Will COVID-19 and inequality transform grantmaking sooner?

‍by David Goldsmith, SVP, Strategy‍

This is an extraordinary moment in philanthropy. The twin crises of COVID-19 and civil unrest in the wake of George Floyd’s murder are pushing nonprofits to the brink. These combined forces are placing unprecedented demands on grantmakers to do more. 

New data shows nonprofits are on track to lose $25 billion in revenue in 2020. As Ford Foundation president Darren Walker said in a recent blog, the sector “faces overwhelming need paired with existential threat.” As a result, his foundation and several other major funders are taking an equally unprecedented step to issue debt finance in order to fund an additional $1.7 billion in grants in 2020.

At GivingData, we see firsthand how this threat to the sector is impacting our foundation clients. When the first wave of the pandemic hit in March, many moved quickly to provide emergency relief funds. They increased both the number and size of their grants and modified the application process to make it easier for organizations to seek emergency funding. Several foundations also amended existing grants to provide additional funding, extend the length of the grant period or remove restrictions that were put in place prior to the pandemic. 

Following mass protests and renewed urgency to mobilize in support of Black Lives Matter, they moved quickly again. Several foundations have pledged to devote more funds and resources to organizations focused on systemic racism and inequality. 

No more business as usual

For philanthropy’s leaders, it’s a moment to lean in like never before — rethinking how grantmaking is done, where grant dollars should flow, and how to reduce friction in the grantmaking process. 

“The time for business as usual is long gone,” writes Kris Putnam-Walkerly, an advisor to foundations and Fortune 500 companies on giving strategies. Among her recommendations — dispense with “lengthy and prescriptive” RFPs, accept unsolicited proposals from organizations rooted in communities hardest hit by systemic racism, and open the door to new ideas and partners. 

Philanthropy leaders are stepping up. More than 750 grantmaking foundations signed a pledge to loosen or eliminate the restrictions on current grants and to make new grants as unrestricted as possible. They also agreed to reduce the burden on their grantees — shedding paperwork, postponing reporting requirements, and cutting down on time-consuming site visits. 

Three key areas of grantmaking that are primed for change

The impact of these converging forces has been to accelerate the rate at which philanthropy is re-engineering its grantmaking practices. In several areas, the shift is occurring faster than anyone anticipated. 

For starters, the future of grantmaking will be even more focused on diversity and equity issues than in years past. It will mean not only confronting the roots of systemic inequality, but making substantial investments in programs that address education, economic inequality, criminal justice and social determinants of health. 

Beyond that, it will change the speed at which philanthropy responds to society’s most urgent needs. Lengthy strategic planning exercises, followed by cumbersome planning and approval processes, won’t fly. Agility, flexibility, and adaptability will be viewed not just as core values, but as strategic imperatives. 

Within the span of a few months, grantmaking at the speed of digital has moved from being an aspirational goal to an organizational necessity.

Here are three areas that we expect will further accelerate the rate at which foundations make this shift:

1. Virtual collaboration: With COVID-19 sending funders into lock-down mode, there has been little choice but to embrace remote work and collaboration. This has affected executive leaders, board members, program officers, and support staff equally. It has also required that foundation directors and trustees adopt new ways to carry out their fiduciary responsibility to quickly approve emergency grants. By necessity, foundations have had to embrace cloud-based tools to connect and collaborate in real-time. They have also had to put new systems and processes in place to manage their workflow and business processes remotely. Funders with paper-based grants management processes have had to devise workarounds that are inefficient and costly. Those already using cloud-based systems to support remote collaboration have come to recognize this should be the new norm.
   
   
2. Grantee portals: The pandemic has brought into sharp focus why web-based grantmaking is no longer a nice-to-have. Getting needed funding into the hands of front- line organizations requires online portals that facilitate the entire grant process and greatly reduce application cycle times. While most foundations now accept grant proposals through online forms, many still haven’t completely digitized every aspect of their business process. We now see why that’s essential. Today’s portals need to go beyond simple transactions. They should enhance collaboration between grantseekers and grantmakers, making it easy to address questions in real-time or to work together to refine the purpose and scope of a grant. They should readily facilitate online grant reviews by program staff and external reviewers. And they should enable funders to collect and store banking information in order to facilitate immediate electronic funds transfers to grantees’ bank accounts. 

3. Constituency Relationship Management: While many foundations have moved more of their grants management process online, the emphasis has too often been on the transactional nature of grantmaking. The pandemic has taught us that being agile means being collaborative. It means cultivating relationships and sharing knowledge with multiple stakeholders, including grantees, peer funders and subject matter experts. As such, foundations should invest in platforms that strengthen Constituency Relationship Management (CRM) and capture every critical interaction, whether by email or by phone, over the lifetime of the relationship. Any important inbound and outbound communications should be associated with the correct contact, organization, and grant record. Journals and workbooks individually maintained by foundation staff should go the way of the fax machine. Insight into the lifecycle of grantee relationships and simple tools to foster ongoing communication and collaboration, should be table stakes in a post-COVID world.

The dual crises we face reinforce the need for funders not just to bolster their support of grantees, but do so faster and with greater agility than ever. It means every effort must be made to capitalize on technologies that reduce unnecessary friction in the grantmaking process. The risk today is not moving fast enough. The future of the nonprofit sector is in the balance. The good news is the future of grantmaking is now likely to arrive sooner than we imagined.