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Taking Measure

Discover surprising news about the changing nature of Foundation-Nonprofit relations in Georgia, and what’s keeping you from your next grant, in this report from a ground-breaking survey conducted by Georgia Grantmakers Alliance, The Foundation Center–Atlanta, and GCN.

For the second annual Taking Measure survey, the Georgia Grantmakers Alliance and the Foundation Center–Atlanta teamed up with GCN to take the pulse of the state’s grantmaking community and, for the first time, collect feedback from the nonprofit perspective.

Though the anemic economic recovery has made fundraising a challenge over the past few years, we found some good news that goes beyond a slight uptick in giving: that grantmakers and nonprofits have similar priorities when it comes to funding areas like operational support and organizational development; that grantmakers are becoming more flexible, especially in the face of acute community need; and that nonprofits can overcome issues grantmakers see as red flags with open, honest communication. These conclusions were presented by Erik Johnson, General Counsel and Secretary of the Robert W. Woodruff Foundation, at an Atlanta GCN member event on Oct. 16 featuring a panel of foundation directors.

Taking part in the survey was a diverse group of Georgia grantmakers and nonprofit organizations:

Responding Foundations:47 Georgia grantmakers accounting for 57% of the state's foundation assets—over $6.7 billion
 
In 2011, they awarded $365 million to Georgia nonprofits, with 78% of grant dollars going to Health, Education, & Human Services.
Responding Nonprofits:
 
358
Georgia nonprofits representing all sizes & service areas,
with 30% outside Atlanta.
 
By Service Area:
Environmental & Animal (5%)
Arts & Culture (11%)
Education (14%)
Public Affairs/Societal Benefit (15%)
Health (18%)
Human Services (35%)

As it turns out, Georgia grantmakers maintain a relatively high rate of in-state giving, compared with peers elsewhere: a full 88% of Georgia grant dollars stay in Georgia. That’s good news for state nonprofits, particularly since more than half of responding nonprofits said grants count for 10% or more of their income. 

A full 88% of Georgia grant dollars stay in Georgia.

Further, more than a quarter said their reliance on grants has grown over the past two years in the face of a sluggish economic recovery and a steady increase in demand—the latest national surveys from Giving USA and the Nonprofit Finance Fund reported, respectively, that charitable giving in 2010-2011 saw its second slowest growth for any two-year period since 1971, and that 85% of responding nonprofits reported increasing demand for four straight years. (And no wonder: U.S. Census Bureau data shows that, from 2008 to 2010, the number of Americans living in poverty jumped by 16%, to 46.2 million.)

Alignment: Now more than ever

A question asking participants to rank the relative importance of different funding needs showed that nonprofits and grantmakers have similar priorities, putting the same five areas at the top of their lists: “operating support,” “professional development,” “information technology,” “professional development” and “new programs.” Though grantmakers tend to rank “organizational development” and “advocacy” more highly than do nonprofits, this general priority alignment is something Erik Johnson would not have expected to see ten years ago: “Now, by and large, I’d say that nonprofits and grantmakers have uniform beliefs about what is and what isn’t more important. But historically, many foundations have focused on providing extraordinary capital support; fewer were funding operational support before the Great Recession [of 2008] threatened the very viability of many critical nonprofits.”

Community Foundation for Greater Atlanta President Alicia Philipp, speaking on the presentation panel, said that’s the reason her organization began committing all competitive grant programs to operational support in 2008: “Many other grantmakers have also realized they have to strengthen the core of the organizations they really believe in. Capital building and other concerns are less important now than making sure organizations can sustain themselves and their mission.”

Grantmakers are showing a much greater willingness to adapt than ever before.

A follow-up in the survey showed that operating support, in fact, proved to be the kind of funding most likely sought by nonprofits and most likely awarded by grantmakers. Southeastern Council of Foundations President and CEO Janine Lee said that, 15 years ago, “it was sometimes a struggle” to find foundations offering support specifically for “organizational effectiveness.”

“This was a time when foundations were under enormous criticism for primarily supporting projects and programs, when there was a lot being written about how philanthropists should be more ‘businesslike’ and think like venture capitalists,” she said. Lee is “pleased” to see the trend reverse over the years; she cited the latest survey by the national organization she co-founded, Grantmakers for Effective Organizations, in which 83% of foundations reported funding nonprofit operational support in 2011.

Though participating grantmakers report more giving toward building, construction or renovation in 2011 than any other kind of support, Johnson explained that it only takes one or two large capital campaigns to skew results in a single year: “Capital campaigns are episodic, so looking at any one year might be misleading. That particular question will be more instructive when we get a data set that shows giving priorities over five-plus years.”

Conversely, that limitation can be seen in the discrepancy between the level at which third and fourth-ranked “professional development” and “information technology” were prioritized versus the actual level of giving in those areas. Johnson also noted a modest trend among grantmakers toward fewer but larger grants, especially among independent foundations, whose median grant size ($81,529) is almost three times the size of the overall median ($30,113).

The great news is that, where nonprofits and grantmakers do have diverging priorities, grantmakers are showing a much greater willingness to adapt than ever before. “There’s an appetite among foundations to be flexible, to react to changing community needs,” Johnson said at the event, but he still counted himself “surprised” to see more than half of responding grantmakers say they would consider giving outside their stated priorities.

In follow-up interviews, those grantmakers pointed to an acute community need like natural disaster relief or economic crisis as an example of what would prompt them to give outside their traditional parameters.

But the only sure way to find out if a grantmaker is willing to bend its giving standards is to ask—and that means communication.

Communications: And how to improve them

Taking Measure also examined grantor-grantee communications, especially from the perspective of nonprofits. Erik Johnson concluded that the state of that communication is “not great, but pretty good.” According to the data, nonprofits largely find Georgia grantmakers “clear” or “moderately clear” when communicating their procedures, decisions and priorities. Nonprofits also reported that grantmaker websites are not only their most-used information source, but also the most helpful. Where there’s room for improvement, Johnson and the panel agreed, is by increasing direct person-to-person communication, either over the phone or face-to-face. Nonprofits ranked phone calls and meetings the most helpful kinds of communication after the website, but also reported using them significantly less. Janine Lee noted that, while larger grantmakers like the Knight Foundation have been engaging grantees in-person through group educational sessions, smaller foundations may not have the time or personnel to attend face-to-face meetings, or even return many phone calls.

Bobbi Cleveland, ED of the Tull Foundation, said that what’s most important in communications is to be fully open and honest.

“What it tells us is that, when we do answer the phone or meet in person,” said Johnson, “you’re going to appreciate it. And it tells you that you shouldn’t hesitate to pick up the phone, if that’s going to be helpful to you.” Clearer communications, he noted, is a rising tide that lifts all boats: better understanding of grantmakers’ priorities and procedures allows nonprofits to produce a better grant appeal, which means a better class of candidates for grantmakers, which means it’s more likely that grantmakers will give.

Panelist Bobbi Cleveland, ED of the Tull Foundation, said that what’s most important in communications, especially when seeking grants, is to be fully open and honest. Though the process can be daunting and highly critical, she said, nonprofits can bridge gaps in their record by identifying problems ahead of time, developing plans to address them and presenting those plans fully and clearly to grantmakers.

Deal-breakers: What you can do

Top Deal-Makers1. Strong executive leadership
2. Financial Stability
3. Strong Board Leadership
4. Evidence of program sustainability
Top Deal-Breakers
 
1. 
No evidence of financial stability
2.  History of frequent leadership turnover
3.  Significant debt

But what are the gaps you should be on the lookout for? Taking Measure asked grantmakers to list the make-or-break issues that drive their decisions; leadership and finances were tops in the list of “deal-makers” and “deal-breakers” both.

To be exact: evidence of financial stability and strong executive and board leadership rank as the top deal-makers. Speaking from the panel, Alicia Philipp explained what that looks like: “It’s having a staff and a board with core competencies both in managing and in the nonprofit’s particular issue. Ideally, it’s three years operating in the black, six months of reserve funds, clean audits. Not everyone will meet those standards, but everyone should know what they’re doing to get there.”

Leading the deal-breakers list, meanwhile, is a history of frequent leadership turnover, significant debt, and other signs indicating financial instability. According to the panel, these red flags can come in the form of an inadequate or dysfunctional board, a lack of reserve funds, an incomplete or outdated strategic plan, an operation running at a deficit, or other organizational snafus. 

Nonprofits can bridge gaps in their record by identifying problems ahead of time, developing plans to address them, and presenting those plans fully and clearly.

Overcoming those red flags, said Bobbi Cleveland, is where full, open, honest communication comes in: “It has everything to do with coming in to talk with us and help us understand how your organization got to where it is. We want to know that you understand the external and internal factors that led to the challenge you find yourself in. We want to know you have a plan to address your challenges, and we want to see evidence that you’re implementing that plan—especially if it involves hard decisions. “When that happens, there is openness to investing in the solutions that the nonprofit itself has developed.”

Next: More data, more meaningful conversations

As a snapshot, the 2011 Taking Measure survey reveals a grantmaking community that’s largely aligned with the concerns of the nonprofits they support, and suggests a surprising capacity for adaptation in the case of changing community needs. In context, the survey also indicates that grantmakers are becoming more sensitive to the needs of nonprofits, especially regarding communications, and are at least sympathetic to the demands placed on them by granting organizations—a surprising 66% of grantmakers said they’d consider using a “common grant application,” a simple (in theory) one-document solution to nonprofits’ problem of filling out different, widely varying application forms for each grant request. “The caveat on that question, and it’s a big one,” said Erik Johnson, “is that the common grant application would have to provide all the same information that grantmakers get from their current [individual] application.” Johnson admits that he has no idea what that application would look like, or whether it would really simplify anything once all the grantmakers’ needs were taken to account, or even how the conversation on such a project would begin—but grantmakers’ willingness to consider the question means that conversation isn’t some impossible dream.

As the first in a series, the 2011Taking Measure survey begins the process of bringing grantmakers and nonprofits together by tracking the giving trends, attitudes, and expectations on both sides of the grantor-grantee divide. Together, the Georgia Grantmakers Alliance, the Foundation Center – Atlanta and GCN will continue to chart the entangled fortunes of grantmakers and nonprofits through Taking Measure, and use what we find to start more meaningful conversations and build more successful partnerships.

For a deeper dive into the findings, view the presentation.

Marc Schultz is writer/editor at the Georgia Center for Nonprofits.

 

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