The Energy Foundation: A Major Speed-Freak Grantmaker

In my recent post on speed-freak philanthropy, I cited two small foundations (Mulago and Philanthropic Ventures) for their rapid grantmaking. One of my points was that the slow grantmaking process of most foundations was due to self-imposed constraints rather than anything inherent. So I was thrilled to see the comment below left by Jason Ricci, the chief information officer of The Energy Foundation.

Before I hand things over to Jason, I want to point out the Energy Foundation does $110 million in annual grants, making it one of the largest 50 grantmakers in the US. The fact that they are able to make grants seven times faster than the average grantmaker is evidence that a much faster approach to philanthropy is available to large foundations.

In addition it should be noted that the Energy Foundation is in fact a public nonprofit that is a partnership of other major foundations. This indicates that the Energy Foundation’s process might be fast, but it is not reckless since large foundations conducting slow due diligence find the Energy Foundation to be an excellent grantee. But it should also be noted that as a public nonprofit dependent on receiving grants, the Energy Foundation is subject to external pressures to perform from which private foundations are immune. This fact highlights the idea that a slow grantmaking cycle is a choice made by many large foundations and that when pressured to perform, a large grantmaker is able to greatly increase the speed at which they operate.

Just in case you don’t read his full comment, don’t miss the reference he makes to Fluxx, the open source grant management system designed by The Energy Foundation to power their speed-freak philanthropy.

Here’s the comment left by The Energy Foundation’s Jason Ricci:

“At The Energy Foundation, we’ve spent the last two years tackling the speed problem. When I joined EF as Chief Information Officer in 2009, the average time it took to get a grant out the door was about 90 days. And, while that’s half the average that Sean quoted, it was still in my mind too slow. Fast forward to today, and our average grant takes 27 days – from initial request to final approval and checks out the door. Here’s some background and insight into how we made this happen.

1. We no longer bring individual grants to the board for approval. Our board agreed that we needed to make grants faster, and had confidence in our ability to choose grant recipients wisely based on our program team’s knowledge of the sector. Our board no longer approves each grant. Instead, our board meetings are focused on allocating funds for future grantmaking strategies. I’d like to see more boards move in this direction.

2. We analyzed our grantmaking processes with a fine tooth comb. We make an average of 800 grants totaling over $110mm each year. We have a lot of requests moving through our organization, and with a staff of 80 we were overwhelmed. By spending a few months understanding our processes, we were able to identify the bottlenecks and where things were falling through the cracks.

3. Armed with an assessment of our processes and workflows, we spent the next few months standardizing those processes across programs. This took a lot of negotiating, but in the end we wound up with a solid and documented way of doing business at the foundation.

4. We built a grants management system that allowed us to manage and track all of our requests and grants. The workflows we mapped out are now built directly into our grants management system – everything flows smoothly from one approver to the next and nothing gets lost. Ever.

5. The fact that we had to build our own grants management system was not ideal, but it was clear that none of the existing vendors had a solution that solved our pain points. So, we decided early on to open source the code to the rest of the grantmaking community so others could benefit from the work we put into our system. There are now several other foundations who have adopted Fluxx to streamline their own business processes. You can check out the project at http://projectfluxx.org if you’re interested.

One other note – I’ve been on both sides of the game, and I can tell you from the nonprofit’s perspective the current state of foundation grantmaking is extremely frustrating. I’ve also been in the startup/VC world for a long time, and it’s a whole different world over there. I’ve been involved with startups who have raised $5mm in 2 weeks, all based on a crazy idea and a prototype. VC’s are willing to take enormous risks in search of enormous returns. They understand that 9 of their investments will fail, but that 1 will hit it big and make those other 9 failures worthwhile. The startup community doesn’t hide their failures in a closet – in fact, they celebrate them. Why can’t we do the same?”