Fast Build Friday: Episode 45- How to Build an Effective Grant-Making Process (Part III)

Recently, we have seen organizations requesting help with incorporating diversity, equity, and inclusion principles into their grant making. We know the issue as soon as we see the request and we know those requests are missing 2 important building blocks.

Today’s Fast Build topic is about how to build an effective grant-making process. Nic shares the third and final building block you need to build an effective grant-making process for your organization.

The third building block is that you must ensure that the core and overall design of the process are equitable and inclusive. This third building block comes after consideration of the first two building blocks, which are understanding your organization’s values and understanding and defining risk.

At each building block phase, you address equity and inclusion in your approach, analysis, discussion, and struggle, and then finally ensure that the entire process has been assembled in this way. After years of building grant-making processes and infrastructure, we do not believe there is any other way to build an effective grant-making process.

How are you thinking about equity and inclusion in your grant-making process? About your values? And about risk?

Let us know in the comments!

You can watch Episode 45 below.

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Fast Build Friday: Episode 44- How to Build an Effective Grant-Making Process (Part II)

If we separately asked you and a colleague who works closely with you to define risk, would you share the same definition? What if we asked everyone in your organization? Would everyone’s response be the same or would it change based on grantee type, leadership, or location? Is it okay if it does?

Today’s Fast Build topic is about how to build an effective grant-making process. Nic shares the second of 3 building blocks you need to build an effective grant-making process for your organization.

The second building block, based on designing and structuring grant-making processes for many years in different regions of the world, is understanding and defining risk. Unless you get clear on how your definition of risk aligns with your organization’s values, you cannot build an effective grant-making process.

A grant-making process can be effective when the organization pays attention to how it defines risk and struggles well with getting that definition right. Are you struggling well? Let us your thoughts in the comments.

You can watch Episode 44 below.


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Fast Build Friday: Episode 43- How to Build an Effective Grant-Making Process (Part I)

What if we told you the reason you should build a process, but our actions revealed a different reason…could you build it?

You would be surprised at how many times we build core processes without knowing the “Why” or with conflicting “Why’s.”

Today’s Fast Build topic is about how to build an effective grant-making process. Nic shares the first of 3 building blocks you need to build an effective grant-making process for your organization.

The first building block is that you need to understand your organization’s values. Without understanding and articulating its values, an organization will never build a grant-making process that is effective and allows the organization’s goals and strategy to show up in the way it is awarding funding to organizations and individuals.

This is not a one-time transactional conversation. Instead, it is highly revealing and iterative. And once you define and understand your values, you can then move to the second building block. This building order is critical to creating an effective and sustainable grant-making process.

How are you building your #grantmaking process? Let us know in the comments!

You can watch Episode 43 below.


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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.

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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.

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