Special Section: Stronger Nonprofits

Most of us can cite painful examples of exciting and potentially important programs folding because of lack of management depth or meager funding base or any one of many other key elements required to deliver a successful program. So it's understood that even the most innovative, effective, value-added, replicable and client-centered nonprofit programs we grantmakers might wish to fund require an infrastructure capable of delivering those programs in the field.

How do you develop such an infrastructure? It takes human and financial resources, as well as planning and training, just as developing a program does. Although intellectually this makes sense, it is still far too rarely seen in actual practice. We as funders still too often consider assistance with this form of capacity building as an inappropriate or wasteful allocation of our scarce resources. We use the dreaded "o" word to symbolize this waste—overhead. In a more kind way, it may be termed operating support. But in either case, since it does not represent the direct service we are so passionate about delivering, we shy away from a grant of this nature.

Strategies for capacity building abound. You just have to begin talking with prospective grantees (the customers) to begin to gain some understanding of the scope of what is possible. When asked how foundations can better support their work, grantees most often cite technical assistance. Yet there are too few nonprofit technical assistance centers and very few foundations staffed to provide it.

Let me illustrate with some examples. The Tides Foundation, David and Lucile Packard Foundation and the New York Community Trust have published guidelines dealing explicitly with technical assistance to grantees. Other philanthropies are now following a more venture capital-style model, explicitly making longer-term grants that carry with them a whole arsenal of capacity-building opportunities in the shape of a grantor-grantee partnership. New Profit is an example of this.

As we grantmakers commence the important work of assisting our grantees with their infrastructure improvements and capacity building, what becomes of our own?

The foundation world is every bit as balkanized as our grantees. We funders don't collaborate with each other as much as we should. We can be secretive. We don't invest sufficiently in our own staff and knowledge base because it takes money away from our grantees. In fact, some boast of giving away great sums of money with little or no professional support. After all, they argue, isn't staff just another manifestation of the dreaded "o" word?

To cite an overused cliché, "A man who represents himself has a fool for a lawyer." Yet in the matter of making critical decisions about the dissemination of scarce community resources, we often believe we need not invest in the outside expertise that staff and consultants might provide. After all, they are not privy to the culture of our philanthropy. And shouldn't our giving be a private matter?

Some boards are concerned that too much input might make decisions more time consuming and difficult. They make grant investments in their community on their own. But these same organizations don't hesitate to spend money on outside expertise when making investment decisions with their financial portfolios. Would you invest your own financial portfolio with a group of well-meaning neighbors who view the work as more of a part-time avocation, rather than a professional organization of portfolio managers who study the field full time?

What Should We Do Differently?
We funders might consider the view that investing in our own organizational capacity is a sound use of our assets. Just as in the for-profit world, where substantial sums are invested in research and development and understanding the marketplace, our communities and their needs deserve no less. We might be as much concerned with the effect of our grants and their significance in our community as we are with our program budget. Independent Sector, as part of its current Measurements Program, asked a cross-section of organizations if they assessed the impact of their programs on their clients or customers. Fewer than half did.

What to do? I suggest we: 

• Provide more professional development opportunities for our staff members, so that they can be knowledgeable both in grantmaking alternatives and in the technical aspects of the fields we fund. If there is no staff, perhaps there should be.     
• Add people with knowledge and experience in our field of endeavor to our boards of directors—beyond our immediate network of friends and acquaintances. Alternatively, we might think about creating advisory committees of successful grantseekers or others representing our "customers."         
• Hold periodic meetings of preeminent thinkers in our field to help us move our programs forward.     
• Building in a proactive, opportunity-seeking function. This goes hand-in-hand with being more professional and responsive to grant requests that come to us. Foundations have the opportunity to be the catalysts for significant change because they can rise above the geographic, programmatic and philosophical boundaries of individual grantees.

On that last point, consider one example. In any given metropolitan area, there are many agencies performing the same services. No agency wants to give up its identity or historical base of support. Yet all are chronically underfunded and have the minimum number of support staff. Only an unaffiliated third party such as a foundation might have a chance to bring all the players to the table to get them to think about some form of strategic restructuring or collaboration. In the for-profit world, simple market economics would make this happen, but there is no such mechanism for nonprofits. Instead, agencies simply limp along or go out of business, leaving chronically underserved populations at risk.

Consider What Success Looks Like
Let's remember that foundations hold a sacred trust, bestowed on them by their community. Just as we expect to hold our grantees accountable for the expenditure of scarce grant dollars, our community is justified in holding foundations accountable for grantmaking decisions. The fact that fewer than half of our peers find it necessary, or even of interest, to ask how well they are exercising that trust should be of concern to us all. If we do not hold ourselves accountable, others likely will, and with very unfortunate results.

Foundation money spent on assessing the impact of grants is money well spent for the benefit of our communities. Not one of us would give money to a stock broker and never ask for a performance report. In fact, we probably would establish some clear and mutually acceptable performance criteria at the outset. We also probably would agree on a benchmark against which to measure performance over time. Yet we invest millions of dollars in our communities without the slightest clue about what a positive return might look like.

I am not suggesting that we tell our grantees how they must evaluate their own work. Quite the contrary. We should be encouraging them to undertake their own assessments in whatever form is most appropriate. Is such a request a burden on grantees? Not at all.

I find it most helpful to ask grantees to consider for themselves what success looks like, whatever the nature of their work. If answering the question requires further research or outside expertise, it should be encouraged and supported. Perhaps part of the reason we continue to face such enormous societal challenges is that we are too quick to provide support and too slow to ask what the impact will be.