In their well-done report, Room for Improvement: Foundations’ Support of Nonprofit Performance Assessment, authors Brock, Buteau, and Herring lay out a vexing tension that exists between foundations and their nonprofit grantees. Their survey demonstrates that nonprofit leaders are hungry for more financial and technical assistance to drive the quality of ongoing performance assessment, while the vast majority of nonprofits receive no foundation support to establish and/or improve our assessment efforts. Concurrently, the majority of nonprofit leaders agree that foundations increasingly are requiring nonprofits to provide assessment data as an integral part of their grant agreements, without providing either financial support or technical assistance. To further increase this tension, the authors note that foundations’ requests for assessment data are often grounded in establishing their own effectiveness as philanthropic institutions and not necessarily assisting nonprofits in driving increased effectiveness to achieve their respective missions. In my experience as a nonprofit leader, they have rightfully diagnosed a structural impediment to nonprofits having both the financial resources and right incentives to integrate performance assessment into an overall organizational development strategy.
I believe that this impediment will not be removed until the relationship between foundations and nonprofits is either clarified or re-established. The prevailing nature of the foundation-nonprofit relationship is, in my experience, best described as the nonprofit community serving as a pool of potential contractors to the foundation community. Most foundations now have their own strategic plans, theories of change, and sets of metrics. They scan their well-defined sector to determine the best nonprofits (contractors) with whom to work, and then negotiate with these nonprofits specific pieces of business that roll up into a comprehensive investment strategy which then relies on each nonprofit (contractor) to report out quite specifically on the set of performance metrics that the foundation determines they should produce. My observation over the years is that foundation program officers assume that to win a grant from them, nonprofits have already built the necessary assessment infrastructure to produce the data that the grant demands, and therefore, the foundation does not need to invest in nonprofits’ capacity to improve or establish performance assessment infrastructure.
The authors do a great job conveying the implications of this dynamic through their survey. But I believe it is important to point out that until this impediment is removed, nonprofits will remain under-resourced to drive their own performance assessment development and effectiveness. Moreover, the fragmentation of foundation theories of change means that nonprofits are structurally set up to run much less efficiently. Instead of establishing one strong and unified performance assessment infrastructure, nonprofits have to develop, build, and adjust their performance assessment infrastructure constantly according to the demands of their ever-changing group of funders. Not only is this inefficient, but it compromises nonprofit leaders’ ability to make data-driven decisions about quality, scale, and impact due to a volatility of clear and stable information regarding their core business.
What is my suggestion for removing this impediment? I have two. First, insofar as the relationship between foundations and nonprofits remains one of foundation-contractor, then foundations must be willing to resource nonprofits more like traditional for-profit contractors that have product prices for specific pieces of business. This will require foundations to give back a healthy degree of fiduciary freedom to nonprofits and hold us accountable for producing results. For example, when you contract with the Boston Consulting Group (BCG) for a particular piece of work, they present you with a contract with clear deliverables and a pricing structure for those deliverables. You negotiate over pricing or value of their products, and leave it up to BCG to run their business efficiently to produce competitive work and turn a profit. If the foundation-nonprofit relationship worked similarly, the marketplace would drive efficiency and quality as foundations would fund nonprofits that could produce the best results against their theories of change. Nonprofits, on our part, would have to shift packaging of our work into discrete products that include infrastructure investments as a part of our pricing—investments that otherwise cannot be garnered under the current proposal structures foundations require of us. The resulting nonprofit pricing structure would create sufficient resources to produce appropriate performance assessments for foundations to evaluate their effectiveness, without starving nonprofits of needed resources to produce those assessments.
A second suggestion that would remove this impediment would be a shift from a foundation-contractor relationship to one of foundations as high-impact investors in nonprofits. Much has been written about venture philanthropy or high-impact investing in the mode of the Edna McConnell Clark Foundation or the Social Innovation Fund. What is important to mention is that these frameworks remove the impediment by aligning the funder’s performance assessment requirements with those of the nonprofit, rather than the reverse. In addition, these philanthropic investment strategies, which often are made in the form of general operations funding to support a mutually agreed upon set of milestones, allow grant dollars to be used to build and/or improve grantees’ performance assessment infrastructure. This investment strategy in turn provides grantors with better performance assessment while funding nonprofits to not only build appropriate performance assessment infrastructures, but also report out on their core business – not another institutions’ metrics.
Finally, this investment strategy enables nonprofits to develop the organizational muscle to develop and refine their programmatic quality and efficiency in execution. I strongly favor this suggestion and have experienced first-hand, through my work at Communities In Schools, the powerful transformation this recasting of the foundation-nonprofit relationship—from foundation-contractor to foundation-investee—can create. As a result of this transformation, Communities In Schools has almost doubled the number of students we serve in the last 10 years, serving last year more than 1.2 million of the nation’s most at-risk students.
Dan Cardinali is President of Communities in Schools. You can find him on Twitter @DanCardinali.
Join the conversation about the findings featured in Room for Improvement: Foundations’ Support of Nonprofit Performance Assessment on Twitter using the hashtag #granteevoice.
