2020: The Year that Changed Grantmaking

2020 will be remembered as the year that changed grantmaking.

Foundations are in the midst of a sudden and unexpected upheaval of long-held grantmaking practices. Faster access to capital and removal of administrative burden have become the clarion-call from nonprofits struggling to meet the intensified demand of constituents. If ever there was a mandate to reexamine the role and process of funding, now is that time.

The practice of funding has traditionally been lopsided in favor of those doing the granting. Nonprofits undergo an arduous application and vetting process designed to provide funders a measure of confidence that their investment will achieve an intended outcome. Foundations have a fiduciary responsibility to be good stewards of their endowment. Carefully vetting each project and partner is the due diligence required to make good decisions.

On the surface this feels reasonable, but in practice significant issues and challenges emerge. The process is a time-intensive, laborious grind for applicants. Grantees painstakingly provide long histories of past performance, financial projections, and thorough descriptions of expected results. Once submitted, the application is scrutinized and debated across the organization –often requiring time consuming revisions of the proposal. And if accepted, the nonprofit can expect to produce a flood of data in the form of recurring progress reports.

When funding is awarded it comes at the cost of time, energy, and resources that could otherwise be spent concentrating on impact; and if the grant proposal is rejected, all that time and energy was for naught.

The situation is equally challenging on the funder’s side. Program officers and staff spend long hours shepherding grantees through this complex process, collecting and reviewing endless pages of documentation, and debating the merits of projects with a host of reviewers and committees. The process emphasizes administration and paperwork over engagement and relationship. Program staff have less time to commit to partnership, capacity building, and mutual accountability.

Enter 2020, the year that redefined grantmaking and philanthropy.

Ushered-in by a confluence of societal challenges and crises, traditional grantmaking practices are under pressure. Foundations are scrambling to award grants faster, and nonprofits are pressing to eliminate all non-value-added activity. Fortunately, movements like the Trust-Based Philanthropy Project were already gaining traction in the sector, and their principals provide guidance to how we might reimagine the end-to-end grantmaking process.

Learn how grantmakers can drive operational efficiencies for better outcomes with internal controls.

Spearheaded by the Whitman Institute, the Robert Sterling Clark Foundation and the Headwaters Foundation, the Trust-Based Philanthropy Project aims to change the grantmaking paradigm from transactional to ongoing partnership. It emphasizes six core principles to establish stronger relationships and streamline administration:

1. Provide multi-year, unrestricted funding
2. Do the homework
3. Simplify and streamline paperwork
4. Be transparent and responsive
5. Solicit and act on feedback
6. Offer support beyond the check

Values such as power-sharing, equity, and collaboration are at the heart of these ideas, and they provide a framework for enhancing agility, reducing burden, and simplifying the funding process.

Other ideas designed to reduce grantee burden are also emerging. The Kenneth Rainin Foundation introduced a process for their New and Experimental Works program to accept applications that grant seekers have previously submitted to other funders. This eliminates the need to create a new application for Rainin, and leverages the investment already made in a prior proposal.

Other funders are exploring the idea of standardized grant applications. Whether this develops into a “common application” for the sector remains to be seen. The concept could further reduce overhead, by enabling data to be produced once and then shared or re-used with multiple funders. It would provide a level of predictability and transparency, further reducing administrative burden and simplifying data sharing.

Both software and data will play a critical role in operationalizing these streamlined, agile processes. Grants management software (GMS) is the lifeblood of most foundations — providing tools for collecting, reviewing, and choosing grant proposals, and the data to evaluate their impact. In a world where expediency and relationships are valued over an excess of verbiage and data, grants software — whether on-premises or hosted in a cloud environment — must support these new values and ways of working:

• Constituent Relationship Management (CRM) functionality will become even more critical in the mission to expedite grants. CRM empowers funders to capture the data that is most essential to their decisioning, record keeping, and evaluation. As dialog replaces documentation, a GMS must provide a simple and effective way to capture notes and details from phone calls, video conferences, online chats, emails, and other communications. And, this new data must be easily discoverable and accessible throughout an organization.
• Grant application data should be analyzed to objectively determine what provides the greatest value in terms of decision making. Online applications can be pared back to only the most essential data required by the funding organization. Eliminating non-value-added data supports a lean process that reduces the time to produce and review documentation.
• Funders that accept unsolicited proposals should develop a short letter of inquiry (LOI) style form to quickly assess interest and fit. A minimal LOI provides just enough detail to make an initial assessment, potentially saving the grantee hours of time and expense.
• New ways to share information must be supported by grants systems, including video-based applications (now common in the MacArthur Foundation’s Lever for Change competition). Sentiment indicators, photos, IoT data, and direct input from project beneficiaries can contribute to new ways of demonstrating and evaluating impact.
• Grants management systems should provide a simple way to share or reuse applications initially completed for another funder. They should also provide a means for grantees to broadcast a project proposal to multiple funders, simultaneously. Changing the model from one-to-one to one-to-many could result in foundations collaborating to fund a project (talk about changing the power dynamic!).
• Grants management systems must facilitate better data sharing, providing all funders and grantees a comprehensive, common dataset for research, analysis, learning, and evaluation. Tech firms like BrightHive can expedite this process by educating more organizations to the benefits of data trusts.

The nonprofit sector is at a rare inflection point. Faced with the urgency of this moment, funders and grantees must reexamine long-held beliefs and processes to find better and more-expedient ways of working. Movements like trust-based philanthropy, participatory grantmaking, and the Council on Foundation’s Pledge of Action provide new frameworks for further democratizing our partnerships, expediting access to capital, and simplifying our grantmaking processes. Technology will play a critical role in achieving these goals, but only if we demonstrate the courage of our convictions and willingness to evolve as a sector.