New Rating System Grades Foundations by Grant Making Practices, Not Size

For several years a growing number of foundations and philanthropy organizations have pushed grant makers to provide more general operating support and flexible funding to their grantees. But those efforts have shown mixed results. Now a new type of rating hopes to put a system in place to provide a simple and visible way to assess grant markers’ practices. 

The ratings are the creation of John Jackson, president of the Schott Foundation for Public Education, which supports youth and parent advocacy groups led by people of color that seek  more equity in education. He based the rankings on the LEED green building standards that rank buildings on their energy efficiency. Just like companies that proudly affix LEED stickers on the outside of their structures, Jackson hopes foundations will hype their rankings: gold sliver, bronze, and in exceptional cases, platinum.

“It’s our hope that by having these designations, board members will ask, “What is our rating? Why are we at the silver level, not the gold or platinum?’” Jackson said.

The ratings, called the Sustainable Grantmaking Benchmark, sort foundations by factors like how much general operating support and flexible funding they provide and how many of their grants in the previous several years have been long-term grants of three or more years, rather than one-off, short-term project grants.

While there have been many tips for effective grant making and “top five” practices floated over the years, this may be the first effort to provide a ranking on anything other than a foundation’s asset size or grant-making budgets.

Advocates for the grant-making approach the ranking embraces say that long-term, flexible grants help build trust between grant makers and grantees. It can also help build a durable network of nonprofits working for social change that can withstand political volatility, economic declines, and the ups and downs of fundraising.

What was missing, Jackson thought, was a way for foundations to see how they measure up in a single glance, which may be one key to getting them to change the way they make grants.

Some Big Grant Makers Join the Ranking

So far, seven philanthropies, many of them focused on justice and equity, agreed to be ranked in the first round: the California Endowment, California Wellness Foundation, Communities for Just Schools Fund, Grove Foundation, Robert Wood Johnson Foundation, Schott Foundation for Public Education, and Woods Fund Chicago.

The ratings are not meant to characterize grant makers as “leaders and laggers,” Jackson said. Instead, they are a way to give foundation leaders and board members an instantly recognizable indication of how they are doing and to motivate them to improve. He would like to update the designations every 18 months or so. 

The standards were created by Schott and nonprofit consulting group PTKO, which specializes in technology and data. Other advisers included Asian Americans/Pacific Islanders in Philanthropy, the Bridgespan Group, Grantmakers for Effective Organizations, and the National Center for Family Philanthropy.

To get their designation, foundations are asked questions about the duration of their grants, the degree of flexibility in their grants, and whether, along with traditional grants, they use grant-making tools such as support for advocacy, endowment grants, or impact investing.

Of the groups that participated, four received gold rankings, two silver, and two bronze — Schott and the Communities for Just Schools Fund. Although the Scott Foundation was ranked by standards Jackson shaped, he says the decision on the foundation’s bronze ranking was made independently.

It could be cynical to suggest it was easy for like-minded foundations to all achieve high marks, concedes Darren Isom, a partner at Bridgespan, a philanthropy consulting firm. But like in a marriage, Isom says, “positive reinforcement is a great thing.”

The ratings, Isom said, also send a signal to new philanthropists.

“We’re living through a period of wealth transfer where there are lots of new donors that are thinking about what success looks like,” he said. “This is a way of laying out a path to success for those that are entering the field.”

An Easy Decision to Participate

The Grove Foundation is one of the grant makers marking the route for others. Schott had asked the California grant maker, which plans to spend down by 2030, to participate. 

Getting ranked was an easy call for Alicia Harris, a senior program officer at Grove. The foundation already participates in the Center for Effective Philanthropy’s Grantee Perception Report. Harris saw the Schott rankings as another way to hold Grove accountable.

“It’s important to make sure that we’re doing what we’re saying we’re doing,” Harris said.

Harris said that the rankings are helpful but cautioned they don’t necessarily take into account the nuances of each foundation’s design.

For instance, as a spend-down foundation, Grove is, by definition, limited in how long it can support grantees. That, surmises Harris, might have kept Grove from getting a higher ranking.

“We’ve always done some degree of two- and three-year grants, but we’ve been a spend-down since the foundation’s inception,” she said. “The way that we manage our grant-making budget and our finances is different than some other foundations.”

By providing long-term grants, Schott’s Jackson is convinced that philanthropy can help bring about lasting change. As an example, he points to the Campaign for Fiscal Equity, a decades-long effort to provide more funding to struggling school districts across New York State. Schott provided about $24 million in grants to nonprofits associated with the effort over 20 years, resulting in billions of additional dollars in state funds to schools that had been neglected.

So why did Schott only get a bronze ranking, given its history of sticking with grantees? Jackson says the foundation’s relatively short grant cycles might be an issue. Offering grants that last up to five years is difficult for Schott because it is a pass-through foundation, meaning its grant making budget largely depends on how much money it raises.

Schott also could have scored higher, Jackson said, if it hadn’t been holding money aside for a fund to help racial justice and education nonprofits. The board realized it had good intentions of saving up for larger endowment grants but realized worthy grantees might need money sooner.

The ratings, Jackson said, gave Schott a clear idea of how to improve its practices. He hopes others who have been bombarded with advice about grant making will be able to use the rankings to easily identify ways to improve.

Said Jackson: “It’s important that we have a universal metric that is broadly understood.”