Practically growing with flexible funding

In our last article, I discussed the two reasons for the hesitation, reservation, and aversion towards flexible funding.

Once those reasons are internally addressed, foundations and funders that currently provide no or a limited number of unrestricted or flexible funding awards can transition to bravely integrating this type of funding into their funding strategies.

Discussing how to transition to unrestricted or flexible funding is not novel. In fact, in funder convenings, it is often encouraged, but momentum is lost when converting that conversation into practice. I also hear it discussed in conversations with grantee organizations as a real need, but it still does not become part of their funding requests.

Trepidation certainly exists on both sides, for different reasons. Still, if the value of unrestricted or flexible funding is not regularly articulated, requested, and awarded in a funder-grantee relationship, that relationship will inhibit funders and grantees from collectively and meaningfully shaping a thoughtful flexible funding process.

To help with the transition to flexible funding, I have provided five practice insights below that apply to both funders and grantees and are based on my years of experience in structuring and evaluating flexible funding awards:

1. Invest in leaders. Just because an organization is doing good work does not mean that the leadership of that organization does not need to be supported. In fact, the better supported an organization’s people are; the better supported the organization is as a whole. Indeed, when the people who are tasked with leading the mission have built their own capacity, that capacity in turn critically strengthens the organization’s infrastructure. This understanding of the organization’s leadership provides an outline of the organization’s potential and work that should be sustained through flexible funding. Consequently, understanding how a leader is investing in and building the capacity of the leadership to move the organization towards its vision is critical.

2. Understand infrastructure. Understand what infrastructure means generally and particularly for the contexts in which the funder operates. Universally applying a percentage is too blunt an instrument to consistently invest in an organization’s sustainability, and is, frankly, lazy. Although general funding principles should exist to guide awards, a funding award should be tailored to sustainably support an organization. This tailored understanding does not come through checklists, however. Instead, it comes through meaningful conversation that gets at the nuance within the running of programs, projects, and the organization itself, which costs are often underestimated by both funders and grantees. Therefore, even if funding comes in the form of project support, understanding the true costs of operating that project is critical. At that point, the grant becomes less about deliverables and more about how to create a sustainable infrastructure for the organization to conduct this work, as part of its strategic priorities.

3. Have vision. I am often encouraged by funders who receive restricted funding requests and then engage in holistic conversations with grantees to better inform their funding awards. During this conversation, the funder approaches funding in a supportive way, and does not transplant its vision for the grantee’s, but instead strives to fully understand the grantee’s vision in order to inform its support. The purpose of the conversation is to determine the organization’s ability to successfully execute on the project to create sustainable results, which is key to unrestricted and flexible funding awards. This pivot transforms the conversation to be about more than just the project itself and allows the funder and grantee to delve into understanding the grantee’s infrastructure to support the work being proposed. Therefore, even if the proposed project is six months long, for example, having vision requires that organizations think beyond the point at which the project produces deliverables and towards the point where the project contributes to outcomes. Usually, this timeline requires a multi-year vision, which in turn requires a flexible, multi-year investment, regardless of the length of the project.

4. Experiment. Grantees often request funding so that they can do something innovative enough to change some corner or corners of the world. So, the way investments are made into these organizations also demands innovation. Innovation in funding is not always linear or easy, however, particularly in international spaces or highly-regulated countries so we have to experiment to find what works in those contexts. Moreover, innovative funding should allow for conducting diligence, structuring, monitoring, reporting, and evaluation in a way that effectively builds trust, is outcome-focused, and manages risk over a multi-year period. These goals are complex; each demanding a nuanced, creative approach. Therefore, funders and grantees must experiment to learn what works to achieve these goals. A one-size-fits-all funding approach will not consistently provide innovation. Funders and grantees must both be willing to take risks and possibly fail in order to achieve the appropriate amount of flexibility and accountability needed to support a grantee’s sustainability and innovation.

5. Diversify. In 2019 and beyond, holistically investing in a grantee often requires more than just unrestricted grant making. There are other funding tools that can be used to provide similarly flexible funding. Moreover, these tools, such as impact investments or recoverable grants, help ensure that the grantee diversifies its own funding and creates its own flexibility. When a grantee relies solely on unrestricted grant funding and does not receive that funding, it must then restrict its work and its impact. Thus, funding diversification is not only meaningful for grantees, but necessary, in many cases, to build their resiliency and sustainability. Similar to experimenting, organizations need to think creatively to arrive at the right balance of funding diversification. To do so, they must be willing to diversify beyond frequently-used funding tools, commit to understanding infrastructure needs, and build other innovative tools and vehicles for flexibility and sustainability.

This conversation about unrestricted and flexible funding and helping funders to transition into funders who invest in sustainability should not be a funders-only conversation; it must also be a funder-grantee dialogue. These practice insights aim to ensure that this dialogue makes what we fund and build beneficial and sustainable for the communities we serve. Now, let’s get to doing.

Follow Up: If you know a funder or grantee embodying the practices discussed in this article, please let us know.