Failing at grantmaking?

19th January 2016

Failing at grantmaking?

19th January 2016
Pensive woman looking out window

Failing at grantmaking?

Failing at grantmaking? Low impact and low return: Funders and grantmakers should be concerned

After conducting numerous impact assessments for some of South Africa’s largest donors and grantmakers, Next Generation Consultants came up with a list of contributing factors to low impact and low return aspects. In our search to build an industry body of knowledge, we would like to share these and hope that more people will contribute so that we can collectively ensure the end of poverty as we know it – both in our country and on our continent.

Why do social/community investments fail?

  • Limited understanding of the often complex local context: Companies have sometimes commenced social investment initiatives without fully understanding the socio-cultural context or how their presence and actions can affect the complex dynamics between and among local community stakeholder groups. This has led to a range of unintended consequences, including the exacerbation of tensions or creation of conflict among communities.
  • Insufficient participation and ownership by local stakeholders:Delivery of social/community projects without sufficient involvement of local communities and local government in decision-making around development priorities has resulted in projects with low relevance to and ownership of local stakeholders (and therefore by implication low impact).
  • A perception of “giving” rather than “investment” (including lack of clear objectives): The tendency to view social investment as charity, rather than as an investment linked to the business and operational objectives, has resulted in vague mandates and a lack of direction and purpose for socio-economic development strategies and programmes.
  • Detachment from the business:Social investment programmes have tended to be planned and implemented in isolation from business activities and other day-to-day actions affecting all stakeholders. This has limited social investment’s effectiveness in helping the company to address key social risks and opportunities at the site level, or to take advantage of business efficiencies and competencies in support of local communities.
  • Responding to local requests in an ad hoc manner:Ad hoc approaches are typically opportunistic and focus on short-term outputs rather than catalysing long-term change. The risk, in many cases, is that the sum of all these disparate contributions to local causes does not add up to anything that either the company or host communities or even government can point to as a tangible or lasting socio-economic development benefit.
  • Lack of professionalism and business rigor:Few social investment programmes are held to the same standards that companies apply to other business investments they make (in terms of professional rigor, a clear business rationale, planning and budgeting processes, and accountability for results). This often reflects the low priority given to social investment by senior management when there is no perceived link or added value to the company’s bottom line.
  • Insufficient focus on sustainability:It is only in recent years that the sustainability of social investment activities supported by companies has become a key factor in project selection and design. In the past, short-term objectives took priority over longer-term considerations and sustainable development principles. Outcomes and criteria were not given much focus.
  • Provision of free goods and services:While well-intended, the consequences of providing free goods and services – or infrastructure and money for that matter – have not proven to be in the interests of either the company or local stakeholders. The lack of requirements for matching contributions (whether financial or in kind) has made it difficult to generate shared ownership or financial sustainability and has instead fostered dependency.
  • No exit or handover strategy:Commencing activities without planning in advance for the company’s eventual withdrawal has rendered many company-supported programmes unsustainable and created difficulties for the company around its “social license to exit” in times of financial cutbacks or at the end of a project.
  • Overemphasis on infrastructure and under-emphasis on skills/capacity building:Traditionally, social investment programmes have been dominated by company-led, bricks-and-mortar types of projects (particularly in the mining industry) with a significant lack of investment in the participatory processes – such as skills building and organisational development – necessary to affect and maintain long-term change.
  • Lack of transparency and clear criteria: Unclear criteria have led to numerous cases of conflict between and among communities over who gets what and why. When transparent criteria are lacking, company practice in distributing benefits may be perceived as secretive, unpredictable and susceptible to manipulation.
  • Failure to measure and communicate results: In many cases the effectiveness of social investment programmes is unknown because it has not been systematically tracked or measured the way most other business activities or expenditures would be. Common shortcomings include the lack of proper baseline/impact data (i.e. social impact studies) and a focus on measuring the volume of spend (inputs) or the number of outputs (number of beneficiaries) rather than the actual quality of the outcomes.

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