Dear Dr. Streamline,
I recently met with a wealthy man who created a family foundation 15 years ago. He is looking for new board members and has asked me to consider joining. Among other things, he told me that the foundation makes general operating grants only when a contribution will (1) have significant impact and (2) not create dependency. I don’t know a lot about nonprofits, but have some questions. What kind of impact do you think a foundation can have when its grants average $7,000 and go to organizations with budgets of $1 million or more? He said that grantees assure the board in their grant requests that the contributions do have significant impact. Also, does there seem to be much risk of fostering dependency in this situation? He said that only a few groups funded have gone out of business.
Okay, I’ve picked myself up off the floor. Thank you for the laugh.
The idea that a grant that is .007 per cent (at most) of an organizational budget would have “significant” impact is silly. Just think about it through a personal lens: if your mom gave you a check that was the same small percentage of your take-home pay, you’d be grateful, of course, but you probably would not find it to be essential to your well-being or a life-changing fulcrum. Welcome and helpful? Certainly. Significant impact? No.
In my view, it is equally unlikely that funding at this level will foster dependency, again due to the tiny percentage of budget such a small grant represents. Would the loss of funding hurt? Yes, every loss stings.
Is there a problem, then, with this foundation’s screening would-be grantees by these criteria? I suppose the overall effect is relatively harmless. However, I don’t see how these criteria would actually screen any otherwise qualified applicant in or out of consideration, so they aren’t really screening questions, are they?
On the other hand, from what you have described, grantees are asked to report on the impact of the grant they received. Since the impact of a small general operating grant is often something fairly mundane (We were able to pay staff for 2.3 days! We used your funds to attend a life-changing workshop on using Excel!), it’s a tacit invitation to (1) lie outright, (2) exaggerate, or (3) speak truth to power. If the last has occurred, it doesn’t seem to have been absorbed.
Encouraging BS from grantees is a waste of their time and the foundation’s time – and certainly won’t help build a sense of mutual regard and partnership. Some funders who give general operating grants ask for organizations’ standard annual report or materials developed for other funders, instead of a special report on their grant, in recognition that their funding is a small piece of the overall pie.
Upon reflection, there seems to be a paradox: if a grantee is large enough for there to be no risk of dependency, they will be too large for those small grants to have significant impact. And the reverse is true too: if the grantee is small enough that a small general operating grant makes a big difference, then there’s always the potential that losing that grant will be an issue.
I want to note one thing that you mention about this foundation that is exemplary. It is making its support as flexible as possible by making general operating grants. If you join the board and want to help improve the foundation’s practices, you might begin by uplifting this aspect of grantmaking, and build on that to explore more sensible criteria for selection that cultivate honesty and respect between grantmaker and grantee.
Dr. Streamline is Jessica Bearman of Bearman Consulting, LLC. She provides facilitation, organization development, and research and development to help grantmakers and other mission-focused organizations align strategy, practice, and culture for greater effectiveness, equity, and joy.