Effective funding linked to listening

Grantmakers that make it their business to understand and connect with nonprofits they fund are more likely to provide the kind of support nonprofits need to succeed, a new study says.

Among 755 grantmaking organizations that responded by a 2011 survey sponsored by Grantmakers for Effective Organizations, or GEO, and conducted by TCC Group, grantmakers that “listened to and learned with their grantees and other stakeholders were more likely to offer multi-year, general operating and capacity-building support – the kind of support that enable nonprofits to address the deep-rooted problems in their communities,” GEO says.

Still, it says, “progress across the foundation field has been generally slow, which may not be surprising given the kinds of pressures facing the nonprofit sector and philanthropy.”

General operating support, for example, generally has remained static, the study says.

It characterized as “disappointing” the fact that grantmakers still devote a median proportion of 20 percent of their annual grantmaking dollars, a share that has changed little in nearly 10 years, according to the Foundation Center.

The study found that, when faced with limited funds to give out, some foundations made improvements to their internal processes to make it easier for grant recipients to get access to funds, while also preserving two types of “much-needed” support.

Funders, for example, reduced the turnaround time between receiving an application and approving a grant to 60 days in 2011 from 90 days in 2008, while also reducing to 15 days from 21 days the time from approval to initial payment.

Despite “limited options for supporting nonprofits financially, the study says, 51 percent of grantmakers surveyed opted to preserve their investments in general operating support at the levels they had before the recession in 2008, while 59 percent preserved their investments in capacity-building support.

And 35 percent even increased those investments, generally saying the increases were not related to the economy, showing those types of support “are becoming core elements of foundation grantmaking strategy,” the study says.

Yet funders also reported making multi-year awards much less frequently than they had in 2009, with 28 percent of funders reducing those dollars, although 54 percent of those that decreased their multi-year comments said the reductions were temporary and the result of the economic downturn.

The study also finds that evaluation “remains an exercise in proof and accountability rather than learning with peers inside and outside of an organization.”

Most grantmakers surveyed did not significantly change the way they engage with stakeholders, with 58 percent reporting they assess the needs of their communities, 53 percent inviting stakeholders to address board members, 51 percent inviting stakeholders to provide input on foundation strategy, 49 percent inviting stakeholders to provide input on grant proposals, and 16 percnet delegating decision-making power on funding to stakeholders.

“Funders are seeking additional ways to stay plugged in, including seeking feedback from grantees to help strengthen their performance,” the study says. “Grantmakers with an ear to the ground tended to use their investments to help build strong, adaptable nonprofit organizations. It is these resilient nonprofits that stand the greatest chance of making a difference at times when their communities are in greatest need.”

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