What I’m saying is foundation staff’s core expertise should be in evaluating nonprofits. They should also have expertise in the area they are funding, but I’m arguing that the emphasis should be on building great nonprofits, rather than an emphasis on evaluating the program area and designing strategies to affect change.

Evaluating organizations is the role of an investor. Crafting plans to create change is the role of the social entrepreneur(and I use that phrase in the sense of nonprofits who try to tackle new problems without any reference to profit making or any “new” social enterprise movement).

But my point in all of this is to argue that donors should place the analysis of the organization ahead of the analysis of a specific type of program. Why should a donor (whose biggest asset is the fact they have assets to give/invest) have their own theory of how to affect social change? Are not the nonprofits on the ground, who are domain experts, better positioned to make these decisions? Especially if they have the internal resources to evaluate their activities well?

That doesn’t mean that funders should just decide to let nonprofits do whatever they want. But for-profit investors in retail companies (for example) do not design business models and then go looking for companies that fit them. They examine companies and decide which ones seem to make the most sense.

Say a donor wants to reduce poverty for single-parent families in a certain zip code. In a metro area, you’d see probably 100+ organizations claiming to help in some way. A donor ought to be able to have at least a starting theory that explains their bias towards, say, post-secondary educational attainment as a key pathway out of poverty. This can at least help them narrow the field of opportunities and better test their assumptions.

I think there isn’t any reason a donor can’t have that type of basic theory and then fund organizations in the way you describe. I’d advocate for your position on long-term equity funding for organizations that then fall into that chosen pathway (presuming they’re well-run etc.).

The designing of conditions, programs, policies etc, should be done at the nonprofit level and funders should evaluate the evidence and arguments made by each potential grantee. But the current practice, which you do a good job of laying out, gets things backwards (or at least that’s the argument I’m advancing). By designing their own theory of change and then “contracting” with organizations who can deliver the building blocks, the funders are maintaining a situation where most nonprofits are under-capitalized because they only get short term “revenue” in exchange for program execution rather than long term “equity” funding that can help them build their organizations.

A basic version of a theory of change is: 1) defining goal of the impact (what impact for whom over what timeframe), 2) thinking about what building blocks (conditions, programs, policies etc.) need to be in place to achieve the goal, and 3) finding the organizations that are delivering on those building blocks (or are best positioned to). Depending on the situation, those organizations may be nonprofit, government, business, or loose citizen alliances.

Like any theory, it is meant to be tested and modified as you learn more (in fact it works best if you’re willing to listen and learn). But it does give you a framework to focus your giving and learning, and a means to clearly say no to things that don’t fit. It can also provide framework for a donor’s volunteer and advocacy time.

Any donor or foundation can start with this basic strategy. And, they can implement the theory through general ops or strategic growth grants to efforts that provide the most impact, rather than trying to design their own programs.

I think a far greater power differential exists when funders use nonprofits to execute the funders strategy. But as nonprofits are built up into strong, robust firms, they are able to break free of the cycle of dependency on specific funders.

Yes, foundations are nonprofits, just as both investors and companies are for-profits. But the role of the grantmaking foundation should be to capitalize (fund) entrepreneurial nonprofits, not to design their own programs and then use nonprofits to execute them (at least that’s the argument I’m advancing).

However, I think that one distinction remains untouched. Foundations ARE nonprofits. By separating the funder world from the nonprofit sector, we in fact confirm the notion that power lies in the position. This is adverse to my beliefs as a program officer at a community foundation.

It is my job to learn, to listen and to assist in recommending requests for funding that fit the mission of our foundation and also meet the criteria established by the donors we represent. I always say that we look to the nonprofits to be the experts in their field of practice but it is the duty of foundation staff to be informed on the issues deemed as priorities by our Board and by our donors.

There are also distinct difference between an individual donor, an investor and a foundation. Having money to give does not necessarily mean that there is power associated and I think we do a disservice by creating an atmostphere in which foundation staff members are cultivated in the same way that individual donors are.