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.

Is the status quo a good thing?

Over the past few years, the nonprofit sector has weathered significant challenges. For some, these challenges sparked significant enhancements to practice and strategy. For others, just holding ground was a victory in light of the magnitude of the hardship and adversity faced by our communities.

As I mentioned in my previous post, smarter grantmaking practices are those that strengthen nonprofit vibrancy and adaptability, such as providing flexible support like general operating and multiyear grants, investing in nonprofit capacity, using evaluation to support learning and continuous improvement, engaging stakeholders in decision-making, and collaborating with other funders to take collective action.

Given that grantmaker behavior has a significant impact on the ability for nonprofits to tackle the most intractable problems, are grantmakers making changes for the betterment of nonprofits? Or are they embracing a status quo approach?

In our 2011 field survey of more than 750 foundations, Grantmakers for Effective Organizations found that most chose status quo. Despite increased knowledge and understanding of effective grantmaker practices that boost nonprofit resiliency, and at a time when nonprofit resilience has been most critical, the ranks of grantmakers engaging in practices that we know contribute more to nonprofit success did not grow. Depending on your point of view, the status quo has positive or negative implications for nonprofits.

GEO’s study revealed the following:

General operating support levels remained static.

Many nonprofit leaders will tell you that unrestricted support is the hardest support to find. As I mentioned in my post yesterday, the good news is that unrestricted dollars didn’t get scarcer. However, funders missed an opportunity to increase this support at a time when flexible support may have allowed nonprofits to chart a new course through rough seas. Although most grantmakers (roughly 80 percent) provide some level of general operating support, the proportion of dollars annually devoted to general operating support remains steady at 20 percent. While it’s encouraging that grantmakers preserved their levels of general operating support at a time when it might have seemed more logical to provide restricted dollars to serve immediate client needs, it is also disappointing that this number has not changed much in almost a decade, according to the Foundation Center.

Evaluation is focused on proof, rather than learning.

About 70 percent of grantmakers report that they evaluate their work. However, over the past two years, there has been a decrease in the number of grantmakers that use evaluation to strengthen future grantmaking. Only one third of grantmakers use evaluation to contribute to knowledge in the field or to strengthen practice in the field.

Multiyear support decreased.

Multiyear support did not fare well over the past several years. Funders reported making multiyear awards much less frequently than they had in 2008, and the survey found that 28 percent of funders said they decreased these dollars due to the economy. One of the more hopeful pieces of news was that more than half (54 percent) of those who decreased their multiyear commitments said these changes were temporary due to the economy.

For many, these findings may be disappointing. Changing behavior is hard in the best of times. In a gloomy economy and volatile investment climate, it can be even harder. However, the urgency and scale of needs in communities requires us to think about doing things differently.

Some grantmakers—such as the Illinois Children’s Healthcare Foundation, which strategically targets areas that are underfunded—recognized that in order to stay focused on long-term changes in areas such as children’s health, multiyear grants are a necessity. 

For those grantmakers who are already adopting practices that strengthen nonprofits, the status quo is essential. For those who aren’t, it’s not too late to make a change. In my next post I will share some of the ways grantmakers are embracing the behaviors that will lead to stronger nonprofits and better results.

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