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Grantmaking Should Be Grounded In Real Costs

Stanford Social Innovation Review Oct 11, 2018
This article is deemed a must-read by one or more of our expert collaborators.
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Grantmaking
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Giving Compass’ Take:

• Stanford Social Innovation Review makes the argument that building better relationships between funders and grantees is a vital part of “pay-what-it-takes” philanthropy.

• What are we doing to build such trust? It all starts with transparency (making sure everyone knows where the money is going), and it helps to bust out of the overhead myth.

• Here’s more about the challenges within the current nonprofit model and how to address them.


This article, “Pay-What-It-Takes Philanthropy,” is a heartening sign of the growing recognition that supporting nonprofit organizations with limited, restricted funding does not work. So what can we all do to make sure this recognition leads to systemic change that sets up nonprofit organizations for success and honors funders with the results their generosity deserves?

The answer is simple in theory. But how do we practically make that work in the absence of a mutual commitment to build trust between funders and grantees?

This understanding recognizes that:

  • Full costs differ over time.
  • Full costs differ by context.
  • Full costs are about more than covering indirect costs or overhead.

Although this particular process may not work for everyone, it may be worthwhile to consider testing it among funders and grantees nationally, adding to the research agenda called for in the article.

Most importantly, all funders and nonprofit leaders can help foster more honest dialogue in these ways:

Funders: Reorient funding discussions and requests around the results you want grantees to achieve, rather than how you want them to spend money. Signal that you understand the constraints your grantees face. And provide general operating support.

Nonprofits: You must articulate clearly the impact you generate with the resources you raise, which takes time and effort you likely do not have. So start by asking the hard questions internally — that will at least make you better informed about your own full costs. Then identify which of your funders would be willing to discuss the implications of these insights.

Read the full article about grantmaking grounded in real costs by Antony Bugg-Levine and Fred Ali at Stanford Social Innovation Review.

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Interested in learning more about Impact Philanthropy? Other readers at Giving Compass found the following articles helpful for impact giving related to Impact Philanthropy.

  • This article is deemed a must-read by one or more of our expert collaborators.
    Click here for more.
    Amplifying Your Philanthropy Through Impact Investing

    When TPI helped create and launch Invest for Better last year, one of our goals was to curate and share the best, most accessible resources about impact investing that have been created by our colleagues in the field. We know that great resources exist, and we want to help people get their hands on them so that more capital can be activated for good. But we’ve also come to find that there are gaps where key resources are missing, and we’re stepping in to fill them. Many donors we come across – either through Invest for Better or our consulting work at TPI – are experienced philanthropists, but new to using their investments as a force for social change. Does this sound familiar? Maybe you’ve deployed smart, focused philanthropic giving to support innovation and experimentation in your focus areas, to fill a gap in services that should be covered by public money, or to bring together stakeholders to learn and collaborate – but you feel frustrated by the limited ability of philanthropy to scale proven solutions. Or perhaps you’re discouraged by the absence of sustainable funding for an essential program. Donors in this boat may be intrigued by the idea of turning to the capital markets and their own investment capital to address these challenges, but don’t quite know how. It is for these people that we created the new workbook, Amplifying your Philanthropy through Impact Investing, with generous support from Fidelity Charitable. Aimed at helping the philanthropist who is a newbie impact investor develop plans for both learning and action, the workbook guides users through 6 questions to help identify possible ways to use investing to increase their impact on the people, places, and issues they care about: What are your philanthropic goals? What source(s) of capital do you want to use for impact investing? How much capital do you want to start with? What are your financial goals for each capital source? What impact investment solutions or tools might help you achieve your philanthropic and financial goals? How will you decide which impact investments to pursue? What criteria and due diligence processes will you use? How will you measure the success of your investments? The workbook includes a concise primer on impact investing along with numerous examples of impact investments. It is intended to serve as a starting point for developing an impact investing strategy to augment one’s philanthropy, and could be used in consultation with financial, philanthropic, and other advisors. (Heads up, advisors: Stay tuned for an annotated version of the workbook that you can use with your clients.) Philanthropy plays vital roles in our civil society that cannot or should not be replaced by the capital markets. We need all types of capital – philanthropic, impact-first, frontier, and market rate – to tackle critical issues facing our planet, and an ecosystem of smart investors who know how to use all the tools in their toolbox. We hope this new workbook contributes to that vision. If you're an individual, family, or foundation intrigued by the opportunities presented through impact investing, or if you have clients who want to learn more, also check out TPI’s primer, Navigating the Territory: A Guide to Impact Investing for Donors. If you’d like to discuss how you might use impact investing to amplify your philanthropic efforts, reach out to us at info@tpi.org. --- Invest for Better is a project of The Philanthropic Initiative (TPI). Visit www.investforbetter.org to learn more, and contact Ellen Remmer to get involved.


Looking for a way to get involved?

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