Transformational Grantmaking is Most Needed in a Crisis

This article was originally published in the PEAK Grantmaking Journal. PEAK Grantmaking is a member-led national association of more than 5,000 professionals who specialize in grants management for funding organizations. PEAK members come together to form a vibrant community of practice that advances shared leadership and learning across the sector – helping funders of every size and type maximize their mission-driven work through living their values. Learn more at peakgrantmaking.org and follow @PEAKgrantmaking on Twitter and LinkedIn.

The COVID and social justice crises are requiring us to think of what we have been doing to effectively and nimbly support change. It is an interesting time, a scary time, and most importantly, a time in which we, as a sector, should be leaning in and taking incredible risks to create and support justice and equity.

The sector has generally subscribed to certain grantmaking expectations, rituals, and routines for years, embracing them as things that have always been done and should continue. We have thus tended to uniformly engage in grantmaking, often questioning the edges of our practices, but rarely the core. 2020 presents a key moment to fundamentally reconsider how we engage in grantmaking. Indeed, risk protocols should be challenged, new practices should be welcomed, and innovation should be explored in order to cause seismic shifts of power towards marginalized communities that have been historically left out of conversations.

Risk protocols should be challenged, new practices should be welcomed, and innovation should be explored in order to cause seismic shifts of power towards marginalized communities.

Here, I highlight three areas of focus within grantmaking for foundations interested in creating and supporting this kind of transformation.

First, ensure that the grantmaking process is accessible.

The grantmaking process is critical because it is how a foundation’s values are meaningfully incorporated into its grantmaking. A key consideration to creating an accessible process is understanding how a foundation has used or leveraged technology within that process. For example, can the grant application and materials be completed through a centralized portal that stores information about the grant that both the foundation and grantee can access? Can grantees sign award letters electronically instead of having to mail back a signed original? And is there an electronic payment process that gets funds to grantees quickly and does not involve grantees having to cash paper checks?

Another accessibility consideration is developing a shared, objective understanding of risk. This understanding can then be used to create grant risk profiles. These profiles can inform whether all grant agreements require signature from both the grantee and the foundation or if the grant can be made after the foundation decides to award the grant, which can make the process more efficient. This shared understanding of risk will also allow a foundation to determine whether it has the right decision makers within the process at the right time. If, for example, a foundation has its board approving every grant regardless of the amount or proposed activities, this type of decision-making may be creating inefficiencies within the grantmaking process, ultimately impacting how quickly funds are awarded. Creating a more accessible process will thus help create efficiency in how grants are awarded.

Second, start providing more flexible funding and support.

General support is frequently discussed as a sector best practice, but many foundations still have not generally adopted a more flexible funding approach. Given the tremendous needs that have surfaced within our current environment, foundations need to shift to more flexible funding awards to allow grantees to creatively approach risk and have the confidence to perform in the face of crisis. Indeed, grantees need funding that allows them to build their capacity at any time. When project support grants that do not focus on supporting the general needs of an organization are used as primary funding tools, they can interrupt an organization’s ability to strengthen its infrastructure and thus ultimately reduce the viability of the same projects that are the focus of the restricted funding.

Flexible funding encourages an organization to be brave – to show up as its most authentic self – to effectively problem-solve alongside the communities it serves.

To this end, foundations should transition their funding to more unrestricted, flexible funding – e.g., institutional support, general support, capacity building – and allow grantees to use this funding to build operating reserves and endowments. The sector should not expect innovation, experimentation, or accountability to lofty outcomes without this type of flexible funding. Only when organizations believe they have a funding safety net can we have organizations that perform as though they have a funding safety net. By not providing this kind of flexible funding, foundations support the creation of organizations that are too afraid to take risks, even calculated ones, because they do not know where they will receive funding to support their basic operational and organizational needs. In essence, providing solely restricted funding teaches organizations to be less nimble, less flexible, and take a one-dimensional approach to risk – avoiding it. On the other hand, flexible funding encourages an organization to be brave – to show up as its most authentic self – to effectively problem-solve alongside the communities it serves.

Third, expand the types of grantees that are supported.

If a foundation provides funding solely to U.S. public charities because it believes these organizations play a unique role in its work, given their status, then limiting funding only to these organizations makes sense. If no direct, strategic connection between an organization’s tax status and a foundation’s grant making exists, however, then the foundation should explore expanding the types of grantees it supports. Too often, foundations are guided by tax considerations – avoiding enhanced due diligence procedures, for example – to determine how they will engage in grantmaking and who their grantees should be. In this moment, that self-imposed limitation will limit a foundation’s flexibility and ability to innovate while advancing its mission.

Particularly in this time of COVID and social unrest, groups of individuals have come together to make change in nontraditional ways. Foundations should thus consider the critical roles that nonprofit organizations that are not public charities, fiscally sponsored projects, community-based organizations that may not have tax-exempt status, organizations that are not referred to them by their networks, and social-impact vehicles may play within the charitable ecosystem they are supporting to inform their grant making.

These three areas of focus illustrate key changes that foundations can make to their practices, work, and operations to ensure they are responsive and nimble, while also preserving their organizational integrity from both a legal and compliance perspective. Embracing just one of these areas can have a transformational outcome for a foundation, its grantees, and the vulnerable and marginalized communities they serve.

Read more

The Discovery Pod Hosted by Doug Nelson: Episode 72

The Discovery Pod, hosted by former CEO Douglas Nelson, features conversations with leaders in non-profit/social sector. He talks with CEOs, Board Chairs, Founders and other senior leaders about how they got started in the sector, how they work with their boards, and what remains to be done. Doug is the current Managing Director of The Discovery Group, a philanthropy and governance consulting firm based in Vancouver, BC., where understands the complexity of leading organizations and institutions and the challenges of aligning governance and philanthropic performance.

Listen to Episode 72 where Doug interviews our very own Founder & CEO, A. Nicole Campbell. Together, they dive into how Nic found her way into the field of philanthropy, taking risks, her advice for philanthropy leaders and much more.

Click here to listen to Episode 72. 


Read more

The Funding Infrastructure Trends to Watch in 2020 (Part 2)

I started writing about infrastructure trends to watch in 2020 before the COVID-19 pandemic transformed our lives. Since then, I have provided six recommendations for both nonprofits and funders to survive COVID-19, hosted a webinar on nonprofit sustainability during and beyond the COVID-19 crisis, and created a COVID-19 Nonprofit Funding Action Plan to (i) help nonprofits determine funding and capacity needs; (ii) be better positioned to negotiate and receive funding; and (iii) build for sustainability.

Interestingly, the COVID-19 crisis highlights, if not magnifies, the current environment in which nonprofits and funders operate. Accordingly, the trends we identified that we believe will continue to surface in 2020 have not vanished because of the crisis. On the contrary, the crisis has only magnified and will likely continue to magnify these trends.

Therefore, particularly now as we search for ways to build sustainability during and beyond the COVID-19 crisis, the sector should be aware of these trends to learn of and identify innovative practices, tools, and approaches that can help organizations build towards sustainability.

Below are the remaining six infrastructure trends that we think you should watch in 2020:

Board diversity. We have seen a concerted effort around conversations about diversity, equity, and inclusion in the sector to ensure that the sector can engage with and show up as diverse as most of the communities it works with. These conversations usually center around how staff and leadership within an organization engages with each other, grantees, and partners, and the frameworks for ensuring these interactions happen consistently. What I have not heard as loudly or consistently is how many of these conversations are being raised about and with the board itself. Sustainable change in any organization begins with the board. Until the board is diversified in the same way that the organization wants its staff to be diversified, the organization will continue to struggle with diversity. And when an organization struggles with diversity, it will struggle with innovation, which will keep that organization and its impact stagnant. In other words, until the leaders that are responsible for the oversight of the organization are required to diversify and become inclusive, the organization has no model, no urgency, and no need, quite frankly, to incorporate an infrastructure or approach that requires diversity of thought and perspective. Although diversifying many boards, particularly foundation boards, is often an uphill engagement, the conversations have started, and we think they will only increase. We have seen it happening in the for-profit governance space and have even seen a state issue fines if boards are not diverse. This trend is headed for the sector. We think it is just a matter of time, and that time will be this year. Those organizations that embrace it will certainly see sustainable successes first.

This trend raises questions about intentionality. Specifically, how will organizations build sustainable infrastructures to encourage integration of values underpinning diversity, equity, and inclusion throughout the entire organization, including their boards? How long should a deliberate and intentional transition be? And what do meaningful efforts in this area look like to deliberately change the board and avoid tokenism?

Place-based vision. We have observed an increased focus on supporting communities through place-based grassroots leaders and organizations. In other words, funders are more interested in directly supporting community leadership and vision. For example, we are seeing community support being evidenced through community leaders hosted within unaffiliated community-based organizations, funders working directly with place-based or community-focused intermediaries, and innovative funding that maintains the integrity of the community vision. The trend here is that although individuals or organizations are leading the vision, it is the place-based community vision and mission itself in which funders are investing. As a result, funders are interested in finding ways to sustainably fund this vision or support other community leaders to take up the place-based vision that most resonates with the needs of the community. Accordingly, we have seen a shift towards supporting a place-based ecosystem of organizations and community leaders. Similarly, when using intermediary organizations to receive and regrant funding, we are noticing funders increasingly search for intermediaries with legitimacy in and proven relationships and reputations with the communities they are serving, even if they may be otherwise unknown to the funder, instead of working with intermediaries simply because they are nationally or widely known. We believe this shift needs to continue in order to consider and include organizations led by people of color serving under-resourced communities and marginalized populations that have been historically omitted from pivotal funding conversations.

This support of place-based community leadership raises questions around the preservation of legitimacy. For example, how do you encourage grassroots leadership to show up as its authentic self, so to speak, when many funders still use traditional funding tools and vehicles that may create tensions with newer forms of leadership and organizations? How do you assess risk management in this place-based community leadership model when the traditional risk management tools are more often used to help organizations transition from this type of grassroots, non-traditional leadership to more traditional models?

People. We cannot discuss infrastructure trends without focusing directly on the people within organizations and their performance and capacity. We are seeing a growing need for organizations to better support and manage individuals, teams, and staff throughout the sector. Specifically, we have found that leadership teams are exploring and interested in learning how to (i) create leverage within organizations that already have staff with limited capacity; (ii) gain a better understanding of staff roles and responsibilities to provide staff with critical support; (iii) provide meaningful encouragement and appreciation to support staff morale; (iv) strategically use consultants to provide added capacity; and (v) engage in thoughtful and practical change management to support the organization’s growth. Addressing these issues is critical; they all impact the way people operate within organizations and thus impact how an organization itself is run and ultimately performs. We are finding that the traditional, hierarchical organizational staffing and accountability models that lack flexibility and nimbleness are, alone, ill-designed to address these issues or be fully responsive to the needs of organizations today. Moreover, these issues need more than a singular approach. We believe that people management will be one of the key considerations in 2020 and organizations should thus invest significantly in human resources and human capital management to be sustainable.

This acute focus on people raises questions about accountability. Specifically, how can leadership approach these issues consistently and thoughtfully yet take into account each staff member’s individuality when evaluating performance? How does an organization transition from a management system and culture of accountability that focuses on culpability to one that is focused more on coaching an individual towards a desired level of engagement?

Fellowships. With all of the talk about general support grants circulating throughout the sector, one might think that providing this type of support is the most significant grant-making related shift occurring in the sector in 2020. On the contrary, we have also noticed a significant increase in awards to social entrepreneurs and individuals across the sector. These awards are often in the form of fellowships where the funders providing the fellowships have a vested interest in both the individual and the fellowship itself. We are also seeing an expansion of the types of support and resources provided during fellowships, including, for example, group and individualized coaching, exposure to experts in various fields, and increased accountability check-ins for both the fellow and the funder. In essence, I am observing an incubation of people’s ideas and work in a way that I have not seen in the sector over the last decade. And we are also seeing a growing number of funders deliberately transforming themselves into supports and resources and serving as incubators, accelerators, and hubs for social entrepreneurs. Increasingly, funders are holistically supporting social entrepreneurship as a critical component of the sector.

The expansion of fellowship support raises sector-wide questions about sustained innovation. How can funders provide ongoing support to fellows beyond their fellowships to ensure their projects are sustainable and remain innovative? How can funders support the building of the sector with the work of fellows without creating additional nonprofit organizations?

Technology. We have observed an increase in organizations using technology and data to inform their initiatives and projects and an increase in organizational leaders using technology and data to address their operations and performance. We have also noticed that grant makers want to better protect the information they receive from or about their grantees. Moreover, grant makers are asking their grantees how they will keep their own information safe and exploring ways to support their grantees’ cybersecurity needs. Given the complexity of many privacy laws around the world, organizations are creating staff positions, engaging advisors, or leveraging software to address new cyber and technology practices. Namely, we are seeing the rise of the Chief Technology Officer in many organizations. And regardless of title, organizations are hiring or engaging someone to be responsible for effectively managing these practices and safeguarding data and other information for the organization.

This technology trend raises questions in the sector about capacity. How are smaller or leanly-staffed organizations that have data challenges and responsibilities safeguarding their information on much smaller budgets and following best practices? What role does the board play in helping an organization navigate its technology needs if the board is unfamiliar with emerging technology trends or is unsure of how to support staff to effectively manage technology?

Philanthropy builds. I have been an advisor within a philanthropy initially set up to be time bound that then transitioned to one built for perpetuity. To be in the midst of that transition gave me tremendous insight into how philanthropies are built for the short term, how they are built for the long term, and how infrastructure can and should be built for each. Interestingly, a meaningful conversation about building philanthropies, namely whether they should be built to go “far” or to go “fast,” so to speak, has surfaced. And we have noticed an uptick in the creation of philanthropies that are not built for perpetuity. Indeed, we are encountering philanthropies that are time bound and plan to wind down after a finite time. The way these time-bound philanthropies structure themselves, their grant making, and their operations appears to be nimbler and more flexible than philanthropies that are built for perpetuity. For example, their application and reporting requirements frequently request less information from grantees, and their grant awards are often larger and for multi-year support. At the very least, the conversations about whether philanthropists should create philanthropies for a finite period of time or perpetuity are occurring with more regularity and in more depth than they were previously.

This trend raises questions about the structural asymmetry within the sector. Is there a model for time-bound philanthropies that supports grantee diversity? How can time-bound philanthropies support the ecosystem of grassroots organizations working with marginalized communities and organizations led by people of color, particularly when time-bound philanthropies tend to award much larger grants to organizations known to them and do not often have open grant calls or invitations? How do philanthropies built for perpetuity respond nimbly and with urgency and build diversity into their grant making and operations?

I hope these trends inspire those in the sector to take action to create change around the world, particularly for vulnerable and marginalized populations. I encourage all of us within the sector to use our collective knowledge and information to act bravely, albeit imperfectly. Bravery is my hope for the sector, and I want to ensure it trends.

Read more

Surviving COVID-19: 6 Recommendations for Nonprofits and Funders

We are in the midst of the 2019 novel coronavirus (COVID-19) pandemic and our lives are evolving on an almost daily basis. Industries globally are feeling the financial effects of the virus. The travel industry, for example, which is comprised of airlines, hotels, and parts of retail, restaurants, and technology is estimating that the drop in the industry’s economic activity could be as much as US$1 trillion. And the music and film industries are each projecting a US$5 billion loss. Millions in revenue are being lost daily across most industries.

And in the nonprofit sector, the revenue losses continue. Many large-scale nonprofit conferences, convenings, galas, and meetings have been canceled, and more events are expected to be canceled this month. Thousands of event registrants are being notified almost weekly of cancellations. More intimate in-person meetings are also being canceled or postponed. Many organizations have closed their physical offices and asked their staff to work remotely. The coronavirus outbreak is fast-moving and has disrupted organizations and our lives generally. We are in a novel holding pattern, and for many people and organizations, panic and uncertainty have started to set in.

Unfortunately, no one knows exactly when this pandemic will end. I do know, however, that the only thing that can carry us through this time is resilience – of people and of the organizations we build. We are built to withstand adversity.

As with any other crisis, the COVID-19 outbreak needs to be effectively managed by leaders who are supported by strong infrastructure consisting of robust systems and engaged people with sufficient capacity. In that way, this crisis is not so unique, and it may not be the last crisis we encounter. At this point, many nonprofit organizations are unable to determine whether their systems, operations, and programs can survive this or another crisis and are struggling to keep their heads above water, so to speak.

Accordingly, grant making, funding, and the evaluation of whether new grants or funding should be awarded should not be suspended in this environment; on the contrary, this funding is critical to the current stability of the sector.

I share six recommendations below that consider efforts from both funders and fundraising nonprofits so that they each have active roles in creating solutions and forging a path forward in this crisis and beyond. In this way, nonprofits are not passively waiting for funders to help them during this pandemic.

My recommendations focus primarily on benefiting marginalized communities that are most impacted when funders and nonprofits face resource restrictions and on people of color-led organizations serving these communities that tend to historically receive the least amount of funding even outside of a crisis; these communities and organizations are often the most vulnerable, particularly in times of uncertainty.

These recommendations are based on my interactions with clients and nonprofit leaders around the globe who are experiencing and responding to this pandemic in their different environments and geographies:

Meaningful conversations. It should go without saying, but funders and nonprofits should be talking with each other about nonprofit sustainability. These conversations should be occurring between funders and their grantees and funders and nonprofits that are not currently receiving funding from the funder, if those nonprofits are critical parts of the ecosystem in which the funder and its grantees operate (see the ecosystem approach recommendation below). These conversations will vary in focus based on the funder and nonprofit. Immediately, however, the focus should be on identifying immediate needs, expense increases, and revenue losses that are significantly impacting the nonprofit’s budgeting, and determining how to stop any financial hemorrhaging, so to speak, occurring within the nonprofit. This initial conversation will highlight the funding already provided and used, outstanding funding, and tracking that funding to meet the grantee’s needs, and will also allow funders and grantees to determine if current grants should be amended to meet those pressing needs. As I have stated previously, grants should be flexible, innovative, and likely for general support so in uncertain times like these, restrictions likely do not need to be removed because flexibility was built into the grant in the first instance. These conversations should also address the nonprofit’s revenue streams. Many nonprofits’ revenue is not diversified. So, when crisis hits, if that homogenous source of revenue is at risk, the nonprofit’s business and financial models and thus the nonprofit’s viability itself is at critical risk. These meaningful conversations should occur immediately and should remain a cornerstone of the grantor-grantee relationship.

Ecosystem approach. The nonprofit sector is interconnected, and COVID-19 has only reinforced this point. Instead of providing a grant to a nonprofit for its singular needs, funders and nonprofits should consider who else within a particular ecosystem may need support. This ecosystem-based funding can still be received by a singular organization, but coordinated among many organizations. This integrative approach better ensures a nonprofit’s sustainability than providing isolated funding to a nonprofit based only on its immediate needs in this crisis. For example, if a nonprofit is part of a cohort of organizations or is part of a supply chain of programming or resources for a community, supporting that singular nonprofit without regard for the ecosystem in which it sits may not effectively contribute to that nonprofit’s sustainability, if the remaining entities within the ecosystem do not receive any support and instead are left to fail. Therefore, both nonprofits and funders should consider other nonprofits that are integral to the ecosystems in which those nonprofits operate when requesting or providing funding in the current environment. The funding award can thus be structured to not only meet the nonprofit’s immediate needs during the crisis, but contribute to the overall stability of the ecosystem in which the funder and nonprofit operate.

Innovative funding tools. To the extent funders are able to do so, they should increase their funding to support emergent needs at their grantees and nonprofits in their grantees’ ecosystems. Still, unplanned, increased grant making usually means that the funding for the unplanned grants comes from another part of the funder’s budget. Having worked with philanthropies for over a decade, I have seen this decision being met afterward with cuts to existing or planned programs and initiatives because the amount of funding for grant making was determined by an independent board or by the founder. These cuts usually have serious and asymmetric consequences for marginalized communities and people of color-led organizations and thus should not always be an option. Increased nonprofit needs do exist in this current environment, however, and could be addressed by funding that goes beyond typical grant instruments, allows funders to retrieve their funding if certain circumstances materialize, and does not claw back funding from nonprofits and ultimately the communities they intend to serve. Recoverable grants, reinvestment grants, and zero or low interest “bridge” loans to cover any unexpected expenses or lost revenue are examples of such tools. This type of innovative funding makes it possible for a funder to retrieve a portion of its grant-making budget that it did not plan to expend when it supported a grantee’s immediate needs, but also takes into account the grantee’s financial position, its ability to repay, and the dynamics of the situation. At their core, these funding tools should be designed to diversify a grantee’s revenue and preserve its ability to receive additional funding even if the initial funding is not repaid. Depending on the nonprofit’s situation and the funder’s resources and capacity, innovative funding tools may work well to provide security to nonprofits during and after this crisis.

Flexible support. Providing support that is responsive to a grantee’s immediate needs, but allows the grantee to grow sustainably is the kind of flexible support that nonprofits need generally, and even more so during this time. Throughout this crisis, funders should think of ways to provide this flexible support and nonprofits should request it, based on their needs. This flexible support comes in the form of both approach and funding. For example, general support and hybrid (e.g., part project, part general) grants are ways to flexibly support nonprofits’ sustainability and not limit funding solely to a nonprofit’s immediate needs. Moreover, funders should be flexible in their interactions with grantees, including conducting diligence for the funding award and the way in which information is shared between funder and grantee or reported about the grant by the grantee. And instead of only requesting or providing cash, consider requesting or providing in-kind assistance, such as for attorneys, accountants, operations, and information technology (IT). Many nonprofits may not have access to these resources that are needed during this time as a result of canceled events and remote working environments, such as the need for contract reviews, additional software subscriptions and licenses, and cybersecurity needs, for example. By not having these resources, many organizations are creating exposure for themselves, which ultimately impacts their longer-term sustainability. This provision of in-kind resources also extends to the ultimate beneficiaries in under-resourced communities. For example, students who received free meals in schools that are now closed indefinitely, still need those meals if their families cannot afford to provide them. Finding ways to leverage funding and corporate and other relationships to provide this kind of flexible support to grantees and the communities they serve is crucial.

Cash reserves. When a nonprofit does not have a safety net for its financial ebbs and flows to maintain its operations, it puts its sustainability at tremendous risk. Cash is what often makes an organization run as it pays for the operating expenses of an organization, including salaries, facilities, and business supplies. Determining how much cash to have in reserve is based on an analysis of an organization’s plans, use of cash, stage of business, and cost to acquire additional cash. On average though, it is suggested that businesses keep at least three to six months of operating expenses as cash reserves; about 50 percent of nonprofits have no more than three months of cash reserves. In fact, many of the nonprofits that are teetering on the brink as a result of this crisis are likely the organizations that had little to no cash reserves in the first place. And it is uncommon to request or provide funding to create a cash reserve. Now is the time to create or fund one, however. Funding this reserve could be part of a general support, flexible funding, or hybrid funding award. In this environment, in order to contribute to a nonprofit’s short and longer-term sustainability, providing a nonprofit with funding to create or fund a cash reserve should be supplemental to the funding needed to address a nonprofit’s immediate needs.

Crisis/Risk management. The coronavirus outbreak has highlighted the absence of crisis management teams, protocols, and plans in both nonprofits and funders. Now is the time to design and staff that team, design those protocols, and create those plans. I encourage organizations to understand what was missing in their response to this crisis, what would have been nice to have in place, and what can be done to effectively move forward in the event of another crisis. Discussing risk management and ensuring that a crisis management team and plan are in place is essential to ensuring that a nonprofit’s operations have business continuity.

These recommendations are not radical. In fact, they work well generally and especially in crises because they center around providing innovative, flexible, and responsive support to nonprofits to ensure their sustainability. Our ability to effectively come together during this time shows that we are strong. And we can only get stronger by continuing to build nonprofits that can survive this crisis and sustain their impact long after this crisis ends.

Please let us know if you have noticed ways in which nonprofits and funders are responding and collaborating well during this time.

If you would like to receive a copy of Build Up’s COVID-19 Nonprofit Funding Action Plan, please email us.

Read more

The Funding Infrastructure Trends to Watch in 2020

2020 presents the opportunity for a new infrastructure build for the nonprofit sector. After all, it is the beginning of a new decade. To that end, I wanted to share my thoughts about the funding infrastructure trends to watch in 2020, informed by both my experiences with and observations of the sector.

Yes, there are such things as infrastructure trends. They tend to indicate how the sector is building itself internally, organization by organization and ecosystem by ecosystem to advance its programmatic work.

As I have explained previously, infrastructure is not just processes and systems. It also takes into account the frameworks in which individuals act and engage within the sector; how organizations provide services and awards within the sector; and, of course, how these same individuals and organizations work together to effect change.

We should pay close attention to these trends because they inform the way we should build infrastructure in the sector; they highlight areas of strength and challenge and indicate areas of improvement, which provide critical information in creating a much stronger and resilient sector.

I also think trendspotting is exciting. It is the equivalent of taking a scan of the sector, if you will, from stories shared by different actors in the sector, both individuals and organizations; from their independent and collective actions in different environments; and from analyzing the effects of all of those things. It is then identifying patterns from each of those pieces that, when put together, tell a compelling story about the strengths and challenges of the sector’s infrastructure.

It is intriguing to know where we can go next by simply paying attention to what is and is not happening and listening to what is and is not said within the sector.

The trends I highlight in this article are gleaned from my engagements and work in the sector; observations of the work occurring in the sector, including the work of social impact organizations and for-profit companies engaged in social impact projects; and conversations with diverse clients who are philanthropists, leaders of philanthropies and fundraising nonprofit organizations, and operations, grants management, legal, and programmatic leaders within the sector.

These trends are based on analyzing patterns of a diverse set of individuals and organizations operating within the sector, and thus, I believe, truly represent the direction of infrastructure in 2020 and beyond.

I have identified the top trends that have caught my attention, are directly impactful to infrastructure, are sector wide, and I think will be disruptive for the sector. I also identify what these trends mean for the sector at large and the questions and implications they raise for the sector.

Below are the first five infrastructure trends that we think you should watch in 2020:

Donor collaboratives. We have noticed that many donors increasingly do not want to invest or contribute individually and instead would like to pool their resources to effect change and scale their impact. In previous years, there seemed to be a larger push around individual efforts and contributions. More recently, however, donor contributions are being made collaboratively, and the “bet” is being placed on the joint impact that donors can have collectively. Interestingly, in the past, we saw funders urging their grantees doing similar work to work collaboratively; encouraging them to work together on projects and in key funding areas after noticing duplication of efforts. This sometimes forced encouragement often had varied results and seldom resulted in lasting partnerships. On the contrary, these donor collaboratives are enduring and are attracting donors that otherwise do not have prior relationships with each other. And the recipients of these collaboratives benefit with increased, sustainable funding and strategic alignment with multiple donors funding their work. This increase in donor collaboration indicates to us that donors are (i) understanding the need for strategic alignment and are acting on that need; and (ii) realizing that scaling impact for many progressive issues requires formal collaboration and sharing of ideas.

This trend raises sector-wide questions about innovation. Specifically, what is the impact on grantees’ innovation when engaging with a bloc of donors instead of individual donors that may provide more flexibility and space for creative problem solving? And is there an incentive to innovate at all for donors or grantees when the formal collaborative is created with predefined funding criteria? Finally, what impact does this collaborative infrastructure have on diverse organizations that were not initially on the radar of the various donors who joined the collaborative and are now moving together and creating greater influence in the field about decisions around issues, projects, and potential grantees?

Ecosystems. Almost gone are the days of impact being primarily seen or curated through singular, independent vehicles or entities. We have noticed that when nonprofits and philanthropies form or as they assess their ongoing operations, they are realizing that a singular vehicle does not, by itself, accomplish their often multi-dimensional missions and goals. Accordingly, we have seen a significant increase in U.S. public charities and private foundations becoming part of social-impact ecosystems that consist of other charities and advocacy-focused organizations and even for-profit companies. This ecosystem approach indicates to us that many individuals and organizations are embracing ecosystem infrastructure as a sophisticated means to achieving their overarching vision of social impact and their goals instead of fearing that infrastructure can only create unnecessary bureaucracy.

This ecosystem approach raises questions for the sector about accountability. For example, how will these ecosystems impact the transparency that the sector has grown to expect as part of a nonprofit organization’s accountability? What does it mean for ecosystems to act collectively in approach and brand, particularly when each of those entities may have its own mission, goals, and approach? Can or should each entity be able to maintain an independent identity while being part of an ecosystem?

Corporate partnerships. We have seen an increase in partnerships between corporate funders and nonprofit organizations, both in terms of resource partnerships and funding relationships. Accordingly, the gap between private and nonprofit sector interaction is gradually diminishing and collaboration is on the rise. The space between the sectors’ interactions and communication still exists, but we have noticed a concerted effort to create relationships between for-profit companies and nonprofit organizations. This increase in partnerships indicates to us that nonprofit organizations and for-profit companies are increasing their alignment to better address social issues with wide-ranging impacts for global communities and thus for both the for-profit and nonprofit spheres. As a result, many nonprofit organizations are seeking or receiving funding from corporations in addition to their traditional non-corporate foundation funding. Many of these corporations have not previously engaged with the nonprofit sector and thus have different expectations than many nonprofit organizations are used to. These differences in approach and expectations then surface in the funding application process, reporting, and evaluation.

This uptick in corporate partnerships raises questions for the sector that are focused on funding frameworks. For example, will this increase in corporate partnerships and funding impact the push towards general support funding as many of these relationships will be new and the corporate partners and funders may come to the sector with expectations that may not initially align with the general support framework? Specifically, will corporate partnerships and funding result in a reduction or increase in these and other types of flexible funding awards? Will these funders and partners create new funding hybrids that the sector has not yet seen?

Risk management. Both “risk” and “risk management” are earning different reputations in the sector. Over the years, the definition of risk has evolved from a fear to consideration of a factor that impacts overall success; and the definition of risk management has evolved from restriction to supporting activity based on a dynamic understanding of the actor’s operating environment. The concepts of risk and risk management are being reframed from avoidance to become more about ensuring that key decision makers have all of the information they need to make informed decisions. We are seeing risk management surface in funders’ thinking about the ways in which the grant application and process can share information between grantee and funder; and funders’ approaches to the underlying relationships they have with grantees to ensure that information is being shared between them in a sound, consistent way to, again, inform decisions within the funding relationship. Therefore, this evolution in risk management indicates to us that risk has become much more multi-dimensional for the sector and thus the considerations involved in traditional risk management have certainly become more sophisticated. Risk management in 2020 thus requires an innovative infrastructure to incorporate different perspectives into funding decisions and create a way for diverse stakeholders to effectively receive and share those perspectives to be informed about all aspects of a funding decision.

This trend raises sector-wide questions about alignment. Specifically, how do we align the different approaches to risk management across the sector to ensure that grantees and funders are clear on how to effectively define and manage risk, particularly when the very concept of risk varies across countries, regions, and cultures?

General support. I know you are likely expecting me to say that we are seeing an increase in general support in 2020. Although that statement is true, that part of this trend is not what I want to share with you. Although the general support tide is rising, so to speak, it is not rising nearly as quickly as the conversations themselves about general support and the need for flexible funding. Now, you may see the fact that general support funding is not rising as quickly as the conversations about funding as disappointing, but, on the contrary, I find this increase reassuring primarily because of the number and quality of the conversations. In previous years, conversations about general support were rarely raised, one-sided, and clumsy. Now, these conversations are occurring within foundations, with funders, and with grantees, both individually and collectively. They are also more sophisticated and thoughtful, and there is a mutual push between funders and grantees to better understand what general support means for an organization. And the focus is on ensuring flexibility. This increase in general support conversations indicates to us that an underlying appreciation for an organization’s sustainability is emerging in the sector and both funders and grantees are thinking about how to create better flexible funding awards that recognize organizational and other costs.

This trend raises questions for the sector that focus almost entirely on traction. Specifically, when will these conversations gain more traction and translate into a sustained increase in general support funding so that the organizations that need it can be supported? How does the shift to general support and more flexible funding impact smaller and leanly staffed funders that may want to provide additional flexibility to their grantees, but may not have the resources or staff to explore how they can successfully transition from solely project-based funding to more flexible funding, particularly to new grantees?

These trends are all exciting and meaningful. They speak to a sector that is not afraid of course correcting and of innovating. And we will see just how they each unfold and evolve in 2020.

In Part 2, I will share the remaining key trends we are seeing for 2020 and the near future, many of which focus on the people, who, as we know, are the core of all infrastructure.

Read more