February 12, 1998 | Read Time: 6 minutes
Too few grant makers recognize the potential they have to improve charity operations. From the proposal stage to the completion of a grant, grant makers can do many things to help non-profit groups.
Through their guidelines for grant proposals, grant makers can educate charities — even those that eventually do not receive support — about the qualities that make for successful organizations. Non-profit groups pay fuller attention to reading proposal guidelines than they do to anything else, and guidelines that are well-structured can help non-profit groups establish sound organizational practices.
But few grant makers use guidelines to educate grant seekers. Too often, guidelines become mere check-off lists.
For example, grant makers can be much clearer about what information they need in the grant proposal. Most grant-making decisions are based on six criteria: (1) the mission, history, and capability of the applicant; (2) the current proposal and its consistency with the organization’s mission; (3) the unmet need that will be served; (4) the program’s cost and what share is being borne by other grant makers; (5) plans to sustain the effort in the future; and (6) the desired results and how they will be measured.
To a large degree, those are also the criteria with which every non-profit group should be concerned, not only in their proposals but also in their overall operations. If grant makers clearly spelled out those six points and insisted that they should lie at the heart of any grant proposal, several salutary things would happen. Non-profit groups would write better proposals, since they would be free from feeling the need to toss in every point about their program that they could possibly dredge up. And they would gradually internalize the key points and learn to become more focused and strategic in their thinking.
What is true of the proposal is also true of the required attachments — projected budget, list of board members, and the like. How many grant makers use the request for such items to explain why they are important?
Take the requested list of board members as an example. The reason a grant maker should want such a list is to see if the non-profit group is responsible in how it handles issues of governance and growth. Does the non- profit group build a board to be representative of its community and its constituency, or does it just build a board from among a small circle of friends?
Regrettably, many grant makers ask for a list of board members without explaining why they are interested in seeing it. In so doing, they actually help defeat best practices.
Most non-profit organizations will take such an unexplained request as a sign that grant makers merely want to see if people they know are on the non-profit organization’s board. The message, therefore, becomes “To get money from our foundation, you need to pick a board of connected people” — not that the board should represent one’s constituency or be chosen for reasons of effective governance.
Grant makers also send charities the wrong message by shying away from support of administrative expenses. Foundations need to understand that non-profit groups are caught in a difficult vise between the expectations of individual donors and those of grant makers. The measurements of success used by one category of supporter contradict those used by the other.
Individual donors today focus on the use of revenue — what percentage of expenditures goes to programs and how much goes to administration and fund raising. The National Charities Information Bureau, for example, suggests that at least 67 per cent of a non-profit organization’s budget go to programs. Grant makers, on the other hand, are asking for measurable results.
To be effective in its delivery of services, a non-profit organization generally has to spend money to figure out ways to use its resources effectively and to train, develop, and retain its staff. The organization that spends little on itself and much on its programs may please its individual donors, but that organization may actually be less effective in delivering meaningful results.
Grant makers can help non-profit organizations caught in that tension in at least two ways. First, they can follow the lead of a small group of foundations that provide non-profit groups with help in their administrative or fund-raising efforts. The Moore Foundation in Indianapolis, for example, pays professional grant-proposal writers to help specific non-profit groups craft their applications. That keeps the non-profit organizations’ staff requirements lean, provides help that is often better than what the non-profit groups can develop in-house, and enables the charities to report that a higher percentage of their budgets goes to programs and services.
Second, and more important, grant makers need to find ways to provide greater operating support for non-profit groups. Since virtually every grant maker and every donor would prefer to give to specific programs, it is naive for grant makers to think that other contributors will embrace giving to general operations when they themselves will not.
One way to help finance general operations while still enjoying the advantages of supporting specific programs is for grant makers to include a generous contribution to general operations or overhead in every project grant. If a non-profit organization generally spends 70 per cent on services and 30 per cent on administration and fund raising, a project grant might follow the same percentages. For example, a grant of $7,000 for a project — including the project’s specific overhead costs such as insurance, accounting, and oversight — would automatically mean an additional grant of $3,000 for general operations and development above and beyond the project’s built-in overhead costs.
Finally, grant makers are in the best position to help charities sustain their programs. Grant makers often are troubled when programs that are started with their grants are disbanded soon after those grants end. But institutional donors need to realize that their own behavior helped produce that result.
Very few non-profit groups are truly experienced in building long-term support for programs. They struggle to understand how to generate earned income or build endowments or find entrepreneurial ways to support programs for the long term. Given that the staffs of most non-profit groups are made up largely of program of ficers and key administrators — not people trained in building organizations — that outcome should not be surprising.
To prevent the sudden demise of programs, grant makers might routinely provide “exit grants.” In a three-year project grant, the grant maker might add 10 or 15 per cent for the specific purpose of enabling the non-profit group to develop ways to build long-term support. That would enable non-profit groups to continue to generate publicity for their programs and give them access to people who are trained in raising funds and building organizational capabilities.
Most non-profit groups do not have such talent on their staffs — or even on their boards. And since donors generally are critical when money is spent on administration and fund raising, few non-profit groups have their own funds to spend on business-development efforts. Exit grants would help insure that long-term issues are being considered.
Strong projects and programs are usually the product of strong organizations. If grant makers neglect the overall health of the non-profit groups they support, those grantees will fail to live up to their promise and their responsibility.
Private and corporate grant makers, who account for about 15 per cent of the nation’s annual giving to charities, can be important influences on non-profit behavior. But they must exercise that influence in more effective ways than they currently do — even if it means changing the way they operate. Grant makers have an obligation to insure that the charitable organizations they support are able to succeed for the long term.
Jerry Musich is executive director of the Indiana Donors Alliance.
