Foundations have an image problem. Or, more accurately, a self-image problem.
As the Center for Effective Philanthropy’s recent report Strengthening Grantees: Foundation and Nonprofit Perspectives documents, foundations do not understand nonprofits’ needs nearly as well as we think we do — or nearly as well as nonprofits would like us to.
The report’s ingenious design enables foundations to peek behind the often carefully curated and deferential veneer that many nonprofits feel obligated to show to funders. Across so many dimensions of the foundation-nonprofit relationship — from how frequently foundations follow up with grantees to how aware foundations are of nonprofits’ needs to how responsible foundations feel for strengthening grantee organizations — foundations and nonprofits don’t see eye to eye.
This perception gap is particularly stark when it comes to the provision of general operating support. CEP’s report is just the latest in our sector’s already lengthy “best practices” bibliography that demonstrates general operating support’s critical importance to strengthening nonprofits and helping them to achieve their missions. Reports, studies, and articles produced over the past 15 years by organizations such as Grantmakers for Effective Organizations (GEO), the National Committee on Responsive Philanthropy (NCRP), Bridgespan, and CEP identify general operating grants as the type of support nonprofit CEOs most want — and the type of support these CEOs believe is most likely to help build their capacity.
Many of these studies also document the relatively small percentage of funders who consistently devote a portion of their grant budget to general operating support grants. Strengthening Grantees finds that not quite one third of foundations regularly provide general operating support grants to the majority of its grantees — a percentage that is somewhat better than the 20 percent or so of foundations that the Foundation Center and other researchers have consistently found make general operating support grants, but still abysmally low.
Without fail, entreaties from GEO and like organizations make sound, rational, and — to me, irrefutable — arguments for the many ways that general operating support grants benefit nonprofits and foundations alike. But after nearly two decades of well-articulated, logical arguments that have yielded only marginal change, we have to ask ourselves if what we are seeing is the result of rational decisions.
A few years ago, a colleague at a corporate giving program asked me with a mix of bewilderment and indignation why foundations give general operating support grants. “How do you know what your grantees are accomplishing, what impact they are having, and what impact you — the funder — are having?” he wondered.
The narrow answer to his question is that foundations can use final reports, as well as meetings or site visits with grantees, to hone in on the outcomes in the community about which they care most. We can separate our programmatic interests (understanding and documenting a nonprofit’s impact) from our accounting and compliance concerns (our need to know how our grant is spent and whether our dollars are used to pay the electric bill or the health insurance premium or any other “overhead” expense that any nonprofit needs to cover).
But more broadly, my colleague’s question speaks to what may be the real reason that so many foundations take a pass on general operating support grants: there is a sense of control that comes with awarding a restricted program grant and directly linking that grant to program outcomes. (Never mind that most foundation’s grants are not large enough for funders to claim anything more than a contribution to an outcome.)
If foundations want to see the change we envision in the communities we care about become a reality, we need to relinquish the illusion of control that comes with awarding restricted program grants. Instead, we need to trust our grantees, who know these communities far better than we do, to call the shots. The push by many foundations, including the Eugene and Agnes E. Meyer Foundation, where I am senior director for program and community, to name achieving racial equity as a top priority makes moving away from this hierarchy of control more — not less — important.
As Strengthening Grantees reveals, we are stuck in a chicken-and-egg dynamic. The majority of nonprofit CEOs ask foundations to support what they — the CEOs — think foundations want to fund. Most funders consider what a grantee specifically requests when considering whether to provide support to strengthen the organization. If nonprofits think — or know — that a foundation does not make general operating support grants, then they are unlikely to ask for them.
CEP is right that “both nonprofits and foundations have a role to play in closing the gap between the support nonprofits need and the support foundations provide.” Nonprofits do need to ask for what they really need. But power dynamics can make it hard for nonprofits to speak that truth.
Foundations, who hold more of the power in these relationships, need to go first and take what may feel like a big leap to providing more general operating support. Doing so will, among other things, send a message to your nonprofit partners that you are investing in their mission and that you trust their staff and board to use your grant dollars wisely. It won’t prevent you from asking questions or collecting information on program outcomes, but it will position you to build partnerships with nonprofits that are based on trust, which is at the core of any good relationship. And ironically, and perhaps even counterintuitively, as a trusted partner you may actually have more influence on grantees than you do by making restricted — and restricting — program grants.
The solution to foundations’ self-image problem isn’t costly. But it does require some courage on the part of foundations to surrender the illusion of control and move toward building true, mutual partnerships.
Karen FitzGerald is senior director for program and community at the Eugene and Agnes E. Meyer Foundation. Follow her on Twitter at @kfg_MeyerFdn.