If you’re in the business of running a nonprofit, there are bad grants and there are good grants. And then, once in a while, there are great grants.
A bad grant is one that is underfunded, relative to what needs to be accomplished; or one that commits an organization to activities that distract from its institutional mission; or one that locks in a relationship with an overly demanding funder. A good grant is one that provides adequate resources to carry out a project that is central to the institutional mission with a minimum of muss and fuss. And a great grant? Well, that’s general operating support—unrestricted funds that can be used in more or less any way, and reported on with materials the organization already has, such as its audited financials and annual report.
General operating support is precious to organizations whose work is dependent on project-by-project outside funding. It’s what gives them the ability to pursue activities they know are important, but no donor has yet seen as a priority, providing a measure of independence. Unrestricted money helps organizations retain staff during lean periods, and make investments that help to take institutional performance to the next level: a new website, increased capacity to implement a communications strategy, professional development for staff, remodeling an office, trips by the executive for fundraising, and a thousand other things that benefit the entire organization.
General operating support is particularly precious because it’s so hard to get. These days, many foundations are reluctant to offer unrestricted support and, despite some positive signals (including recently by the president of the Ford Foundation), I have my doubts about whether we’ll see widespread changes in the philanthropic sector anytime soon.
At the Hewlett Foundation, we’ve always been able to offer general operating support to a significant share of grantees, and we know from their responses that this is both deeply appreciated and rare among their funders. But it’s never enough.
If what you need the most is the hardest to get, you have to start getting creative. And organizations we work with are getting creative in lots of admirable ways—some that expand their sources of support, and others that reconceptualize what they’re trying to get funding for.
One way organizations try to expand support when they have a friendly institutional funder is to ask for a matching grant as the basis for a fundraising campaign. While creating some risk for the grantee, matching is a tried-and-true way to mobilize support from individuals, jumpstarting a base of support from people who might be persuaded to continue contributing even without an ongoing match to motivate them. In this way, even a small general support grant multiplies itself into a larger unrestricted pool.
When it comes to reconceptualizing the ways to use funding, clever organizations transform mundane institutional needs into initiatives that can attract funders who prefer discrete projects. With a little creativity, many institutional priorities can be “projectized.”
Imagine, for instance, that a nonprofit knows it needs to undertake strategic planning, upgrade staff skills, and revamp the website. Rather than dipping into reserves to pay for these necessities, a smart fundraiser could create a project called “Impact 2020” and pull together a narrative that explains how these activities fit together and, in combination, will prepare the organization for the future. With a realistic timetable and budget, that package has a chance of attracting funding from a supportive donor that likes specific, time-limited projects. Sure, it’s not as efficient or flexible as general support, but organizations may be able to get funding that otherwise wouldn’t be available, and perhaps even accelerate the sorts of institutional changes that tend to languish when there’s no external mandate to make progress.
Separate from conceptualizing institutional investments as projects, smart nonprofits make sure that projects serve institutional needs by creating budgets that reflect the true cost of the work, clearly and accurately. When the resources required to maintain or strengthen institutional capacities are lumped into something called “overhead,” funders balk. But most funders know that project costs need to include support for, say, computers, the financial management team’s time, and even some support for professional development for staff. Some (not all) funders will permit items like that to be listed as direct costs rather than aggregated into overhead. But that will only happen if organizations accurately estimate the full institutional costs as they prepare project budgets, and think about how to present the information clearly and in ways that demonstrate how each line item contributes to the project aims.
None of this magically solves the problem of too many bad grants and too little unrestricted support for the nonprofit sector. But for individual organizations applying some strategic thinking in their funding relationships, it can help get the most out of the great grants, and make the good ones even better.