Comments on: Restricted Grants vs. Operating Support

By: Bruce Trachtenberg

Bruce Trachtenberg — Mon, 03 Sep 2007 13:44:50 +0000

Maggie,
I think you are right about funders favoring successful program outcomes. But there are some foundations, including one I was at for several years, the Edna McConnell Clark Foundation that has built its entire grantmaking approach around supporting the growth (and scaling up) of organizations that can effectively deliver programs and services that improve lives of young people. It can be done, but it takes a lot of work on the part of both the foundation and grantees.

By: Maggie F. Keenan, Ed.D.

Maggie F. Keenan, Ed.D. — Sat, 01 Sep 2007 20:30:13 +0000

I’ll be brief. Nonprofits convey program success well through outcomes. Funders like numbers as a measure of success. So they give to successful programs. I do not think nonprofits communicate well organizational success. Harder for funders/individuals to get their arms around what a successful organization looks like. The only organization that has ever successfully fulfilled its mission is the March of Dimes.

Whether it is foundations or individuals, it may be a perception that giving to general/operating is too big to get their arms around and “it’s the organizations job to see it’s operating expenses are secured.”

Also, I think funders like narrow (like looking outside through a window)as it’s easier for them to justify their grant (successful or not successful). They just can’t seem step outside and look around.

By: Peter A. Mello

Peter A. Mello — Fri, 31 Aug 2007 20:42:49 +0000

Many problems that nonprofit organizations face are technical challenges that can be solved by technical solutions which are sensibly funded by restricted grants. (Food for a food kitchen, books for a school, etc.) However, these solutions often can’t get to the root of the problems. The BIG ONES (poverty, climate change, cancer, diabetes, education, etc.) are adaptive challenges that require creative collaborative adaptive leadership. Since we don’t know where the solution will come from, they often don’t benefit from generous restricted grants.

I recommend reading Leadership without Easy Answers by Ronald Heifetz because he clearly articulates the adaptive theory of leadership. It may be able to better prepare some nonprofit leaders for their discussions with potential or actual funders.

As a ceo of a national nonprofit for the past 6 years, I was always happy to receive either restricted or unrestricted funds. Nonprofit leaders should be grateful for any and all types of support. But clearly my sleepless nights over making payroll or having enough resources to execute and report on an innovative program took away from my ability to focus necessary attention and energy on the real challenges that we faced and to which we could have contributed a solution.

Thanks.

By: Sean Stannard-Stockton

Sean Stannard-Stockton — Fri, 31 Aug 2007 19:03:27 +0000

That’s a good point about the consumer metaphor. I had thought of the same thing (ie. just because I buy Nike sneakers doesn’t mean I only wear Nike clothes). However, in the consumer model, the company is built to serve the consumer. In the investor model, the company gets capital from one group and serves another. So I think it is a better metaphor than the consumer model. But they are both applicable and neither are a perfect fit.

I think that foundations in particular think of themselves as “investors” rather than “consumers”. As Jim Canales told me: “I just don’t buy the parallel: as a funder, I don’t see us “buying a service” that lends itself to simple assessment of whether we were satisfied as a “customer”. I see us as investing in organizations who share our priorities about how to improve California.”

By: Holden

Holden — Fri, 31 Aug 2007 18:27:12 +0000

We’ll never entirely get rid of the mission misalignment issue. It’s inherent in the sector - every person has slightly different values. That’s one of the reasons I prefer consuming to investing when we’re busting out the metaphors. When I invest in Coca-Cola, all I want is money; I’m not telling them what to do. But when I buy from Coca-Cola, it matters whether I want Coke or Sprite. Same with helping Americans vs. Africans, children vs. adults, etc.

That said, I agree with you that the extent of mission misalignment we see today largely reflects a problem. I’d love to see more high-performance, highly focused nonprofits with a coherent and specific mission.

The problem is on the donor end too. This issue would also be less severe if fewer donors were caught up in their own homeland, their own ethnicity, their own disease, etc. and more concerned about just helping people as well as possible.