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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.