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PEAK Grantmaking

Philanthropy’s Blind Spot: The “How” of Grantmaking

Over my 25 years in philanthropy, one question has always sat in the back of my mind: Why don’t more grantmakers set strategic goals aimed at making them the best makers of grants possible? Sure, there are many ways funders add value to those they support, from mission investing to convening partners to disseminating knowledge, but the one unique contribution we offer is our grants.

Yet, in PEAK Grantmaking surveys, fewer than 50 percent of responding funders maintain strategic goals relating to grantmaking practices—the steps funders take to equitably, effectively, and efficiently mobilize resources to achieve shared goals with grantees and partners. Despite our sincere pursuit of real-world change, we’ve neglected to structure our grants, practices, and measures to achieve real outcomes, creating a mismatch between our ambitions and our actions.

How our “how” is misaligned

How we make our grants matters. In the absence of a widespread commitment to grantmaking excellence, we’ve instituted a dizzying range of policies, processes, and requirements—both within and among funders—that are not only misaligned with our values, but send a strong message that we don’t trust our grantees.

For instance, when we fail to consider how to make our grantmaking practices equitable for organizations led by people of color, or responsible to communities of color, the message we’re sending is that issues of diversity, equity, and inclusion don’t matter to us. The same thing happens when we ignore those issues within our own organizations.

Every requirement placed on grantseekers requires them to shift resources from delivering on their missions to fundraising. While that might be dismissed as the “cost of doing business,” we need to remind ourselves that nonprofits don’t really receive grants: They receive “net grants,” the total amount of funding minus the costs of getting and managing the grant. (Of course, this doesn’t take into account the costs of unsuccessful requests, which the grantseeker must fund on its own.)

Further, these net grant totals are going down. Grantseekers report that the time spent to meet grantmaker requirements is growing: time spent on application requirements, per grant, has increased from 20 to 24 hours, and time spent reporting on each grant has grown from 10 to 15 hours over the last ten years. This reduces the impact our grant dollars have in the world. (Want to learn more about the net grant? See netgrant.org.) 

Seeing our “how” as secondary

The absence of strategic, accountability-setting goals related to the practice of grantmaking is a huge blind spot for philanthropy—particularly given the importance many grantmakers place on our grantees’ goals and metrics as decide who to fund and how to assess impact.

Consider this: Would you, as a funder, make a grant to an organization that didn’t hold itself accountable for doing its work well? Failing to hold ourselves to the same standard represents a disconnect between our practices and implicit values like accountability and impact. This disconnect has the potential to damage our reputation with grantees, partners, and beyond.

Digging deeper into PEAK research, we can see that the strategic goals funders do have in place leave room for improvement. The most-cited strategic goal among PEAK survey respondents is “setting a budget for a grant program.” While that’s absolutely necessary, it doesn’t address whether the funder does a good job making grants. While we express the laudable desire for our grantees to be sustainable and make an impact, we need to be explicit about how grantmaking practices will help them do that—by, for instance, moving from project support to operating support, or making fewer, larger, longer-term grants.

How we can do better

To live our values authentically and create trusting partnerships with our grantees, we must do better. This will only happen if we hold ourselves accountable for being the best grantmakers we can be. If we want to move the field towards more equitable, effective, and efficient practices, we must establish strategic goals related to practice, then report on our progress to staff, board, and, yes, external stakeholders—including our grantees.

So how do you set a strategic goal aimed at making you the best maker of grants possible?

Any such strategic goal would describe how you will improve grantmaking practices as they relate to either your internal processes or to your relationships with potential grantees and other partners.

Because change comes in stages, and only when nurtured by a culture of continuous improvement, I encourage every funder to adopt evergreen goals that reflect a vision for how grants are made in support of the organization’s programmatic goals and core values. The strategies and tactics you use to achieve those goals can then evolve over time as you realize incremental improvements.

Below are some examples of organization-level strategic goals that you might want to consider:

  • Narrow the power gap with grantees by collecting feedback from them, and then using that feedback to improve our processes.
  • Drive equity by eliminating bias in our decision-making processes, and incorporating people with lived experience into the process.
  • Share what we learn from and with our grantees to build the field and make a greater impact overall.
  • Practice responsiveness by implementing risk management practices that promote equity and reduce the burden on nonprofits.

It is within the power of every grantmaker to prioritize their practices, set strategic goals to improve them, and evaluate them as a critical indicator of grantmaker success. To that end, PEAK Grantmaking has developed a set of guiding principles for grantmakers: Tie Practices to Values; Narrow the Power Gap; Drive Equity; Learn, Share, Evolve; and Steward Responsively.

Learn more about them in our white paper, Courage in Practice: 5 Principles for Peak Grantmaking. Then, get ready to explore the many resources we’ve developed to help grants management professionals lead the way in putting these principles into practice, coming online this month. Together, we can reinvent the way grants get made, and transform the practice of philanthropy into the practice of principled grantmaking. We invite you to join us on this journey.

Michelle Greanias

Michelle Greanias is executive director of PEAK Grantmaking.