2015 12:26 PM

    Thanks for these thoughtful comments. In this conversation about how we can better optimize resources , we find it helpful to separate two related but distinct issues: 1) is an organization mobilizing all the resources it needs to cover the “full cost” of delivering services? and 2) is the organization able to invest in both the service delivery and organizational development that will enable sustained improvement in community outcomes?

    The first question requires organizations to know our full costs (too few do) and funders willing to cover them (too few are). The second requires organizations to cover more than just the full cost of delivering services in the short term but, in addition, the resources to build a strong organization that can innovate, learn, and improve. At NFF, we talk about the need for both “buy” money that enables program delivery and “build” money that enables an organization to invest in building its own organizational strength.

    There are two paths to getting organizations the full resources we need. One is to know our full costs of delivery and the build money we need and to get our funders to pay for both. The other, as Paul hints at, is to reorient the whole conversation around outcomes. So instead of asking “much does it cost to build the toilets?”, we can orient around paying for outcomes (“how much will it cost for your organization to measurably contribute to improved health in the community you serve?”) The benefit of outcomes-oriented approaches when done right is that it’s not just about changing how much money an organization gets but also the basic dynamic between payer and organizations. An outcomes-oriented agreement done right empowers an organization to decide how best to use resources to achieve the outcomes. Rather than having to satisfy a compliance regime focused on ensuring we did what we said we would, we can instead focus on resourcing what is proving to be most effective.

    For some organizations, in pockets of specific sectors and places, reorienting around outcomes is an exciting way out of this under-funding trap (especially with the shift in the US to funding healthcare based on outcomes rather than per-procedure). And preparing now to thrive in an outcomes-oriented funding landscape is worthwhile. But for now, most organizations will need to continue figuring out how to sustain our services in the current system.

    For all of us (nonprofits and funders), there’s no shortcut to knowing the full cost of providing services and building a sustainable organization, communicating that clearly to those who will listen, and making the tough choices to balance financial and programmatic priorities.

Leave a Comment

 
 
 
 
 

Please enter the word you see in the image below:

 

SSIR reserves the right to remove comments it deems offensive or inappropriate.
 
 
 
 
If We Want Our Funding to Change the World… - Thumbnail
Philanthropy & Funding

If We Want Our Funding to Change the World…

Featuring Donors Forum

Grantmakers and nonprofit leaders at the Donors Forum—an annual convening in Illinois to advance social change institutions—discuss the real cost of running an effective nonprofit and why it is essential for grantmakers to support indirect costs.

Great Management Creates Great Impact - Thumbnail
Philanthropy & Funding

Great Management Creates Great Impact

Featuring Josh Beckenstein

Philanthropist Josh Bekenstein of Bain Capital explains how philanthropists unwilling to cover nonprofits’ indirect or overhead costs are missing the opportunity to completely support that organization’s mission.