Generally, grantmakers pay considerable attention to what they fund (grantmaking strategy and impact) and who they fund (the grantees, organisations and intermediaries they support). But what about the management practice of funding? In our experience, grantmakers should pay equal attention to how grants are made and managed, evaluating and continually improving the practices used to make grants. Practices matter. Grantmaking practices are one of the most public expressions of organisational values that grantseekers experience.
Every grantmaker should be able to answer five core questions:
- Does our grantmaking align with our intentions?
To know whether grantmaking aligns with strategy, you first need to answer some very basic questions about grantmaking: Where does the money go? Who gets grants? What types of grants go out the door? How competitive is our process compared to how competitive we want it to be?
- Are our grants structured to be successful? Success for grantmakers is based on expectations. Are your expectations of what can be accomplished with your funds in the time-frame allotted reasonable for grantees and for staff?
- Are we efficient in our internal processes? If you look closely at your grantmaking practices, are they as efficient and professional as desired, both internally and for the benefit of grantseekers?
- Are we communicating effectively? How does your organisation convey its grantmaking goals and procedures? Are your written and verbal communications with grantseekers and grantees clear, intentional, appropriate and courteous?
- Does our process strengthen and support grantees? Every grantmaker should be able to measure the success of their grantmaking practices:
1. Does our grantmaking align with our intentions?
(a) Are we making the types of grants we intend to make?
An effective grantmaking process ensures that grantee time, energy and money go toward the mission-based work that your organisation most wants to support, rather than to the administrative demands of applying and reporting. Does your grantmaking process have the positive impact you want for your grantees? You first need to think about what kind of grants you want to make and match the actual results to your intentions. This requires clear intentions about the size and length of the grant, type of support, and length of the relationship planned. If you have not articulated this yet, looking at grant data over the past 3-5 years may help you define your intentions for future grantmaking.
- grant size distribution – grant term distribution – new vs. repeat grantees
- median grant size
- median grant term
- percentage of grants made by type of support (general operating support, project support, capacity building, etc.)
- percentage of new vs. repeat grantees
(b) Are we funding the types of organisations and programmes we say we want to fund?
A grantmaker first needs to think about what kind of grantees it wants to support and match those results to the grantmaking plan.
- programmatic distribution – geographic distribution – diversity stats
- percentage of grants by programmatic focus
- percentage of grants by geographic focus
- statistics from funded organisations on diversity of board, staff and beneficiaries
(c) Is our process appropriately competitive?
The appropriate number of declined proposals depends on what your organisation is trying to accomplish. Different funders have different expectations for how grantees come to them and how many new organisations approach them for funding.For some, an open RFP process is part of their desire to cast a wide net for potential partners. For others, a policy to not accept unsolicited proposals allows them to strategically identify and get to know only organisations that meet specific criteria.
A high percentage of overall declines might suggest a number of things. If you receive many inappropriate requests or proposals, your guidelines may not be clear. A high percentage of declined full proposals suggests that your process is draining resources from both the denied grantseekers and from your organisation, creating a widening group of grantseekers with potentially negative views about your organisation. You may consider alternative ways for your programme staff to identify new grantee prospects, such as connecting with grantmaker colleagues (including government grantmakers) to learn about their grantees, reaching out to thought leaders in your space and connecting with the community you are trying to serve directly to identify the strongest organisations serving them.
- proposals advanced vs. not
- proposals funded vs. declined
- percentage of proposals declined vs. those that advance to full proposal stage (if applicable)
- percentage of full proposals funded vs. declined
(d) Is our organisation taking the right amount of risk in our grantmaking?
There is no right or wrong answer to this question and the appropriate level of risk is a decision to be made by your board or management. Answering this question requires a deeper analysis, but the indicators can help you determine whether your grantmaking aligns with your organisation’s intentions. Are all of your grants safe bets or do some take risks with new organisations or less certain efforts? Your organisation might also consider how you are learning from the risks you take.
- successful vs. unsuccessful
- new vs. not new
- percentage of unsuccessful grants or grants with outcomes very different from what was anticipated
- percentage of new organisations or initiatives funded
- systems in place to learn from risks (such as ‘after action review’ or other formal processes).
(e) How do our grant decisions today affect our future grantmaking?
The appropriate level of future commitments will depend on what your organisation is trying to accomplish. Grantmakers addressing large, systemic challenges may make many multi-year grants to achieve their goals. Other grantmakers may prefer to maintain flexibility in future years to respond to new challenges.INDICATORS:
- total vs. committed budget
- percentage of future year budgets already committed
2. Are our grants structured to be successful?
(a) Are grantees accomplishing the outcomes they set out to achieve?
When determining whether or not a grant was successful, grantmakers tend to view a “no” answer as a failure and too simplistic an answer to a complicated question. Grantmakers’ natural inclination is to jump immediately into the reasons for the “no” and explain them. While this is a critical analysis to inform future strategy, it generally takes significant time to review reports at that level.
This simple indicator is intended to be just one data point and the very first step in the analysis, not the final one. It can give you a quick look at how your grants are doing and serve its intended purpose of focusing on the structure (not outcomes) of the grant.
A high percentage of grants that achieve expected results might indicate that you are aligning your expectations and level of support appropriately.
A low percentage might indicate that:
- Your grantees are overestimating their capacity (if they established expected results).
- You are overestimating your grantees’ capacity (if you established the expected results).
- Your grants are not large enough to achieve the results you would like.
- Your grants are not given for a long enough time period to achieve the results you would like.
- achieving results vs. not
- percentage of grants achieving expected results
(b) Do our grants require substantial modification or are they correctly structured from the onset?
Mid-course changes to grants aren’t necessarily problematic, but if a high percentage of grants require modification, you may not be structuring your grants properly or providing adequate support to meet goals.
- requiring modification vs. not
- percentage of grants requiring modification (e.g. time extension, change in expected outcomes or increased support)
(c) Are our grants at the level of significance that we intend?
If your grants are a high percentage of the budget of the organisations and projects you fund, then you are providing a significant amount of support to your grantees. Therefore, your expectations and reporting requirements for your grants may be relatively high.
A low percentage indicates that your support is not generally critical to the project or organisation being funded and your expectations and reporting requirements should be ’rightsized’ to your level of support.
- organisational budget distribution – project budget distribution
- median percentage of organisational budget funded
- median percentage of project budget funded
(d) To what extent are our grant periods timed appropriately?
If a high percentage of reports are overdue, it might mean that your grant terms do not align with actual project timelines or that your requirements aren’t ‘right-sized’ to the level of support you are giving. It might also point to a need for a new process, including reminders to grantees to support compliance.
A low percentage of overdue reports might indicate that your reporting requirements are timed correctly, your process supports grantee compliance, and your requirements are ‘right-sized’ to your level of support.
- overdue vs. not
- overdue distribution – on schedule vs. delayed
- percentage of overdue reports
- how far are reports overdue?
- grant payments made on schedule vs. those delayed
(e) Are we paying multi-year grants as planned?
Often multi-year grants are not paid as expected due to late reports, grant modifications, etc. Delays in paying expected grants can have important repercussions on a grantmaker, creating avoidable ‘fire drills’ as you scramble to find a replacement grant to meet pay out requirements or your annual budget targets.
- scheduled vs. actual
- scheduled vs. actual payments
(f) Do our grants support our grantees’ articulated needs?
If your grants are generally a high percentage of what is requested, it might indicate that you can set your expectations to match grantseekers’ proposals. It may also be evidence that your organisation does a good job of discussing proposals and setting expectations for appropriate funding in advance of applications.
A low percentage might indicate that you need to carefully adjust your expectations—for results and time—to match the actual financial support you are granting.
- grants funded vs. requested
- funds granted vs. funds requested
3. Are we efficient in our internal processes?
(a) How much does each grant cost us to make?
It costs your organisation money to process each grant, but many funders have not calculated this cost. Doing so can help you determine whether you want to make changes to increase internal efficiency.
- grant cost distribution
- the cost to make each grant
(b) What is the elapsed time from application to grant payment?
The length of time it takes from receipt to payment is the ultimate indicator of the efficiency of your internal process. Looking into specific phases of the process can help you find room for additional efficiencies. For steps that take a long time, what is happening there? How many people need to touch a grant? Does anyone touch it more than once? Where are the bottlenecks?
- processing time distribution – average processing time per grant
- proposal review to notification
- notification to funding – compare to prior years to see if your process is speeding up or slowing down
(c) Are portfolio sizes appropriate for diligence, efficiency and reasonable workload?
Tracking the number of proposals managed by each grants manager and programme officer can give insight into whether workload is appropriately balanced and whether demands on staff are reasonable. Naturally, grant complexity can add further proposal review or grants management time as well.
There are strategies for balancing portfolio size. If you can’t increase staff in a particular area, look at ways to decrease proposals. Can you design more efficient filter mechanisms so staff review only the most competitive full proposals? Can you ’right-size’ grant requirements to decrease the amount of work each one takes? Can you make more multi-year grants?
- grants distribution
- minimum, maximum and median number of LOIs and proposals managed by each grants manager
- minimum, maximum and median number of LOIs and proposals managed by each programme officer
- compare to prior years to see if volume is increasing or decreasing
4. Are we communicating effectively?
(a) Are we clear about our funding priorities and criteria?
If your organisation consistently has a high percentage of declined proposals, it might indicate that:
- You are not clear enough about your funding priorities and funding criteria, allowing non-competitive organisations to believe they have a chance at support and draining their resources.
- Your materials may not state clearly enough that you accept proposals by invitation only.
- You may be casting too broad a net and should consider a different system of soliciting proposals.
A low percentage may indicate that your information, guidelines and filtering mechanisms are clear and you are reaching your intended grantseeker audience.
- declined vs not
- percentage of declined proposals
- grantseeker perceptions
- inventory of information available to grantseekers and grantees
(b) Do we communicate clearly about the size of our usual grant?
A large difference in the amount of money requested vs. money given may indicate that you are not effectively setting expectations about grant size. This could also suggest that the size of the grant you give is not sufficient for the types of organisations and projects that you attract for funding.
To increase clarity, you can include your average or median grant size in your application guidelines or post a list of all grants funded (with amounts) on your website.
- given vs. requested distribution
- size of grants given vs. the size of grants requested
(c) Does our application process make sense and work well for grantseekers?
If you receive a high volume of calls from confused grantseekers on the same topic or find that a high percentage of grantseekers require assistance, you may need to clarify your guidelines and instructions or offer grantseeker training.
If questions pertain to your online system, the system may have bugs and glitches and need to be user-tested and refined.
- call and email distribution – grants requiring assistance vs. not
- number of calls and emails received
- types of questions asked
- percentage of grants requiring assistance in applying
(d) Is our customer service prompt, courteous and helpful?
Grantmakers committed to being good partners should assess whether staff interactions with grantee partners are respectful and effective.
- response time distribution
- average response time to inquiries
- grantee perception of your staff
5. Does our process strengthen and support grantees?
(a) Is our net grant as high as possible?
A low net grant (the funds granted minus the cost of applying for and reporting on the grant) indicates that your application and reporting practices are too burdensome for the size of your grants. Funders can best gauge the net grant by surveying grantees to know how much time it takes to apply for and report on funding.
- time cost distribution – net grant distribution
- time costs of application and reporting to grantees
- average net grant
(b) To what extent are unsuccessful applicants spending time on our requirements?
Tracking how far an unsuccessful request makes it through your system tells you a lot about the effectiveness of your practices.
If your organisation requires and declines many full proposals, you are causing many non-profits to do significant work without reward. A proposal verification stage or other filtering mechanism can help ensure that only the non-profits with the best chance of receiving funding do the work of a full proposal.
If you have many requests, but a high percentage of proposals advance to the full proposal stage only to be declined, you may need a better filtering mechanism to vet the applications, requests or proposals, only allowing those that truly have funding potential to move forward.
- declined vs. not
- percentage of declined applications
- percentage of declined full proposals
- time costs of application process
(c) Are we supporting the infrastructure and true costs of the organisations we fund?
Strong and sustainable non-profits require support beyond programme grants. Otherwise, they struggle to find funds to pay for basic needs, such as fundraising expenses, professional development, good financial systems, salaries and other overhead expenses.
- purpose of grants – grant distribution
- percentage of funds that go toward general operating expenses
- percentage of grants that pay for indirect costs
- percentage of grants that go toward capacity building expenses
(d) Are reports helping us and grantees to learn and grow?
There are two reasons to require reports:
- evaluation for learning or to understand impact
Confirming compliance with grant terms is a quick and easy match between what you expected to happen and what actually happened. Using reports to build field knowledge, assess whether your organisation is pursuing effective strategies or evaluate whether grants have the intended impact on the world is a much more difficult and time-consuming process.
Being clear about your reasons for requiring reports is critical to ensuring you have the appropriate reporting requirements, frequency and internal capacity to manage the incoming reports.
If reports are not being used to help grantees, inform internal strategy, or build knowledge, then the requirements should focus on compliance with your terms only.
If reports are habitually not read or not responded to, they may be too frequent or too long. It is also possible that staff priorities or workload prohibit a careful review and use of reports.
- reports required distribution – length of time distribution
- reports by age distribution
- average number of reports required per grant
- median length of time between receipt and completed review if you are tracking these indicators annually
- current number of reports under review by age of report (e.g. 0-3 months, 4-6 months, more than 6 months) if you are tracking these indicators more frequently (quarterly or monthly)
- qualitative assessment of report usefulness and relevance by citing examples of how reports were used to inform internal decisions and help grantees
A deeper dive to assess grantmaking effectiveness – additional questions to ask to ensure greater impact and return as well as more effective grantmaking practices:
- How do our grants contribute to lasting impact?
- Do our grants help organisations or programmes become more sustainable?
- Does our grantmaking and other support help grantees leverage funds in addition to our grant?
- Do we have an appropriate exit strategy for long term grants?
- How effective are we at learning from our work and our failures?
- How can we best assess the risk within our grant portfolio?
- How effective is the training and development of staff involved in the grantmaking process?
- Can we show a more direct link between efficient internal systems and process and effective grantmaking?
- How do we assess our compliance work (e.g. expenditure responsibility, equivalency determination and funding for advocacy)?
Next Generation Consultants understand that in order to ensure greater impact and success in social investment and community development, more attention must be paid to additional operational and management aspects. The questions above and the lists below are not exhaustive, it is simply a work in progress as we have come to understand that the success of community interventions depends almost exclusively on the capacity of intermediary organisations and not the design of an intervention. Therefore, funders will increase their chances of success if they not only consider the above qualifying information before they fund interventions, but also pay attention to additional aspects.
Operational capacity required for higher impact:
- Ability to develop, implement and deliver multiple programmes.
- Strength of internal plans, systems and strategies.
- Ability to increase services, products in specific geographies, populations, language and gender specific contexts.
- Dependency of organisations on current funding for operational effectiveness and efficiency.
- Strength of governance systems including skills, diversity, engagement, activities and succession planning.
- Strength of strategic and adaptive capabilities such as collaboration, values, leadership and entrepreneurial spirit.
Capacity required for higher return on investment:
- Ability to continuously develop new solutions, services and products.
- Ability to expand new solutions to new geographic areas.
- Ability to innovate.
- Ability to collaborate.
- Ability to transfer information, knowledge and skills.
- Ability to influence policy.
Future capacity to ensure both higher impact and return for funders:
- Ability to contribute to industry, sector and discipline – growth and development.
- Recognition of the work and impact of the intermediary.