Giving Compass’ Take:
• Writing for The Chronicle of Philanthropy, Nonprofit Finance Fund CEO Antony Bugg-Levine discusses why flexible support, sustainable coalitions and more results-based giving strategies are better than activity-based funding.
• Those on the grantmaking side should take a look at their approach and make sure that there’s a way to measure the outcomes — and that costs are covered.
Even though leaders of those organizations want to make a long-term difference in their communities, that’s not what our system typically pays for. Instead, almost all social-service funding is allocated for activities rather than long-term results. Payment flows to the homeless shelter based on the number of beds occupied and to the youth program and visiting-nurse service based on the number of people they reach.
Many organizations do amazing work and provide essential services that improve the lives of the people they serve. But the focus on activity-based funding has sapped the ability of too many nonprofits to do what matters most.
But this is not the only way.
Innovative organizations, governments, and private donors are discovering they can fulfill their mission better by giving and dedicating funding based on program results, not on the number of people served.
Through our research and work with thousands of nonprofit clients and grantees across the United States, we’ve found these to be effective approaches:
Cover grantees’ full costs.
Nonprofits barely getting by on contracts and grants that merely cover the marginal cost of delivering programs can’t afford to evaluate what’s really working and innovate accordingly. They need grantmakers that will cover investments in data-tracking software, in staff members with the skills to measure effectiveness, and in longer-term relationships with their clients. And they need donors who will support them in generating budget surpluses to build operating reserves that can offset the risks of these efforts.
Provide flexible support.
In an outcomes-oriented system, grant makers gain when their financial support more consistently generates lasting results for the communities they care about. Donors can make that a little easier by providing general-support grants that save nonprofits from dedicating resources to reporting on specific projects and frees them to change their programs when they identify new ways to get better results.
Invest in nonprofit leadership.
Shifting to this kind of approach in a world where most donors are still largely organized around activities is a bold commitment that takes savvy leadership and courage. Grant makers can help their grantees build both by investing in training and nonprofit management development, and by giving their beneficiaries the opportunity to learn from and inspire like-minded leaders.
Forge and sustain diverse coalitions.
Complex social and environmental problems cannot be solved in isolation — focusing on outcomes requires breaking down barriers. Effective solutions arise when nonprofits, government agencies, local institutions such as hospitals, and political leaders organize around common goals. In many communities, foundations have unique access and credibility to sponsor community discussions that identify goals and bring together the players necessary to achieve them.
We must collectively make a commitment to being accountable for what happens to all people in all communities. That requires grantmakers, nonprofits, and government agencies to act in ways that ensure our society will do better for the poorest and most vulnerable people among us and that we organize missions and funding to guarantee their success.
If you are looking for more articles and resources for Impact Investing, take a look at these Giving Compass selections related to impact giving and Impact Investing.
Looking for a way to get involved?
If you are interested in Impact Investing, please see these relevant events, training, conferences or volunteering opportunities the Giving Compass team recommends.
Are you ready to give?
In addition to learning and connecting with others, taking action is a key step towards becoming an impact giver. If you are interested in giving with impact for Impact Investing take a look at these Giving Funds, Charitable Organizations or Projects.