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.
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
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.
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
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.
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.
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?
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.
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
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.
BY paul
ON July 26, 2015 11:14 PM
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.
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.
BY Chris Allen
ON September 18, 2016 03:57 PM
Great articles and discussion.