Phil Buchanan, president of The Center for Effective Philanthropy and co-author of In Search of Impact, the report I quoted from during our debate on restricted grants vs. operating support, left the following comment today:
The debate on restricted versus unrestricted grants often gets over-simplified. Sean has it right that the real question is, what is the donor really trying to achieve? Often, this leads to a realization that achieving the donor’s goals means helping the organizations actually doing the work to become stronger organizations, particularly when there is good alignment between the donor’s goals and the organization’s goals. (Paul Brest of Hewlett, which supports CEP, has written thoughtfully on this topic.) When that’s the case, the question becomes, who’s in the best position to figure our how to allocate organizational resources to achieve organizational goals? Typically, it’s not the donor.
Our research suggests that nonprofits need large, long-term, unrestricted grants to thrive — and to feel that donors are really having a positive impact on their organizations. I’d suggest we spend less time debating type of support and more discussing the question of why so many large foundations continue to make small, short-term grants – with high transaction costs all around. An example: the median grant size of the Ford Foundation is a mere $116,000, according to an article in the New York Times earlier this year. It is hard to imagine that making thousands of individual grants is the way for the second-largest foundation in the U.S. to maximize its impact. Perhaps part of the problem is that too few foundations have really clearly articulated what they are trying to achieve and their strategy for getting there. In the absence of that focus, small, short-term grants proliferate.