Many of us have long known that the overhead rates most foundations allow are too low. Funders systematically underestimate what it truly takes to achieve impact, and grantee organizations assume they have to play along. I learned this the hard way as a 20-year CEO of a nonprofit. In all that time, I can count on the fingers of one hand the number of instances a funder specifically asked me what kind of help I might need to strengthen the organization.
Sadly, this communications gap and the other long-standing dysfunctions that the article “Pay-What-It-Takes Philanthropy” describes mean that we know surprisingly little about what kind of funding, for which kinds of activities, delivered at what point in an organization’s life cycle, actually correlates with improved effectiveness, resilience, and durability. Shifting this dynamic will require significant change on the part of both funders and grantees—away from focusing on the success of a grant or program, toward focusing on impact and the role that strong and effective organizations play in achieving that impact.
As the article notes, the Ford Foundation is one among a number of foundations working to make this shift, and it is harder than it sounds! What are we doing, and what are we learning as we go?
In refining our program strategies to focus on reducing inequality, we saw that strong grantee partners are essential to the impact we seek—particularly because of the nature of what our grantees do. In working to disrupt the forces that produce and reproduce inequality, every success they achieve is likely to cause a counter-reaction. It is essential that they have the capacity to be nimble, strategic, and adaptive so that they can adjust to this kind of pushback.
Are we doing all that we can to help them?
We pride ourselves on being a grantee-focused funder with long-standing relationships and frequent use of general support and capacity-building grants. Yet when we looked at data on our patterns of investment, we saw a gap between our self-perception and reality. While our relationships with individual grantees were long, the great majority of our grants were one-year, project-oriented, and small. This kind of funding made it difficult for grantee partners to have the confidence required to make multiyear investments in themselves—be it hiring staff; strengthening their technology, development, or strategic communications capacities; or improving the diversity, equity, and inclusion of their staff and boards.
In our new strategy, we aim to shift how we work with our partners by giving them the kind of trust, flexibility, and additional support they need to do their best work. With every grant we make, we’re asking ourselves not only, How will this help disrupt inequality? but also, How will our support make this organization stronger? We are doing this in three ways that redefine our overall approach for grantmaking:
- Making more multiyear, general support, and capacity-building grants among all our grantees.
- Doubling our overhead rate on project grants to 20 percent—even though we recognize that this is a very blunt instrument and only one step on the path to a differentiated overhead rate based on indirect or full costs.
- Launching a focused effort to help key institutions and networks build stronger financial and organizational foundations through our new BUILD initiative, a $1 billion commitment over five years.
Not surprisingly, the BUILD initiative has attracted a lot of attention. One billion dollars is a large sum, but it could easily be stretched too thin when you think about it as a global effort. So we are humbled as we begin to develop plans with our partners and recognize that most of our investments are more likely to be catalytic than transformational.
We have much to learn from others and have quickly come to realize that even as a funder that is “all in,” we face a number of implementation challenges. For example, how can we make sure we do no harm, knowing that moving in this direction means we likely will fund fewer grantees? How do we break our own addiction—let alone that of our grantees—to funding activities, rather than impact? How do we ensure meaningful learning that will add to and enhance the existing thinking and research undertaken by our peers?
Our goal is to better understand what kind and level of support will make a critical difference to an organization, and learn from that. Likewise, by agreeing to this intensive support, partner organizations are committing to work closely with us, to grow and to learn together, and to share this knowledge across the philanthropic sector. In the process, we hope to help build resilient organizations that are equipped for the sustained effort of challenging inequality.