Investing ten minutes to read this overview will give you a solid fundamental understanding about what we will call here “the invest in nonprofit people space.” What you are about to read summarizes key principles, practices and beliefs that might otherwise take a lot of time to grasp. This overview will also provide an excellent preparation for other related articles you may wish to read. For those already familiar with the topics discussed below, we believe that the content provided will refresh your thinking to allow creative and transformative approaches to impactful giving to emerge.
Five Ways to Provide Funding to a Nonprofit
- Program funding- Funding given to cover the cost of running programs. This is the most common form of support that nonprofits receive. It is often presumed that there is enough money provided within program funding to cover other expenses such as salaries, operational costs, and capacity support. We will only say here that most nonprofits will disagree.
- Capacity support – Most often, funding given to nonprofits to help them grow and strengthen their ability to accomplish their mission. Such grants or donations are frequently used for training or hiring staff, leadership development, research and development, monitoring and evaluations, or upgrading technologies. Some foundations and others couple financial providing resources with human resources such as offering free consultative services.
- Talent Investing- Funding given to grow talent within nonprofit staff. Examples include coaching, training, education, peer learning, networking opportunities, career development, and preparing for the inevitable turnover of leadership. Talent investment funding can also help increase the longevity of staff, thereby reducing human resource department expenses.
- Operational support- Funding used to cover the cost of running a nonprofit including everything from staffing to paying for utilities.
- Gap funding- Money given or loaned to fill gaps within nonprofits; this often refers to gaps between scheduled or expected recurring grants. Problems occur when nonprofits payout cycles are out of synch with grantmaker’s funding cycles. Funders may provide a loan to help a nonprofit cover expenses while waiting, for example, for an expected government grant to arrive.
Many philanthropy support organizations (PSOs) believe that nonprofits could achieve a considerably greater impact if they received sufficient operational funding.
Many foundation funders hold one of three perspectives:
Grants given to nonprofits allow for indirect costs. These organizations should be more creative or entrepreneurial about raising additional funding. Or, they should do more to reach out to larger foundations or government for additional grants for growing their work.
Funding capacity-building is important but does not fit the foundation’s strategic grantmaking practices. This may be due to perceived risks or difficulties foundations encounter with accurately measuring results. In our experience, the vast majority of educated foundations fit into this category.
Providing capacity-building support for nonprofits is enormously important for growing nonprofits and this sector at large. Additional funding provided in program grants to allow for indirect costs either does not cover costs, barely covers costs, or does little to enable nonprofits to get off of the treadmill and grow. Some foundations focus entirely on capacity-building, but they are in the minority.
Discussion on Power Dynamics
This topic is relevant here because we believe that having a basic understanding about power dynamics can help you should you considering providing special “invest in people” support to nonprofits. In the philanthropy space there is a wide spectrum of grantor-grantee relationships spanning from being highly grantor-centered to being highly grantee-centered. On one extreme grantmakers fund grantees solely to fulfill their objectives. Problems arise when grantees feel compelled to alter their organizational objectives to meet externally imposed requirements to get funded. The other extreme takes place when grantmakers provide support and require very little or no accountability.
Many nonprofit staffers believe that they have more expertise, experience and connections with their “philanthropic ecosystem” than funders with persistent, yet uniformed, notions about what will or will not work. On one extreme a funder might completely ignore the insights and advice given by staffers. On the other extreme they might presume that the nonprofit knows what is best and ignore their own common sense. The middle approach involves giving nonprofit people an invitation to critique your ideas and offer alternatives. Creating a mutually trusting relationship and constructive dialogue with these people can have valuable outcomes.
Many workshops and conference sessions have been given by philanthropy support organizations to help funders be better informed and more reflective about how to use their power in their grantee relationships. Some organizations hire facilitators to assist with building trusting and honest relationships between their staff and grantees. Discussions on equity issues within philanthropy have prevailed for decades. Particularly during the current Black Lives Matter era these issues persist frequently within and across organizations. Therefore, it is quite common for foundation staff to become familiar with the culture and values of nonprofits before providing grants.
Things to Consider Before Providing Special Funding to Nonprofits
- The same group of large nonprofits receive the most funding and have the largest development staff to grow or perpetuate this cycle. These organizations have many advantages over smaller nonprofits. Although it is possible that small grants focused on increasing or improving staffing could be catalytic, this is less likely to happen when supporting large nonprofits. On the other hand, such organizations are generally more stable and resilient to storms such as COVID-19.
- For obvious reasons, smaller grassroots organizations may be less stable. Yet they are often considered to be more in touch with the needs of the communities they serve. While some might debate this perspective, many will agree that grassroots organizations are a vital player in the philanthropic ecosystem. Because of either equity values or grantmakers’ perception that these smaller organizations have better antennas to what is happening on the ground, some will focus exclusively on supporting grassroots organizations. If conditions are right, and fundamentals are strong, relatively small grants for increasing or improving funding are much more likely to be catalytic with such nonprofits.
- Midsize organizations vary greatly regarding every consideration mentioned so far. Therefore, it is more difficult to provide you with general characteristics. Some midsize organizations seek to emulate grassroots organizations. Others try to compete with larger nonprofits. (It is also worth pointing out that even some large nonprofits build grassroots movements on the ground). There are definitely midsize nonprofit working on issues you support that are reasonably stable, yet could benefit considerably from hiring the right additional staff person.
Eight Approaches to Investing in People at the Front lines of Change:
- Providing large amounts of funding for improving staffing ability throughout an organization you support. It is common for foundations with means to use this strategy. This approach is costly, time intensive, complex, requires extensive consultative services, and outcomes could take years to achieve. At the same time, some funders are very satisfied with the outcomes. Through this quite thorough approach it is possible to change the culture and trajectory of a nonprofit – a change that could have long-lasting or even permanent impact.
- Providing leadership or management training for a small group within a nonprofit. This approach is less costly and less time intensive, but still complex. One or more consultants will likely need to be hired for the project. Keep in mind that providing perceived value to staff increases the chances that they will remain with the organization you funded.
- Covering the cost of hiring needed experts. This approach is far less costly than those mentioned above. It also does not require additional time on your end.
- Providing an assistant to an organization’s leadership team. This is the least expensive option mentioned. We believe that the outcome with this approach can have an enormous pay-off under the right circumstances.
- Providing an assistant to an executive director. This can also have an enormous pay-off under the right circumstances.
- Covering the cost to hire a volunteer recruiter and coordinator. This is a special category. Building a strong body of loyal and reliable volunteers is the least expensive option but it does take time and work to build a body of reliable and competent volunteers. There may be added value in recruiting retired people dedicated to a cause. If done right, this could also be immensely beneficial to a nonprofit organization.
- Partnering with a foundation or experienced private funder. Some may presume that the funding source has plenty of financial resources and does not need your help. You may be very surprised to learn that this is often not the case. At least in the case of foundations, there are often clear restrictions on how they can give money. You may be able to fill a vital gap in the cogwheel by investing in people while they help the organization of choice within a different capacity. Even further, with your expressed interest they may either loosen restrictions or provide advice to you.
- With options 3-6, it does happen that staff people move on to other organizations. However, we believe that those hired can most often then work with other people within the organization you funded. For obvious reasons, providing an assistant for an organization with only one or two staff people who are the known face of the nonprofit is a riskier approach.
Key Point: We believe that it is important that the leaders at the top of the nonprofit organizations you are planning to fund are committed to the strategic approach you will be using.