The economic downturn is sharpening focus in the nonprofit sector. Donors—and the charities they fund—are being asked to take on an ever-growing share of the work of combating society’s toughest problems. Meanwhile, as charitable assets decline, competition for philanthropic dollars is stiffer than ever. In requests for funding, nonprofits are under increasing pressure to demonstrate results. How can donors help them achieve those results?
The key is in not just examining how much is given, but how it is given. That requires developing a coherent strategy for giving that includes taking in information from the field to inform strategy. Donors need to resist imposing their own priorities; instead, they need to work collaboratively with their grantees to develop consensus on priorities and goals.
Funders can have a tendency to underestimate the real cost of achieving results, and wind up spreading resources too thinly. Instead, most need to make deeper, long-term investments in nonprofit organizations with well-defined strategies. That—and not merely more money—is the smarter bet.
Furthermore, there has been much discussion about “overhead” and donors wanting to see 90 percent–plus of their money going directly to programs. But low overhead does not necessarily yield high impact. Investment in infrastructure and leadership is as important to the success of nonprofits as it is to any for-profit entity. Donors should not discount the importance of funding capacity-building, and they should hold the organizations they support accountable for managing their own operations and growth wisely.
Last, and perhaps most important, to have real and measurable impact, funders must articulate clearly the results for which they will hold themselves responsible and align their grantmaking accordingly. In philanthropy, excellence is self-imposed.
This means the challenge for philanthropic decision-makers is to ask hard questions about how their contributions are supposed to “add up,” how they are supposed to help nonprofits create results, and what their resources can and cannot accomplish in collaboration with nonprofits.
Some philanthropists do this by making a series of individual grants and supporting great grantees, but not trying to make the whole become greater than the sum of the parts. Others dedicate resources to the integrated elements of a strategy to “move the needle” on a key challenge, like cutting the high school dropout rate. Still others invest in innovation, and want to experiment with multiple new approaches across a range of issues. Whatever the choice, the key is to be realistic about the resources and timeframe required—and about which nonprofits can best partner with you to deliver the intended impact.
For inspiration on where to get started, consider the way that the Annie E. Casey Foundation education program is tackling K–12 reform. The crisis in American education is well-documented; even dis-regarding the 2009 stimulus bill, billions of dollars flow through the system and nearly every philanthropist is “sub-scale” in the face of a staggeringly complex system. Nevertheless, most education funders harbor grand visions. Indeed, Casey’s website states its own vision: that “all young people, especially those in tough neighborhoods, will graduate from school with the knowledge and skills they need for adult success.”
How does Casey’s education program make realistic progress toward this visionary goal? For Casey, the right answer to “where to go?” was straightforward: focus on working with nonprofits in select cities where the foundation was already investing, so that the education program’s dollars could leverage the work already accomplished by nonprofits that Casey funded as neighborhood-based programs, such as Making Connections and Rebuilding Communities.
Helping nonprofits to achieve results is hard work. To deliver impact, funders should fully integrate the grantee’s thinking in goal-setting and strategy development, use data to test assumptions, and ultimately unite around shared objectives. And once donors have worked with their grantees to define what success will look like and how they can achieve it, it’s time to support the work in the field, and help grantees to measure impact and learn from experience.
Thomas J. Tierney is chairman and co-founder of the Bridgespan Group.
