Capacity Building Begins At Home

Thursday, June 4, 2009

By Charles H. Hamilton
Senior Fellow, Philanthropy New York

Thus began an article in 2000 by Robert Mayer, then Chair of the Nathan Cummings Foundation. At any time—and especially during an economic downturn—the question we should ask is “what is the best use of foundation resources?”The whole independent sector would be better served if foundations invested resources more wisely in their own capacity to do a more effective job.

Spending time and money on capacity building and technical assistance for grantees should be an important part of what foundations do. In fact, many nonprofits are handling the economic downturn precisely because they and their funders previously invested in infrastructure. Too bad there wasn’t more of that over the last 10 years.

It is strange to me, though, that with endowments greatly eroded and grantmaking budgets down, foundations around the country seem compelled to offer more and more technical assistance and non-monetary help, as a big response to the recession. A cynic might hypothesize that foundation staff, having less money to give away, are simply finding other ways to spend their time and interfere with grantees. Many nonprofits may even feel that foundation capacity and effectiveness tend to be flabby already, but focusing on internal effectiveness and efficiency could be the most valuable capacity building foundations can do. Clara Miller, President of the Nonprofit Finance Fund, put it nicely: “And while most of the sector’s management improvement and capacity-building work focuses on fixing the management practices of nonprofits themselves, much greater untapped leverage resides in improvement of funding practices…”(emphasis added).

The first step is to identify what foundations should do to become more effective. As Tony Proscio pointed out in In Other Words: A Plea for Plain Speaking in Foundations (which should be required reading): “Often the writer who uses ‘capacity’ genuinely doesn’t know what an organization’s problem really is.” That insight is especially true when we are talking about our own practice. Thus, the first two steps could be:

  1. Survey grantees about one’s own performance, and then take the feedback seriously.
  2. Review some of the fine literature about foundation effectiveness. I am thinking, for instance, about the findings in Drowning in Paperwork, Distracted from Purpose, a report from Project Streamline; and many of the publications of Grantmakers for Effective Organizations.

Great advances in foundation practice can be made. Each of the following suggestions would reduce foundation costs over time and reduce the burden of time and money for grantees and prospective grantees. Each one needs further development, but perhaps this short list will get people thinking:

  1. Simplify application forms and report forms: thus making them less expensive to prepare, and more appropriate to grant size.
  2. Communicate more clearly about mission, programs, and guidelines: thus eliminating unnecessary requests.
  3. Respond much more quickly and candidly to inquiries and requests: thus eliminating uncertainty and encouraging a better use of nonprofit staff time.
  4. Provide serious professional development for staff (especially financial expertise): thus improving due diligence and oversight.
  5. Encourage all program staff to join a board (not of a grantee): thus also improving staff understanding of what nonprofits are really like.
  6. Invest in technology: thus reducing duplication.
  7. Clarify impact measures and benchmarking used: thus communicating clear outcome expectations and reporting requirements.
  8. Review foundation staffing requirements and expenses: thus having the appropriate, streamlined capacity (the “right people on the bus”) and having more funds to grant.
  9. Work much more closely with other foundations—sharing, for instance, a) common applications, b) common reports and outcome measures, and c) coordination of TA offerings: thus largely eliminating vast amounts of silly duplication and sending more unified messages to the nonprofit community.

Common sense, the experience of grantees, and studies by the Urban Institute and Grantmakers for Effective Organizations find that so much can be done. These and other changes would improve foundation efficiency, reduce the cost to nonprofits of working with foundations, and thereby increase the effectiveness of both.

This is not a plea to cut back on capacity building and technical assistance for grantees, but simply a reminder that we tend to ignore what can be done to make our own operations better, more impactful, etc. The recession makes it even more important that foundations look at themselves and make internal changes. That would be a great gift to our grantees.

In recent months, many nonprofits have written revealing and helpful letters to supporters about what they have done in response to the recession by reducing costs and improving efficiencies. Some foundations have written about what they are doing for their grantees. What about writing to grantees about what a foundation has done to increase its efficiency, reduce its costs, and improve its funding practices? While nonprofits may care primarily about getting a grant and not a whit about the internal workings of foundation funders, we should care about, and be open about, what we are doing “at home.”

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