Three Principles for Effective Grant-Making

Introducing three key principles and related best practices to improve the grant-making process for corporate philanthropy.

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Transparency Strategy

This Practical Giving Guide introduces three key principles and related best practices to improve the grant-making process for corporate philanthropy. Additional guides are available on related topics including improving the post-award grant-making process, structuring agrant, and selecting projects.

Key Takeaways

  • A sponsorship is commonly made with cash or in-kind goods or services and is a quick method of deploying resources. The receiver can use the resources with a high degree of freedom.
  • A grant is a more involved vehicle that is employed when an organisation wants to exercise influence over where, how, and for whom its resources are used. A grant is usually governed by a budget, scope of work, or other defined parameters.
  • Three principles to improve pre-award grant making process are: 1) clarify and stick to your goals, 2) do not confuse grant making with contract tendering, 3) approach applicants as co-investors, not as vendors.
  • Social returns and the means to achieve them differ vastly from shareholder earnings.
  • Reducing the overall burden on organisations to respond to your call will yield plentiful and strong proposals.
  • Partnering for success means structuring your relationship in a way that limits hardship that can distract from delivering results and instead nurtures growth.

Introduction

Total corporate giving amongst Fortune 500 firms totals over US $20 billion annually. While the budgets for ‘doing good’ seem large, we gain perspective by considering what they might be spent on. Let us consider the United Nation’s Sustainable Development Goals (SDGs), a collection of 17 global objectives for a brighter shared future. In 2017, the United Nations reported that achieving the SDGs will cost up to US $7 trillion annually. While much of that sum will be committed by governments in developed nations, large investment gaps averaging US $2.5 trillion in developing countries pose a significant challenge. Suddenly the demand for funding seemingly dwarfs global supply.

Private sector giving will undoubtedly contribute towards closing these significant funding gaps by the SDG deadline in 2030. To stretch budgets further, we must ensure that the ways in which we utilise these funds maximises impact. Much of direct corporate giving is carried out through two vehicles. The first, through sponsorship, is commonly made with cash or in-kind goods or services and is a quick method of deploying resources. The second, through grant making, is a more involved vehicle that is employed when an organisation wants to exercise influence over where, how, and for whom its resources are used. Often used interchangeably, the key defining characteristic of sponsorship is that it is generally ‘no strings attached’. The receiver can use the resources with a high degree of freedom. Grants, on the other hand, are usually governed by a budget, scope of work, or other parameters.

Figure 1: Understanding the difference between a sponsorship and a grant
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Both vehicles can support impactful giving. As sponsorships are less complicated, this guide will focus on the key elements to support highly effective grants.

Fundamentals

With your theory of change established, you are now ready to identify organisations that can help you create impact. Upholding the following three key principles can improve each stage of the basic pre-award grant making process:

  • Clarify and stick to your goals.
  • Do not confuse grant making with contract tendering, and
  • Approach applicants as co-investors, not as vendors.
Figure 2: Three key principles to improve the pre-award grant-making process
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Key Principle 1: Clarify and Stick to Your Goals

Why it is important: Having clarity around your giving objectives is fundamental to structuring your grant to meet impact goals. It is also critical to avoid ‘scope creep’. Scope creep is the frequent adjustment of the deliverables covered by a grant, often due to lack of clarity and focus around objectives. Another common trigger is the desire amongst applicants to please the grant maker by bending to every request during the application process.

Scope creep is disruptive in the pre-award phase because it creates a ‘moving target’ that is difficult for applicants to cater to. It causes distraction that reduces the likelihood that proposals will be delivered on time, in budget, or at all. While it is noble to augment your scope, doing so as part of an existing grant process can detract from your original goals or even jeopardise the quality of your programme.

Best Practice: It is perfectly acceptable, and even encouraged to re-evaluate and alter your giving objectives over time, but it is advantageous to disassociate any changes thereof from open grant negotiations. It also may be tempting to work with an existing applicant pool to service your evolving needs, but that pool may not always be best placed to do so. If your scope evolves beyond the core capabilities of your applicant pool, encouraging applicants to partner with other well-suited organisations can be a good way to ensure robust proposals.

Key Principle 2: Do Not Confuse Grant Making with Contract Tendering

Why it is important: You may be tempted to employ similar vendor-related policies to govern a grantor-grantee contract. There is no doubt that a grant is a contract by which both parties will be bound. However, applying the same vendor management approach designed to extract maximum financial value from grantees will likely negatively affect your outcomes and dissuade grantees from going the extra mile to deliver important results.

Best Practice: Achieving your goals requires a strong relationship with the delivery organisation that will ultimately drive impact. Approaching the grantee relationship as a true partnership will better position your joint endeavour for success. Partnering for success means structuring your relationship in a way that limits hardship that can distract from delivering results and instead nurtures growth. Some best practices include:

  • Clarify and stick to your goals.
  • Do not confuse grant making with contract tendering, and
  • Approach applicants as co-investors, not as vendors.

Key Principle 3: Approach Applicants as Co-Investors, Not as Vendors

Why it is important: You may be tempted to employ similar vendor-related policies to govern a grantor-grantee contract. There is no doubt that a grant is a contract by which both parties will be bound. However, applying the same vendor management approach designed to extract maximum financial value from grantees will likely negatively affect your outcomes and dissuade grantees from going the extra mile to deliver important results.

Best Practice: Achieving your goals requires a strong relationship with the delivery organisation that will ultimately drive impact. Approaching the grantee relationship as a true partnership will better position your joint endeavour for success. Partnering for success means structuring your relationship in a way that limits hardship that can distract from delivering results and instead nurtures growth. Some best practices include:

  • Consider multi-year funding. Grantors should be realistic when setting the duration of a grant. Offering single year funding for complex programs is inefficient for both you and the grantee who is kept on constant cycle of fundraising that exhausts resources and distracts from the mission. Multi-year grants also support longer-term planning.
  • Consider flexible funding. There is a temptation to fund only program related costs and restrict their use for overhead. However, more flexible funding that can be used across an organisation for indirect costs is more likely to support innovation and build capacities that directly improve results.
  • Non-financial support: Your organisation likely has more to offer than money. You can support your delivery partner by offering pro-bono services and trainings, in kind goods, software licenses, board-level advisory, volunteer hours, etc. Offering this kind of support may also encourage more organisations to apply for your grant.