By Mary Mountcastle
I wish I had $10 for every conversation I’ve had about whether general operating support or project support is the more effective grantmaking tool.
The New York Times, in a Jan. 6 article, is just the latest to weigh in on the debate.
With the danger of adding more noise to this already overheated debate, here are my two cents on this issue.
* Funding the tires.
Operating support is the lifeblood of any successful organization.
In the business world, investors consider adequate working capital, in conjunction with a sound business plan, to be an essential requirement.
They don’t care about dictating the specific business activities, as long as reasonable outcomes are achieved. In fact, investors want businesses to be nimble and opportunistic because that likely will achieve the largest return.
In other words, if you buy stock in Toyota, you’d feel pretty silly saying your money can’t be used for the tires.
* Wrong default position.
Too often, funders see operating or unrestricted support as the exception.
Instead, operating support should be the default position for any grant, and restricted grants should be the exception, with strategic reasons for why those restrictions make sense.
For instance, a funder may want to focus on a particular program in a large organization with a variety of programs, or target a particular geography through an organization that has a widespread service area.
In these cases, adequate administrative resources should be included.
* Focus on progress toward results.
Instead of focusing on the input (the type of grant), we should focus our discussion with grantees on the outcomes they want to achieve, how they know whether they are making progress toward those outcomes and how they will deal with the inevitable bumps in the road.
This doesn’t need to be fancy strategic planning, but a common sense approach to achieving their mission.
This conversation helps both funder and grantee see how well they understand what the grantee is trying to achieve, how that mission fits with the funder’s interests, and what obstacles and opportunities might arise during the grant period.
A proposed plan of action and related budget are important to see how the grantee hopes to accomplish its goals, but should not be a straightjacket.
When there is alignment between the grantee’s and funder’s missions, along with a reasonable plan of action, funders need to trust that grantees will make the best decisions about what actions will advance their goals.
Then they should give nonprofits the flexibility to spend their resources in the most effective manner.
Mary Mountcastle is a long-time trustee of several family foundations and sometime student of philanthropy.