What Foundations Can Do to Help Strengthen Nonprofit Organizations

Jennifer Wei

CEP released a study this week that shows the disconnect between nonprofits and funders on understanding grantees’ organizational strengthening needs. While almost all foundation leaders say they feel responsible for strengthening grantees and care about grantees’ organizational health, the majority of nonprofit CEOs feel that most foundations do not care about strengthening the overall health of their organizations. What gives?

As a former nonprofit chief operating officer who moved into a program officer role at a large foundation last year, I can see both sides. The nonprofit I worked for, Techbridge Girls, offers programs that inspire girls in low-income communities to pursue careers in science and technology. As with many youth-serving organizations, the organization depends mostly on foundation and government grants. In my time there, almost all of the grants we received were restricted: out of approximately 20 foundation funders at the time, only one funder consistently gave large, general operating support grants.

While that one unrestricted grant was supposed to offer flexibility in how it was spent, in reality we could not use it flexibly because we had bills to pay that were NOT covered by restricted grants from other funders, who usually capped indirect rates at 15 percent (if indirect was even allowed). In essence, the general operating support was subsidizing the gap left unfunded by restricted grants.

Like most other nonprofits, our actual indirect rate was considerably greater than 15 percent. To add to the burden, we needed “build” capital beyond our regular overhead — funders were giving us grants to expand to new cities, yet those funds were restricted to programs, which inhibited our ability to build out the administrative operations needed to run a multi-state organization. With insufficient investment towards building our infrastructure, how could we possibly say that our funders cared about our organizational health?

Now, a year into my role as organizational effectiveness officer at the William and Flora Hewlett Foundation, I am acutely aware of the other side of the coin. I’m fortunate enough to be at a foundation that offers general operating support grants as well as supplemental organizational effectiveness grants. The foundation’s leaders and staff do care about and try to support organizational health where we can.

But, as the CEP report shows, neither general operating support nor capacity-building or organizational effectiveness grants are the norm among foundations. CEP finds that a mere 32 percent of foundations provide general operating support to the majority of grantees, and only 18 percent provide capacity-building or organizational effectiveness grants to the majority of grantees.

A handful of foundations offering general operating support to nonprofits is not even close to being enough.  We need many more funders — a critical mass — to provide general operating support grants and recognize the full cost of running an organization. Only then can nonprofits have enough unrestricted dollars to truly use those funds flexibly, prioritize organizational capacity needs, and strengthen organizational health.

So how do we close this wide gap between funders and nonprofits? First off, foundations need to take a hard look at their giving practices and consider what it would take to move toward more flexible funding for their grantees.

What is preventing your foundation from doing so? Be open to input and feedback from grantees on how you can better support their organizations. After all, they are the ones doing the work for the causes you care about! The less burden on them and the more resources they have, the more they can do.

Short of shifting to general operating support, which may take a long time for change to occur, foundation staff can start laying the groundwork for more open and candid conversations with grantees. Program officers can set the tone by creating dialogue that invites grantees’ honest input and feedback. While the inherent power dynamic often makes nonprofits hesitant to share their challenges for fear of comprising funding, it’s important for nonprofit leaders to feel safe communicating the full cost of their organization’s work, including all the resources and costs it takes to run an organization effectively.

One way for program officers to cultivate and guide candid conversations with grantees is to ask big picture, open-ended questions in a way that indicates a genuine interest in the organization’s health and well-being. Some examples of guiding questions include:

  • What are key organizational factors that lead to your organization’s success?
  • What would it take to move your organization from good to great, or from great to excellent?
  • What has worked, or not worked, in the past to strengthen your organization?
  • What organizational issues keep you awake at night? What issues take up the most time or give you the biggest headache?

Opening up conversations with grantees to discuss organizational strengths and needs — and being honest and flexible about what you can and cannot do to help support those needs — is a step in the right direction. And to go that step further, offering supplemental funding when possible to address some of the needs that get surfaced can begin a virtuous cycle of openness on the journey towards more healthy, resilient organizations.

We have to remember we are all in this work together, striving towards a common goal. Foundations have a vested interest in the long-term success and sustainability of their grantees that are serving the communities we care most about. We need to show them that yes, we do care. 

Jennifer Wei is organizational effectiveness officer at the William and Flora Hewlett Foundation. Follow her on Twitter at @JenniferWei11.

Looking for more on strengthening grantees? Join CEP and a panel of foundation leaders on Monday, October 29 from 3:30-4:30pm ET for a webinar discussion of what foundations can do to best support and strengthen grantees, leaders, and networks. Register here.

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