by Prentice Zinn, GMA Foundations
This post was originally featured on GMA Foundations’ blog. GMA Foundations works with individual grantmakers and private, corporate, and community foundations to establish and achieve philanthropic goals.
Exponent Philanthropy’s website hosts a helpful checklist of annual foundation board to-dos, describing the various financial, legal, governance, grantmaking, and administrative tasks that foundations should undertake each year.
Like all housekeeping chores, however, some of the more difficult tasks may get neglected. Updating grant policies is one of those. Critiquing your own work is not easy. Nevertheless, setting aside a little time to validate and question your foundation’s transactional practices is a great way to recalibrate, to maximize impact.
Consider adding these three hard grantmaking policy questions to your foundation’s housekeeping list for 2014:
Funding duration: Does one size fit all? Nonprofit leaders are known to question foundations’ seemingly arbitrary limits on the duration of funding. For example, what is the logic behind policies requiring that grantees take time off from applying for funding from a foundation?
The common “three-year rule” is often used as a one-size-fits-all means of triaging grant review volume. Does this policy have more to do with transactional efficiency than with strategic effectiveness? Supporting innovation, organizational transitions, and capacity building often require flexible rather than formulaic funder responses. Of course there are arguments for and against locking in to long-term relationships with a finite group of organizations, but those arguments should be considered.
Grant sizes: What is the logic behind your dollar amounts? Foundation trustees scrutinizing their balance sheets typically allow for cost of living increases and fluctuations in returns on investments. Yet, over time, individual grant sizes for many foundations tend to remain fairly constant, and fairly low relative to steadily increasing costs. Although there are no easy formulas for calculating optimum grant size, having a discussion about the financial leverage of a grant can trigger a discussion about strategic focus. Do your grant sizes help you achieve notable outcomes within your field of interest? How does a grant of a particular size fit in to the particular needs of applicants in your target community?
Multiyear grants: What is your benchmark? Despite growing consensus in philanthropy that multiyear funding is essential for nonprofit health and effectiveness, impact and growth, it is far from the norm. Although multiyear support gives nonprofit managers greater flexibility, funders may feel constrained by the commitment. What are the trade-offs? We think that a thorough discussion of the pros and cons for both foundation and grantee may lead you to more multiyear grants. Beyond managing cash flow differently, your board would have the opportunity to focus more deeply on mission, and go beyond grantmaking on “off years” and dive into stronger partnerships with your grantees.
These three questions may be helpful to your foundation, or there may be other grant policies you’d like to review. Whatever the questions, revisiting your foundation’s grantmaking policies reinforces the habits of testing, tweaking, and learning that are essential to boosting impact.
Prentice Zinn is a principal at GMA Foundations (@GMAFoundations). His practice includes start-up work with new donors, helping foundations rethink their mission and focus, and identifying high impact funding opportunities in the fields of the environment, public health, and human services. Prentice can be reached at firstname.lastname@example.org