By Rose Bradshaw and Phil Buchanan | Originally published in Fort Worth Business Press
It’s hard to believe, but the countdown is on to make year-end charitable gifts. With so many good organizations still reeling from the impacts of COVID-19, the competition for resources is greater than ever. So how can you ensure that your donations will make an impact?
The most fruitful investments are grounded in good information and strong relationships. That goes double for philanthropic donations intended to address our community’s most challenging problems. In the excellent new book, Giving Done Right, national philanthropy expert Phil Buchanan drives home the necessity of shared goals, open communication, and the provision of adequate resources to get the job done.
BRADSHAW: What’s the first rule for mutually satisfying donor/nonprofit relationships?
BUCHANAN: Don’t’ force a fit. Look for alignment between your goals and strategies and the goals and strategies of nonprofits. It’s a mistake to think you can use the leverage you have over nonprofits to get them to adapt to what you think is right. Pressure to modify priorities contributes to less positive relationships. Organizations that are pressured in this way are less forthcoming with information about problems. So, it’s crucial to prioritize alignment and fit and not try to force a match.
If you can’t identify potential recipients of your giving that have goals and strategies aligned with your own, that should tell you something. After all, if those doing the work on the ground don’t see your goals and strategies as the right ones, maybe they’re not the right ones. Listen closely to those who are closer to the action than you. If you’re sure you have it right even though others don’t see it, you have work to do to persuade those you will support – before you fund them.
BRADSHAW: When I first entered the world of philanthropy, a mentor cautioned me about the imbalance of power that can develop between grantmaker and grantee: “You’re now brilliant, your jokes are funny, and you’ve had your last bad meal.” What can donors do to defuse this power dynamic with the organizations they fund?
BUCHANAN: Givers can come to believe all the praise that’s heaped on them and become detached from reality. The larger the giver, the greater the risk of self-inflation and detachment. Recognize that if you’re a big giver, you live in a bubble of positivity – and take steps to burst the bubble and learn. I’ve heard too many donors insist that they know exactly what grantees think – that they are so down to earth and accessible as people that they have negated the power dynamic and created open, two-way communication.
They’re wrong. The power dynamic always exists between the funder and the funded. The best way to know grantees’ views is to find creative ways to get feedback. Ask questions like, “is this helpful?,” “What could I do differently to support you? and “What do you most need?”
BRADSHAW: Over the last 10 years, North Texas Community Foundation donors have invested more than $3 million to build the capacity of local nonprofits. Strengthening organizations takes time, focus and money. What additional resources can donors deploy to strengthen the organizations they love?
BUCHANAN: Consider giving time and expertise as well as financial contributions. Donors can assist with strategic planning or the development of fundraising capabilities. But do make sure that the assistance is really desired, of course, and that you have the right experience to provide it. When done right, this assistance can be extremely valuable to nonprofits. Targeting grants for specific organizational capacity needs, such as IT or leadership development, can also be powerful because nonprofit leaders can spend money strengthening their organization’s effectiveness, guilt-free – setting them up for long-term success.
BRADSHAW: The majority of grants recommended by our fundholders are directed to provide general operating support. COVID has forced our nonprofits to step up in ways they never could have never predicted six months ago. Nonprofit leaders are bending over backward to re-engineer the delivery of critical services to help those most in need. How important are flexible resources, particularly in light of COVID?
BUCHANAN: These unrestricted resources have never been more important. At a time when we’re asking nonprofits to meet unprecedented demand, they have lost the revenue-generating fundraising events that fuel their work. Think about that. Revenues are down and demand is up! That’s an unbelievable challenge nonprofit leaders face. So, especially now, I advise donors not to needlessly restrict their gifts and to make them last. For those organizations with goals and strategies that overlap with yours, provide the unrestricted, long-term significant funding that’s most helpful to grantees. Nonprofits need flexible support, and they should build up financial reserves of at least 3-6 months operating expenses.
BRADSHAW: There are situations where restrictions make sense, such as funding for research, a capital project, a program incubator. What’s the best way to structure those gifts?
BUCHANAN: Pay for the full costs of the programs you support. If you have to make a restricted gift, allow for a decent “overhead” rate and offer as much flexibility as possible. Givers often impose arbitrarily low overhead rates on program grants, saying for example, that only 10% of a grant can support indirect costs, such as rent. This means that the grantee is being paid less than the full cost of delivering the program, which creates all kinds of headaches and transaction costs on both sides. In the worst cases, it creates incentives for “creative accounting” as nonprofits scramble for how to pay the rent when none of their grants allow for those basic expenses to be covered – or at least not at the level required.
BRADSHAW: How can donors use their unique vantage point and influence to help nonprofits do their work better?
BUCHANAN: Donors may have a birds-eye view that is not available to those working on the ground. If you have the ability to look across communities and fields and observe what’s working and what’s not, share that information with the organizations you support. Your influence may be able to bring organizations together to learn from one another. Nonprofits can benefit enormously when donors use their distinctive strengths to help everyone do their work better.
