A few weeks ago, we led a well-received session at the Emerging Practitioners in Philanthropy national conference that focused on how funders can incorporate diversity, equity, and inclusion (DEI) principles into their grantmaking to better achieve their mission. Our experience (at the conference and beyond) suggests there is widespread appreciation within the social sector for the principles and goals of DEI, but there are huge gaps in our understanding of which populations ultimately benefit from grant dollars—and from what we do know, the distribution is not particularly equitable. In fact, according to the D5 Coalition, less than seven percent of grant dollars went toward ethnic or racial minorities in 2013, even though these individuals comprise nearly 40 percent of the US population. What’s more, only six percent of grant dollars went to people with disabilities, though they represent 12 percent of the population. And so on; the trend continues.
Why is this the case? In large part because, in their effort to ensure that grant dollars go toward effective organizations, many philanthropists have adopted grantmaking practices that can actually perpetuate the unequal distribution of funds. For example, traditional grantmaking practice tends to favor organizations that have existing relationships with funders and dedicated development staff, which better position them to garner philanthropic support. As a result, less funding may make its way toward smaller organizations, many of which may be serving similarly under-resourced communities. Such implicit bias may lead some funders to fall short of their own goals to promote diversity, equity, and inclusion.
Take our own experience. In 2014, leaders of the global skincare brand philosophy, Inc. approached Arabella Advisors and the New Venture Fund (NVF) to launch a grantmaking initiative called hope & grace fund. The fund would support women’s mental health and wellbeing across the United States, and one of our tasks as advisors on effective giving was to put in place a process for sourcing and assessing potential grantees. To that end, we developed criteria and a due diligence process for hope & grace that drew on best practices we had gleaned from managing dozens of grantmaking initiatives over our 10 years.
Yet as we implemented the process, we noticed that the proposals making it to the top of the heap tended to come from more well-established nonprofits that had larger budgets and staff size, and greater organizational capacity—not the small, grassroots, community-based organizations the fund wanted to prioritize. We also noticed that the smaller organizations, which the process screened out, tended to serve communities of women of color, who historically have lacked access to mental health resources, while none of the organizations at the top of the heap specifically targeted these populations.
In short, we realized our grantmaking process was unwittingly yielding a more homogenous pool than we had intended, and it led us to question the very assumptions on which the process was built. So in partnership with the hope & grace’s advisory board, we refined the criteria the fund uses to recommend grantees for funding, with the goal of removing bias and reducing barriers that make it difficult for under-resourced organizations serving under-resourced communities to receive support.
Through this work, and informed by research into similar efforts undertaken by peers, we compiled a set of recommendations for funders on how to embed DEI principles into their grantmaking. Here are a few highlights:
- Re-evaluate risk tolerance. Organizations that aim to help underserved communities are often under-resourced themselves. As such—because they do not have the organizational and financial capacity of larger, more-established nonprofits—they make riskier propositions for funders. To reflect hope & grace’s commitment to supporting grassroots, community-based organizations, we changed our process so that—rather than simply ruling out organizations whose financials raised questions—we had follow-up conversations with their leaders to learn how they planned to achieve financial stability going forward. In this way, our advisory board members gained a more-comprehensive understanding of the organizations—insight on which they could draw when assessing their comfort level with awarding grants to these organizations.
- Consider awarding grants for capacity building. Small, under-resourced organizations often lack dedicated grant writers and other critical infrastructure, but these on-the-ground organizations may have a very good sense of what programs will be most effective for their target populations. Capacity-building grants for activities such as staff training have an ongoing impact, because they can position an organization to deliver higher-quality services beyond the life of the grant. In doing so, such grants may make these organizations more competitive for future funding.
- Make the application process less cumbersome and more accommodating. Simplify, consolidate, and streamline grant application questions. Also, consider giving smaller, less-established organizations additional time to submit their applications—two more weeks, for example. Doing so may help level the playing field for these groups so that they can compete with larger organizations that have dedicated fund development staff. At Arabella Advisors, we also provide preliminary reviews of grant application drafts to ensure that applicants are on the right track and are investing their time efficiently in the grant application process.
- Consider compensating certain applicants for applying. The hope & grace fund uses its discretion to provide stipends to small organizations that were not selected for a grant but submitted complete applications, to compensate them for their opportunity cost. One possible rule of thumb is $25 to $50 per hour for the average number of hours it takes to fill out the grant application.
- Identify applicants through multiple channels. In addition to inviting certain organizations to apply for funding and asking current grantees for recommendations, hope & grace also allows interested organizations to contact the fund directly via guidance on philosophy’s website. When organizations reach out, we send them a short screening questionnaire; based on their responses, we determine whether to invite them to submit a full grant application. By allowing potential grantees to make the first contact, funders won’t inadvertently screen out organizations with smaller networks. This method isn’t perfect—there may be a bias in which organizations hear about hope & grace via philosophy’s website—but it is one way of broadening the applicant field.
Taking these steps to incorporate DEI into the hope & grace fund’s grantmaking has enabled it to increase diversity in the fund’s portfolio. Many of the organizations receiving grants—though their organizational and financial capacity may not have met traditional grantmaking due diligence—are reaching underserved communities of women, including, for example, African American women, Native American women, Asian American women (including Filipina immigrant caregivers), Latina women, immigrant women, teen women in the juvenile justice system, and women living in rural communities across the United States.
It is increasingly clear that the social sector would benefit from more coordinated, deliberate action to ensure that it is effectively reaching the full range of vulnerable populations it targets. We hope that others will find these steps—and the full recommendation list, which we will continue to develop with input from the field—equally useful as we work toward our common goal of ensuring that our grant dollars reach the people who need them most.