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What grantmaking practices should foundations adopt to best support nonprofit organizations?

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According to The Independent Sector, funding-related practices and relationships are one of the challenges that the nonprofit sector faces, and there are myriad reasons that funding-related practices and relationships are challenging for the nonprofit sector. These include the lack of funding and difficulty securing adequate funds, funding structures that incentivize counterproductive practices, strained relationships between funders and nonprofits, and shifts in funding models and strategy.

Mowrer’s Grant-seeking Challenges highlights that funder practices and requirements are considered one of the greatest challenges for grant-seekers. Foundations leaders need to recognize and understand how grantmaking practices can negatively affect nonprofit organizations and can lead to mission drift. Grantmaking foundations have the financial resources that nonprofit organizations need to accomplish their work. Nonprofit organizations are doing the work essential to further the grantmaking foundation’s mission. “The power and influence that flow from money, combined with the near absence of a negative feedback loop in philanthropy, result in potential manipulation of and control over nonprofit organizations,” Janice Pettey of Nonprofit Fundraising Strategy said. Foundation leaders need to understand how grantmaking practices affect nonprofit organizations and structure grantmaking practices in ways that best support nonprofit organizations.

Grantmaking practices are important to grantmaking foundations. Grantmaking practices help foundations be good stewards of resources and ensure the foundation stays focused on its mission. Inconsistent terminology, incomplete information, and conflicting recommendations are all challenges that foundations face when developing grantmaking practices.

Leaders and managers of nonprofit grantmaking foundations play a significant role in setting grantmaking practices that best serve nonprofit organizations. Foundation leaders’ responsibilities include identifying the foundation’s area of interest, developing strategies with regard to addressing that area of interest, developing guidelines for grantmaking to advance those strategies, and communicating its grantmaking guidelines to members of the public. There are six steps that foundation leaders need to take to adopt grantmaking practices that best serve nonprofit organizations.

  1. Heed legal requirements. Foundations that do not follow the legal guidelines risk the loss of their 501(c)(3) status and a foundation that does not have 501(c)(3) status cannot provide philanthropic support to nonprofits. Nothing else matters if the foundation loses its charitable status; therefore, foundation leaders must ensure that legal guidelines are followed.
  2. Clearly define the foundation’s mission. The mission makes what the foundation sets out to accomplish clear to internal and external stakeholders and guides the decisions and actions of foundation staff. The leaders of a foundation must ensure that the foundation’s mission is clearly defined and articulated.
  3. Establish values and priorities. The leaders of the foundation should establish the foundation’s values and priorities to assure that grantmaking practices align with their mission. Having “explicit, publicly shared statements of values can help grant-makers make a stronger connection between how grants are made - grantmaking practices - and the priorities, aspirations, and overall world view of the grant-maker itself,” Myrick, Powell, and Bain said in “Leading with Values.”
  4. Set clear policies. The Gordon Fischer Law Firm says that policies such as how organizations should approach the foundation for a grant, if grants are restricted or not, timeline information, types of funding requests the foundation will not accept, and more, will guide the staff and communicate to nonprofits what the foundation will fund, ensuring consistency. The foundation leaders need to set clear grantmaking policies.
  5. Be a good partner. The leadership of the foundation should prioritize and focus on being a good partner to nonprofit organizations. To be a good partner, leaders of the foundation should (1) acknowledge the power dynamic and work to minimize it and (2) work to have healthy relationship with nonprofits and grantees. “Research shows that grantmakers that are more connected to their grantees—those that have an ear to the ground—are more likely to provide the support that nonprofits need to be successful” (Stanford Social Innovation Review).
  6. Evaluate to learn. Foundation leaders should prioritize evaluation, provide resources to ensure adequate evaluation is done, and be open to adjustments based on results. Noted by Grantmakers for Effective Organizations, “When grant-makers focus on learning for improvement, we use evaluation and learning to generate information and insights that will help us better understand both how we’re doing in our work and how to improve. A focus on taking action based on what we learn ensures that we are engaged in strategic or applied learning.”

Nonprofit organizations want foundations to adopt practices that help them do their work more effectively. Nonprofit leaders call funders to improve the grants processes and their approach to goals and strategies, provide assistance beyond the grant and more consistent, long-term funding; and have stronger funder-grantee relationships, found in the Center for Effective Philanthropy blog. The steps that foundation leaders need to take to adopt grantmaking practices that best serve nonprofit organizations are (1) heed legal requirements; (2) clearly define the foundation’s mission; (3) establish values and priorities; (4) set clear policies; (5) be a good partner; and (6) evaluate to learn.

Jessica Tudyk is the Program Officer at the Mary E. Bivins Foundation in Amarillo, Texas. She is a Master Certified Health Education Specialist and has spent her over 10-year career working for nonprofits in the Texas Panhandle. Jessica has spent the last five and a half years managing grantmaking and scholarship programs at foundations. She has a Bachelor of Science in Education with a major in Community Health from Baylor University; a Master of Science in Education with a focus in Health Education from Baylor University; and a Master in Nonprofit Leadership and Management from Arizona State University.  

Want to learn more?

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