Inside Philanthropy

A blog on philanthropy and nonprofit news and issues. A publication of Philanthropy Journal.

January 4, 2010

Recession should spur smarter grantmaking

By Todd Cohen

Despite the stress it has placed on the giving sector, the recession should be fueling greater innovation and collaboration in the charitable marketplace and making nonprofits stronger.

And just as the economic crisis has spurred nonprofits to rethink their strategies, grantmakers should be looking for ways to work smarter.

That’s the view of Kathleen P. Enright, president and CEO of Grantmakers for Effective Organizations.

In a year-end statement, Enright offers recommendations for grantmakers.

While they may be tempted to focus on charities with the greatest need, she says, a better strategy for grantmakers is to “focus on the strong rather than the ailing.”

In the recession, “even the strong are struggling,” she says, “so grantmakers would be well-advised to maintain or increase support to the highest-performing groups in their grantmaking portfolios.”

She also says grantmakers should engage their stakeholders by reaching out and listening closely to grantees “to get a clear picture of what nonproifts are experiencing and a better understanding of the help they need.”

Grantmakers also should build new alliances, Enright says.

Wanting their grantees to collaboration, she says, grantmakers also should work with partners.

“The Obama administration is encouraging public/private partnerships to address pressing social needs,” she says. “Grantmakers must embrace these opportunities and use the full range of their convening power to bring key players together to maintain progress on the issues they care about.”

Enright also calls for flexible and full-cost funding.

“Access to unrestricted funding can make or break nonprofits in this uncertain economy,” she says.

So grantmakers might increase the amount of generation operationg suport they provide, or ease restrictions on current grants.

And when making grants, she says, grantmakers should be sure to “consistently pay the full cost of services.”

Finally, grantmakers should “commit to the ‘new normal,’” Enright says.

The collapse of the economy, she says, simply underscored existing “cracks in the nonprofit system,” including nonprofits’ “scant unrestricted assets and no long-term reserve funds,” and grantmakers’ tendency to “work in isolation from those closest to the problems they are trying to solve.”

What the recession has done, she says, is to show increase the urgency of the giving sector’s response.

“Granmakers must provide more flexible dollars and cover overhead in project trants, engage more powerfully with grantees and fellow grantmkers, and ensure that the highest performing nonproifts are well-supported,” Enright says.

Those changes “should not be viewed as short-term fixes in response to the economic crisis,” she says, “but as part of the ‘new normal’ for how grantmakers support nonprofit success.”

By better understanding and addressing nonprofits’ operating needs and practicing the innovation and collaboration they preach, grantmakers can help the giving sector emerger smarter and stronger from the economic crisis.


  • At 11:34 AM, Anonymous Archana said…

    I wholeheartedly agree that foundations could play a big role in spurring innovation among grantees, particularly by funding overhead and becoming more involved with/knowledgeable about grantee operations. I just hope this financial crisis has inspired such action among grantmakers.


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