What if foundations mostly gave unrestricted funding instead of dictating how grantees could spend their grants? What if foundations kept supporting grantees who performed instead of ending funding because the “grant cycle” had ended? What if foundations ditched the whole system of soliciting grant proposals and focused on proactively searching for great grantees? What if foundations expected grant reports to mostly consist of information the nonprofit was collecting anyway rather than specialized requests that sap the grantees resources?
It seems like a pipe dream. A wish list of a harried executive director.
But this sort of foundation exists. And it is thriving.
Located on the second story of a nondescript building in the Russian Hill neighborhood of San Francisco is the Mulago Foundation. Run by a staff of three, the Mulago Foundation may very well be a case study of an emergent model of how to run a foundation.
From the Mulago website:
“Unrestricted funding is the most useful for the organization and the most leveraged for the donor. If we don’t think they know how to use the money better than we do, we shouldn’t give them any.”
They provide continued funding for increasing returns. “We don’t abandon a good thing. If we continue to see real impact and clear progress toward scale, we stay in the game.”
“We don’t take proposals. Proposals are a hassle for all concerned and rarely give us the information we need. We use an extensive network to feed us organizations that meet our very specific criteria. Us finding them rather than them asking us makes for a healthier relationship that is more productive and more fun.”
“The last thing we want is to waste the time and energy of those who are trying to save the world… We gather the specific information that we need. The due diligence documents we require are things that organizations should already have on hand, including a business or strategic plan, financials, organization chart, top-five donor list, and board attendance.”
This isn’t suppose to be the way foundations work.
We tend to assume that outstanding, cutting edge foundations will be big. It is true that very successful nonprofit and for-profit organizations do tend to be big. But actually this is only true of very successful organizations that actual provide goods and service. Hyper successful organizations that invest in other organizations are far more frequently quite small.
Consider Warren Buffet.
“[Buffett] makes swift investment decisions, steers clear of meetings and advisers, eschews set procedures and doesn’t require frequent reports from managers… He seldom holds meetings. "There isn’t much going on here," he says of his office on a typical day… [His company] headquarters is staffed by just 17 employees… Berkshire headquarters, occupies a single floor of a nondescript office building…
Mr. Buffett believes that managers of [his] companies ought to be left to run their businesses without interference from him, and without having to hew to any unifying corporate strategies or goals. "We delegate to the point of abdication," Mr. Buffett says…Mr. Buffett tells the chiefs of his business units not to produce any special reports for him…He keeps no calculator on his desk, preferring to do most calculations in his head. "I deplore false precision in math," he says, explaining that he does not need exact numbers for most investment decisions… Mr. Buffett tends to stick to investments for the long haul, even when the going gets bumpy… "If you don’t make mistakes, you can’t make decisions," Mr. Buffett says."
How is this possible? It is because Mr. Buffett understands that his job is to invest in other companies, not try to run them. He doesn’t have to figure out what should be done, he just needs to figure out who is good at figuring out what should be done and investing in them.
But today, the definition of effective philanthropy has become “strategic philanthropy” where the foundation is expected to devise ways to solve problems and select grant recipients who can best carry out the approach the foundation thinks will work best.
There is another way. The Mulago Foundation is practicing a form of philanthropy that is desperately needed. It is a fundamental departure from the conventional wisdom of what good philanthropy is suppose to be about. But I think it is very likely that an approach that prioritizes picking great nonprofit organizations and backing them is likely to be a lot more effective.
And gosh darn it, it looks like a lot more fun.
Take this a step further. What if philanthropist were using a map to pick what part of the world they want to help, and what city/zip code they wanted to focus on.
The could do a search of Volunteer Match or some other system, by zip code, and find organizations fitting what they want to support, then look at the organization’s web site to decide how, and how much, they want to help that organization achieve the purpose that it shows on the site.
This process could be enhanced if there were a ‘pie chart’ of issues that a donor could click into. If you want to help kids, you’d click into that slice of the pie chart, and then find information about the challenges kids face, and information showing how some people are trying to solve those challenges. Then, the donor could determine what non profits are working on those issues in the zip code they want to support, and use this for decision making.
We created the Tutor/Mentor Program Locator interactive map at http://www.tutormentorprogramlocator.net,to support this idea. Donors, volunteers, youth and parents can use it to determine what tutor/mentor programs are in what parts of Chicago. Click on the program icon, and the donor can go to the organization’s web site.
This process happens in the business world all the time. Companies place stores in many locations, then use advertising to draw shoppers to those stores.
If we can find ways to create daily advertising that draws attention to tutor/mentor programs each day, donors might begin to use the maps and program locator and organization web sites to make philanthropy and volunteer involvement decisions, and we’d reach the vision you’ve described.
We’re trying to make this come true. We need a lot more help to make it a reality.
Working with donors in China, where issues of transparency run deep, I am continually working to educate donors on this issue.
It is an issue of history for many, while of belief (i.e. restricted grants contain the risk ) for others, but I would agree with the original post that donors who do not trust the organization to best allocate their funding should not be donating the money to that organization in the first place.
That being said, from the NGO perspective restricted funding can have a valuable intangible. Providing focus. With many NGOs, particlarly small ones, often finding an urge to scope sihft a restricted grant can provide an anchor that otherwise would not be there for the organization.
An anchor that would (hopefully) drive efficiencies in operations, program management, hiring, and financial controls so that when the opportunity to grow does present itself, it can be done in a manner that is a step forward.
Great case study. At theBigGive.org.uk we focus on the “proactively searching for great grantees”. Recent UK studies (from NPC and DSC) highlight the huge waste in the current application process – for both grantees and foundations.
It seems much smarter to let foundation staff use their skills and networks to identify great charities. Sadly many are buried under application forms (one-third estimated to be ineligible – DSC), which is rarely described as “fun”.
I visited the Mulago Foundation’s web site and see how they are looking to fund organizations who can demonstrate “impact” using a set of guidelines they have created.
The BigGive seems to take a different approach. They have created a searchable database, with a map interface, that enables volunteers and donors to search for what cause they want to support, and what region of the world. This would lead to just a few choices if the search got down to the zip code level.
Once at that level, what does the donor do if the NGO does not describe their impact the way the donor wants to see it, yet is doing work in an area where that type of work is needed. If the donor invests time, talent and dollars with the NPO, it can grow to be good, then great, and can stay that way for many years. With enough help, it can even find ways to show impact in different ways.
I think both web sites are great resources and I’ve added both to the http://www.tutormentorconnection.org library. Thus, if others are looking for ideas they might borrow, they have these and many others that we’ve aggregated over many years.
The key then is increasing the number of NGOs, philanthropists, business and political leaders who are looking at these libraries and using what they see to support their own actions and innovations.
Over time that could lead to a convergence of practices that are used by more people and have greater benefit, and perhaps are even more cost effective, to the NGO and the philanthropist.
It’s very attractive to think of a world without grant applications in which organizations are not expected to fit into a box devised by a foundation far from the frontlines. But the ability to fund this way depends on an effective way to assess impacts, both tangible and intangible. Buffet has the advantage of being able to compare ROI in dollars when doing his estimates for investment decisions. Foundations must develop tools that allow them to compare the effectiveness of nonprofits.
Geri, I’m all for finding ways to assess impact. But may I ask why you feel that this approach requires the ability to assess impact to a greater degree than if you use a grant application process?
Not to a greater degree but with greater clarity. Without grant applications, foundations (and investors in social enterprises) have no way to rank nonprofits. While we may be willing to invest in an organization that has limited effect because it is the only option in a given community, at least we want to make that an informed decision: Yes, other organizations have greater impact but this one is worth our money anyway. I’m not against trying something new; I just think that funders and investors should have standards in mind when deciding if they got what they wanted from their investment and if they should continue giving money.
Yes, no doubt, but I think Mulago’s point is that they proactively seek that information rather than wait for people to come to them.
Mulago does proactively seek information but, as their website says, they have “… developed an approach to measuring impact that is simple enough to do, but rigorous enough to mean something,” and ” … solutions that are too expensive can’t scale. We calculate the cost per key impact in all organizations we fund. With a thorough knowledge and consideration of context, these calculations provide a useful guide for investment choices.”
That’s my point exactly. If foundations seek out nonprofits and fund without grant applications, they must have a clear method for measuring impacts so they make informed decisions about where they put their money. Evaluating impacts is key to opening up all sorts of new ways of attacking social problems, from private/public partnerships to social enterprises. Mulago has a method to evaluate impacts. Would that they would share it with the rest of us!
Geri, while I’m a big advocate of foundations evaluating nonprofits and trying to measure impact. I’m still not sure why you think a proactive foundation has a greater need to do so then a reactive foundation. But that’s OK. I think we generally agree.
Regarding Mulago’s approach to impact, see this post.
In business, each branch of a WalMart or McDonalds does not need to provide research showing their impact because the corporate office has created advertising and marketing that educates the consumer.
Asking each non profit who provides a similar service in different locations to provide impact studies adds a layer of cost to each which many don’t have money to pay for.
What if intermediaries were developing theory of change and impact studies that applied to organizations doing like-kinded work? Would donors use the information provided by the intermediaries to give confidence to their funding?