Wednesday, December 27, 2006

The case against more gen-ops grants

NOTE: my first attempt at describing the CEP report was more truthy than accurate (see reader comments), and is now revised and hopefully better.

There are a couple of "inside baseball" type subjects which keep coming up anyplace non-profit and foundation staffs gather, regardless of what the specific conference/workshop/briefing/luncheon is actually about. One of them is evaluation (of non-profits, of projects, etc.); the other is that foundations should make more general-operating grants rather than project grants. Say the words "program grant" at any such gathering and you'll quickly be surrounded by knowing sighs and frowning head-shakes.

However the Center for Effective Philanthropy recently assembled a bunch of data suggesting that grantees are not nearly so worked up about that issue as are the foundation staffs who fret about it at conferences. The CEP also reports that a lot of foundation CEOs think that more general-operating grants would be better, although they mostly actually issue restricted grants: funding which can be used only a specific project or program.

As the CEP reports, the top reason that foundation boards prefer restricted grants is one that I find perfectly respectable: to be able to track specific outcomes of grant investments. (Foundations no less than operating non-profits are tying themselves into knots these days trying to figure out how to track and document the results of their work and not simply the amount of work they perform.) And while the CEP notes the obvious fact that grantees prefer to get unrestricted grants and hate the paperwork related to restricted grants, their main point is that non-profit directors are actually far more concerned about the length and amount of a grant than about its strings.

My own beef with this whole debate is that the relevant context is often overlooked. Foundation grants altogether are no more than one-sixth of all philanthropy in the U.S. (according to Giving USA); it would take a dozen new Gates Foundations to change that ratio significantly. The vast majority of philanthropic support for non-profits (mostly from individuals) is unrestricted. So is the large fraction of non-profit revenues (anywhere from a quarter to two-thirds depending on specific sector) that comes from earned income. Hence no more than one-tenth of non-profit revenues is actually arriving with specific strings attached. That hardly seems like a crushing burden of red tape for the hardworking executive director; and wishing that the foundations' reasons for those strings weren't necessary doesn't render them invalid.

On a side note, the CEP report includes a sidebar quoting Elizabeth Keating on the "overhead game", whose interesting proposals on that subject were described previously here.


Phil Buchanan said...

Your comment on our recent report on type of support, In Search of Impact, massively distorts our findings and ascribes a point of view to us that we simply do not hold.

You state that we report that "a lot of foundation CEOs think general operating support grants are better." In fact, we report that just 16 percent of CEOs we surveyed prefer to provide general support. Yes, many see operating grants as better for the grantee organizations but, as we report, other considerations, such as the ones you describe, are higher priorities to them. (We don't judge this; we simply report it.)

Second, you say that we assert that "operating support is more effective (than restricted grants) in creating impact on and ensuring the sustainability of grantee organizations." This is a complete distortion: What we in fact say, on page 10 of the report, is: "There is agreement among CEOs on at least one thing: Operating support is viewed as being most effective -- and more effective than program support -- in creating impact on and encouraging sustainability of grantee organizations." This is the CEO view, not necessarily ours. And, again, the point is that this concern appears not to be the highest priority to most of those CEOs we surveyed (or more would prefer to provide operating support). Moreover, we go on in our analysis of the grantee perspective to raise questions about whether this view of what is best for grantees is completely accurate or sufficiently nuanced.

This relates to the third distortion, which is that you say that we document "at length that grantees prefer to get unrestricted grants." Amazingly, you have overlooked perhaps the central point of our report: that type of support actually matters less to grantees than is assumed unless the grants are larger and longer-term than are most grants today. Indeed, this is one of the three key findings we highlight, in large type, on page 4.

We completely agree that the context is key, and discuss that context in our report -- noting, for example, the small proportion of budget funded by the typical foundation grant and listing a whole series of questions our analysis of the data raises for foundation leaders.

Our report is neither an argument for operating support nor an argument against it. It is, rather, an attempt to bring data to a debate that has been marked by an absence of data. If you read the report, you'll see that the grantee view is actually not quite what many foundation officers believe it to be and that, in fact, type of support alone may matter less to grantees than many assume. The report is available for free download at

Phil Buchanan
Executive Director
The Center for Effective Philanthropy

Paul Botts said...

You make some fair points which are supported by a more-careful read of the report (which I clearly read too hastily the first time). My apologies, and this evening I will accordingly annotate the blog post.

In particular I completely missed that you reported that the gen-ops/restricted-grant issue is so much less of an issue for grantees than for foundation staffs. That's ironic since (a) I've spent a lot more professional time in the former role than the latter, and (b) my own experience and attitude conforms perfectly with your finding! Sigh. Hubris alert: this here is a blogger who is always arguing with his newspaper-journalist sister that this medium can just as well be real journalism as a newspaper...perhaps I've just, in a way, demonstrated the fact? Not the plan here at all.

Anyway I will respectfully disagree with your criticism in a limited, and not-terribly-consequential, aspect. My statement that you reported that "a lot of foundation CEOs think general operating support grants are better" was inspired by and seems consistent with the opening clause of that bulleted finding, which reads: "CEOs see operating support as more likely to make a positive impact on grantee organizations..." That same point, at a bit more length, opens the second column of page 10. I do get your point that most CEOs in action choose other priorities over this attitude, but what I actually quoted you on was simply the attitude.

Anonymous said...

Thanks. I appreciate your message very much. We tried very diligently to stay true to the data. Our analysis of the grantee perspective, for example, is based on thousands of completed grantee surveys, as well as a couple of dozen in-depth interviews. We also surveyed more than 150 CEOs and received responses from nearly half. So we grounded everything in the report in the data we collected, and I just want to make sure those who read your blog know that. Many thanks for reading the report, for spurring debate on the topic, and for responding to my earlier concerns about your first post.

Phil Buchanan