Nonprofit Resilience Relies on Smarter Grantmaking

A new study examines field-wide grantmaking attitudes and practices and how philanthropy can effectively support nonprofits to thrive amid a changing environment.

This week, more than 650 philanthropic leaders, representing more than 340 grantmaking organizations, are gathering in Seattle for the Grantmakers for Effective Organization (GEO) 2012 National Conference. If the speed at which this event sold out is any indication, grantmakers are recognizing that current standard practices in philanthropy are not doing enough to make progress on the issues they care about, and are striving to find more efficient and effective ways to support nonprofits to grow their impact.

Research by GEO and other grantmaking experts reveals which grantmaking practices help build strong, effective, sustainable nonprofit organizations. From our research, gathered from both funders and nonprofits, we understand that the practices most associated with long-term nonprofit success are:

• Funding that allows nonprofits to remain flexible and nimble (for example, general operating, multiyear, and capacity-building support)
• Using evaluation as a tool for learning and improvement, and sharing learning with the field
• Engaging stakeholders in key decisions, soliciting feedback, and assessing needs
• Collaborating with other funders, government, and nonprofits to solve complex social problems

Every three years, GEO conducts a field-wide survey of staffed grantmaking foundations in the US to examine trends in the funding practices that we know help nonprofits to achieve more positive social impact. In light of the global economic downturn, this survey, with responses from more than 750 foundation leaders, highlights some of the shifts in grantmaking since 2008 and what they mean for supporting resilience in the nonprofit sector.

There’s no doubt that the past several years have required nonprofits to be creative and nimble to stay afloat, and to effectively serve the growing need in their communities. So, how did funders respond? On the bright side, when faced with tough decisions about what to do with their limited dollars, many funders made improvements to their internal processes so that it is easier for grantees to access funds. They also preserved two types of support that we know are connected to nonprofit success.

Since we last conducted the survey in 2008, funders reported that they managed to reduce the turnaround time between receiving an application and approving a grant from 90 to 60 days; and they reduced the time between grant approval and making the initial payment from 21 to 15 days. This news comes at a time when, for the third year in a row, a study by the Nonprofit Finance Fund found that 60 percent of nonprofits have less than 90 days of cash on hand. Although grantmakers are limited in what they can do to support nonprofits financially, these small changes help get money out the door faster to minimize cash flow issues so that nonprofit leaders can focus on the immediate needs in their communities.

We also found that many grantmakers preserved their levels of general operating and capacity-building support—maintaining the levels of support they had before the recession hit—and that a significant number even increased these types of support. We asked organizations that give general operating support about their core reasons for doing so. Many of them reported that they wanted to provide a level of flexibility and stability to their grantees.

The Boston Foundation, for example, defined specific impact goals for its discretionary grants program and moved towards giving core partners aligned with these impact goals multiyear general operating support. To further enhance its investments, the foundation augments its general operating support to certain grantees with technical assistance and capacity-building support, including strategic and business planning, board and organizational development, evaluation, and data tracking.

While nonprofit leaders would applaud the fact that philanthropy held its ground, many would tell you there wasn’t enough out there to begin with. Now that we are on steadier footing, there is an opportunity to think about how we get nonprofits the type of support they really need. My post tomorrow will explore slow progress in the philanthropic field and examine the important changes that grantmakers can make to better serve grantees by investing grant dollars more effectively.

Read the results of GEO’s national field survey of grantmaker practice, “Is Grantmaking Getting Smarter?”.