Trends in Grantmaking: Achieving Lasting Impact Through Trust-Based Philanthropy

Trust must be earned. “Earning” denotes work. And that work can come in a variety of forms: work by your grantee to fill out long applications with questions about programs, finances, staff, sustainability, and internal controls that get read and then filed.

Or it can be your research and conversations to confirm the dedication to a shared mission. While there will always be a baseline of information needed to make sure your grant funds are stewarded well, the best place to start is with trust.

Creating stronger relationships with your grantees is at the heart of trust-based philanthropy, and a key part of helping you make a bigger impact on the community you serve.

Trust-based philanthropy is a trend that we expect to impact grantmaking for years to come. Learn about the others in our blog post, 5 Trends in Grantmaking that We Think Have Staying Power.

Defining Trust-Based Philanthropy

Trust-based philanthropy is the idea that building stronger relationships with grantees—and the trust that evolves from those relationships—can lead to increased equity, better programs, and more impact.

As a grantmaking organization, you feel strongly about your impact area. You do research and you know the statistics, best practices, and pitfalls of organizations that have fought similar battles. And yet, there is often a layer between that data and the practicality of reaching people with food insecurity, or reducing recidivism, or providing educational art programs. It’s your grantees—those who talk with individuals in your community every day—that often have a better understanding of how to use funds to get results. Trust-based philanthropy comes from giving your grantees the power and runway to do the hard work that they know needs to be done without the traditional strings and hoops required.

So, what does trust-based philanthropy look like in practice? It includes multi-year grants so your grantees feel secure in their funding and can take on important projects that might require more than 12 months to launch. It also helps them stay focused, instead of having to manage new funding applications each year.

It also includes unrestricted funds. As a funder, you want to make sure you are stewarding your resources well, so you want as much as possible to go towards impactful programs. But those programs don’t happen without rent payments, reasonable salaries, and foundational infrastructure.

Trust-based philanthropy does not mean sending money and walking away. You don’t want that and neither do your grantees. Grantees need you to be transparent, knowledgeable, and responsive. It’s important to provide support, such as playbooks for managing lump-sum multiyear grants, training to understand and manage indirect costs, and access to a community of grantees working through similar situations.

Rethinking Risk When Evaluating Grant Applications

For some funders, the idea of trust-based philanthropy can cause anxiety. Without the traditional safeguards of long, detailed applications and regular reporting requirements, how will you know if the funds were put to good use? That’s where the relationships—and trust—comes in. Grantmaking organizations need to view their funding decisions as opportunities to manage risk, instead of assuming there is a high level of risk to mitigate.

In her post for the ENGAGE blog, PEAK Grantmaking President and CEO Satonya Fair, encourages grantmaking organizations to rethink the idea of risk. Grant applications and grantee research should be an opportunity for conversation and curiosity, not a “gotcha” moment.

“Risk models were not designed for our sector and those businesses that require their use do so to gain an advantage over their competitors, generally for the purpose of profitability. As someone who sat on the side of the funder angels for many years, the lack of spirit in that purpose completely misses the mark for those of us with the heart and soul for this work.”

To help reframe risk, Fair calls on funders to remove unnecessary barriers that lurk in their grant applications. Just because an organization is small doesn’t mean they don’t foresee a coming need that you can help get in front of. Just because a nonprofit organization is new doesn’t mean they don’t have an innovative solution that can drive impact.

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Building Trust Through Stronger Relationships

Trust-building and risk-reframing does require work from grantmaking organizations to do the research, set up the two-step applications, and clearly communicate with grantees about what is expected. But with a little planning, those steps can become an ingrained part of your grantmaking.

With clear processes and intentional communication, funders can build the types of relationships with their grantees that breed confidence in the impact of their programs. In her blog post for ENGAGE, Shaady Salehi, the Director of the Trust-Based Philanthropy Project, outlined ways that grantmaking organizations can be transparent with grantees, getting in front of standard questions and reducing the work for both funders and nonprofits and increasing trust.

As a funder, look at your processes through a grantee perspective. Fill out your application. How long does it take? Is there is information that you don’t need at this stage (or don’t need at all)? Set clear expectations on your application or website so the grantee knows exactly what types of organizations the grant is for and what will be required of them through the application process and if they receive the grant. Knowing this information up front, and following through, helps create trust between you and your grantees.

Transparency and Trust-Based Philanthropy in Action

Transparency from the funder can instill trust from the grantee and begin a cycle of relationship-building that leads to increased impact. In our webinar, Transparency as a Grantmaking Strategy to Build Trust and Mutual Accountability, Shaady Salehi leads a panel discussion about what transparency and trust-based philanthropy looks like in action. She talks with three grantmaking leaders about how they’ve incorporated these efforts into their grantmaking process.

Using Technology to Build Strong Relationships

Relationships thrive with consistency and transparency—both sides know what to expect and when to expect it. Whether that’s application requirements, terms of the grant, or simply acceptance letters, having a system to manage these details can help support strong relationships between you and your grantees. Check out our tip sheet for eight ways your Grant Management System can help you build strong relationships.