A Bigger Charity Is Not Always a Better One

For most of America’s history, growth has meant getting bigger, expanding, going farther and farther West. That spirit has found its way into almost every part of our society, to the point where we now regard getting bigger as synonymous with getting better.

In the nonprofit world — or most of it — such a concept of growth is just not reasonable given the availability of money. Still, most charities regularly add programs, supported in part by gifts and grants, and seldom eliminate anything.

The result is that much of philanthropy often teeters on the edge of collapse while foundations grow ever more frustrated when the programs prove unsustainable.

The question is whether the nonprofit world can redefine growth so it can mean improvement without necessarily meaning bigness. What if foundations and charities started with the premise that, except when new income is produced or the work is intended to take place over a specific time period, no new programs would get support unless grant seekers show what they would eliminate if the programs succeeded?

The foundation’s money, then, would be not only “seed” capital to help something new get started, but “bridge” capital to keep the new work afloat long enough to test its validity and to cover the period when it was replacing old programs.

This approach also places the foundation in the role of informed risk-taker, which is a good place for philanthropy to be. Nonprofit organizations need to take intellectual risks to imagine how they might do their work better. But given their budgets, it is unreasonable to expect them to take financial risks. If a new program being tested meets expectations, and if it replaces something that wasn’t working as well, everyone benefits. If it doesn’t meet expectations, only the foundation loses. But given the context of foundations, money directed toward thoughtful exploratory efforts that don’t succeed shouldn’t be considered a loss.

A few examples show how this approach can work:

• An advocacy group seeks a three-year grant to help prepare needy children for school. The cost of the program far exceeds what needy parents can afford or is available from government. The foundation thinks the proposal is sound, but worries that the charity is unable to provide the services without getting larger and jeopardizing its stability. The foundation also wonders how the charity could continue the services once it spent the grant. Rather than say yes or no, the foundation sets up a meeting between the charity and the local public-school district. The three parties estimate the savings if excellent preschool programs result in fewer children needing special education, remedial reading, and other such aid. The projected savings are compared to the program’s projected costs, and because the figures are close, the foundation makes the grant. The charity works with the school district, which becomes more efficient to free up money for the new services. Eventually, the savings generated by those services make them self-sustaining.
• A nonprofit theater seeks a three-year grant to expose children to the dramatic arts and build the theater’s future audiences. While the theater says it can pay for the program after the grant is spent, no one asks where the theater will get the money, how the theater or children will benefit, and whether the benefit will offset the costs of the program, including increased demands on the theater’s staff members. Given that the program aims to enhance education, it makes sense for the theater to work with the schools, but should the schools contribute money to the program? To reach accord, the theater, foundation, and schools must agree on the program’s goals, benefits, and financing. The chances of shaping a shared vision are slim, but without it the program will remain a flimsy add-on, foundation money will be wasted, the theater’s energies will be sapped, and neither students nor schools will benefit. What better role for the foundation than helping the parties achieve consensus?
• A Boys & Girls Club approaches a foundation with a proposal to create an after-school tutoring program. The first questions should focus on what program the club might need to drop if the new one is effective. The organization has only so much operating income, and to plan a budget based on the dream of more gifts and grants is irresponsible. The foundation can use its leverage to test how deep the organization’s commitment is to the new program and to support a process that helps the club improve its services without getting bigger.

Foundations now make it too easy to bypass the hard questions in favor of easy grant making. They support new programs because they appear to be — and usually are — wonderful in their promises. But the programs’ ultimate value becomes apparent only in the full context of the charity’s other programs. Avoiding that perspective is the main reason so many programs fail and why the charities that create them get weaker as a result of their growth rather than stronger.

Can an organization grow — improve — without getting bigger? Even the question sounds heretical to an American ear. Charities must go through periods when they get bigger, but they must be aware of what their budgets, staff members, and donors can sustain.

If foundations are serious about wanting their grants to strengthen the nonprofit world, then they must help to create an environment that will lead to a deeper understanding of what it takes for a charity to get better — but not necessarily bigger.

Ronald Thorpe is on sabbatical from the Rhode Island Foundation, where he is a senior fellow.