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10 Things I Learned About Grantmaking

JSF Board Chair Malcolm Macleod has learned a great deal during his more than 30 years of working in philanthropy. He has been instrumental at the Foundation in implementing impactful grant-making strategies that help disadvantaged people groups pursue education and employment opportunities.

Here, he shares some of his lessons learned, which are discussed in more detail in his recently published book, “The Practice of Philanthropy: A Guide for Foundation Boards and Staff.”

It’s written for donors big and small—whether they are foundations or families who want to make the world a better place.

Read on to learn how effective grantmaking can have major impact on your grantee partners and your organization.

 

1. Grants are investments

Practice grantmaking like you mean it. Whether you are making grants yourself or acting through staff, grantmaking activity must be purposeful and organized. Treat your grants like the precious investments they are.

Foundation investing is different from “for profit” investing. Financial success is uncorrelated to the quality of your grantmaking or the quality of your grantee partners. Your “return” is social benefit, not profit, and your strategies will be different. 

2. Knowledge is your foundation’s vital second asset

Foundation leaders should immerse themselves in their fields of interest. It is the best way to learn. This is where your ideas will come from. Knowledge and ideas will inform your strategy and make it better. Learning is at the heart of good grantmaking practice. 

3. There is a power imbalance

When you deal with potential grantees, the most important thing for you to understand and always remember is that there is a gross inequality of bargaining power between foundation and grantee. This makes it difficult for grantees to trust foundations and inhibits honest dialogue. It can also interfere with the grantmaking process and make the foundation’s work more difficult. The power imbalance cannot be eliminated, but foundation behavior that demonstrates trust in its grantee partner should, over time, mitigate its effects.

4. Grantmaking is an iterative process

Great ideas do not usually arrive in final form. They build on each other and improve. The practice of good grantmaking often leads to better grantmaking. Knowledgeable grantmakers can play a big part in the iterative process of ideas and help propel the evolution of strategy.  

5. Foundation grantees are partners

Do not use the term “partner” in a patronizing or careless way. Realize that your grantee partners are the ones who do the work of advancing your foundation’s mission. You need them as much as they need you. You invest, they work. Once you commit to the concept of partnership there are two things that follow. Choose grantees carefully. Choose grantee partners you can trust and treat them with respect. They invariably know more about their work and the related issues than you. They are the teachers, and you are the student. 

6. Give grantees the tools. 

The best grants are those that empower people and organizations to be more independent. 

7. Embrace risk (and failure)

Foundation grants are risk capital. Allocate some or all of your grants to new organizations and ideas. Foundations are free. They are independent of the marketplace and public approval. 

New ideas and methods will require foundations to be different, to go against the grain of conventional thinking. Foundation independence permits this. Setbacks and failures are a necessary part of innovation. Have the courage to be honest with yourself and transparent with the world. This is a cultural issue for foundations. They must consciously create a culture that embraces risk and develop policies to reward bravery and innovation. Leaders must show humility and openness about their own mistakes and imperfections. This will give everyone the courage to speak up and advance new ideas. 

Risk is not the same thing as recklessness. Knowledge, experience, and strategy will inspire risk taking. Recklessness is born of ignorance and impulse. Know and practice the difference.  

8. Realize that some grantmaking is more difficult

Trying to help people solve seemingly intractable problems is a high calling for a grantmaker. Both grantmaker and grantee must feel their way along with all the self-doubt that this entails. If there were an easier way or even a clear course, it would likely have been found already. 

Grantmakers must be patient and accept small victories. There is usually no silver bullet. Slow progress is better than what preceded it (nothing). And if grantmakers won’t do it, who else can or will? Above all, be honest and transparent about your grants and results. There is much to learn from your experience.

9. Beware of unintended and unwanted consequences

Grantmakers should respect the power of money and not wave it around like a magic wand. The best insurance against unintended consequences is a good knowledge of, and an honest relationship with, your grantee partner.

10. Make freedom and independence your foundation’s greatest asset

Dedicate part of your grant budget to tackle difficult problems that others cannot or will not. The opportunities, large and small, are boundless, and they are out there waiting for you. Use your freedom to go out and find them.

 

About R. Malcolm Macleod, K.C.

Malcolm Macleod was born in Amherst, Nova Scotia in 1951. He obtained a B.A. in English (Honors) in 1975 and was awarded a Lord Beaverbrook Scholarship to study law at the University of New Brunswick.

Malcolm was admitted to the New Brunswick Bar in 1978 and to the Nova Scotia Bar in 1979. He joined the firm of Patterson, Smith, Mathews and Grant as an associate and practiced with that firm and its successors for over 25 years. During that time he served as managing partner and chair of the firm’s litigation department. He was appointed Queen’s Counsel in 1997.

Malcolm joined the Johnson Scholarship Foundation as a trustee in 1993. He was elected secretary in 1995 and served in that position until 2001, when he was elected President and Chief Executive Officer. He retired from that role in April 2020 and accepted the Board’s invitation to serve as Chair of the Board of Directors.

You can read more of his insights in his newest book, which is available for purchase

Greater Good

CEP’s biannual meeting will be held in early May in Minneapolis, and I will attend along with two members of our Board of Directors. The pre-conference session will feature CEP’s most recent research paper, Greater Good: Lessons from those who have started major grantmaking organizations.

Listening and Understanding

At December’s Continuing Education presentation, “How to listen to grantees (and still find out what we need to know),” Bobby Krause of the Johnson Scholarship Foundation Board of Directors made the point that we must actively and empathically listen to our grantees. His presentation to his fellow Grant Program Committee members contained good communication and relationship building advice, namely, show up, shut up, engage and interpret. This advice fits well with recent research by the Center for Effective Philanthropy (CEP), Strengthening Grantees: Foundation and Nonprofit Perspectives.

Here is the summary of CEP’s findings:

  1. Foundations are not as in touch with nonprofits’ needs as they think
  2. Nonprofits most desire help in fundraising, staffing, and communications
  3. Both nonprofits and foundations have a role to play in closing the gap between the support nonprofits need and the support foundations provide
  4. Nonprofit CEOs see general operating support grants as having the greatest impact on strengthening their organizations

The first finding is hardly surprising, and neither are the numbers behind it: 95% of foundation leaders believe that their foundation cares about the health of their grantees and 87% of them believe that they are aware of grantee’s needs. But only a minority of grantees (43%) believe that foundations care about strengthening their organizations and most of them (58%) say that foundations don’t ask them what they need.

It seems trite to say that funders care about the health of their grantees. It is the grantees, after all, who execute the funder’s mission. Money may be an essential ingredient, but it is the grantees who do the work. So why would they think that foundations do not care about them?

Much of the answer lies in the parties’ unequal bargaining position; the grantee asks, and the grantor decides. According to CEP’s research most grantees (64%) primarily consider what they think a foundation will fund, rather than what they really need. JSF has adopted practices to mitigate the power imbalance (listening is one of them) but nonprofits’ telling funders what they want to hear is pervasive, if understandable.

Going back to Bobby’s presentation, we must do more than listen to grantees. We must “interpret” and deeply understand them. What do they care about? Do their values and mission align with ours? What are they doing? What do they want to do? Will their work fit well with our mission and strategy? Does their leadership inspire confidence? The understanding that comes from answering these questions is the first order of business and is by far the most difficult part of the grant making process.

Our grant making process is designed to quickly decline requests that obviously do not fall within our mission and strategy and concentrate on those few that might. We frequently spend a year or more researching and meeting with a potential grantee (and its end users) before deciding whether to entertain a grant application. Implicit in our decision to accept a grant application is confidence in the grantee and a belief that its work aligns with our mission and strategy.

It follows that the grant transaction should be a simple matter of asking how we can best support a grantee or potential grantee. If we have done our work well then the grantee will trust us and tell us exactly what it needs.

Malcolm Macleod is the president and CEO of the Johnson Scholarship Foundation (JSF). Since joining the Foundation as president in 2001, he has spent the past 18 years working with the Board, staff and grantees to ensure that JSF is a Foundation that makes quality grants serving as catalysts for effective change. Prior to his work with the Foundation, he had a 26-year career in law and is currently a member of the Bar.

Doing Good

Sometimes it seems impossible to tell the difference between good grants and bad ones. If we feed the hungry and house the homeless, it feels good but the lasting result is to encourage dependency. If we fund groundbreaking research on how to address poverty, the connection between our grant and the end result is usually hard to see.

Accepting accolades and congratulations from a grantee for our generosity, wisdom or hard work should make us skeptical. Are we really so selfless and smart? Or do these grantees need our money so much that they will say anything to get it? And if that is the case, have we done anything to help our grantees become more independent or is our grant just another link in a chain of endless handouts?

One of my favorite stories about philanthropy is a much criticized grant for medical research that was made in the early 20th century by John Rockefeller. Pure medical research was unheard of at the time and one incredulous observer asked, “Why would you do this?” to which the reply was: “Because we have the faith of fools.” It was not until years later that the grant proved its worth and medical research became a new standard in the world.

Effective grant making often involves risk of failure and, worse yet, risk of looking stupid. None of us enjoys being on the receiving end of a critic’s hindsight, “what were you thinking!” In the short run at least, it is much more enjoyable to be the object of a grantee’s gratitude and affection. But for really great grant programs, the ones that we are proud of in years to come, we were usually faced with the prospect of failure and, at some point or other, found ourselves asking ourselves if this program was worth doing.

Scholarships, education and even transition involve relatively less risk and reward. The Johnson Scholarship Foundation’s grants are less likely to be a waste of money (or to revolutionize the world). Our choices usually involve the question of how best we can utilize our limited resources and talent.

On the one hand, we may be overreaching with such programs. We might ask: Is this program too complex and expensive for a Foundation of our size? Can we really be a catalyst for the community support required to sustain this program in the long run? Time will tell and proper evaluation tools and data collection will help understand the impact.

Accolades should always make good grantmakers nervous. But striving for honest relationships and insightful data can ease the nerves and take the spotlight off of the funders and onto what really matters: doing good.

Malcolm Macleod is the president and CEO of the Johnson Scholarship Foundation (JSF). Since joining the Foundation as president in 2001, he has spent the past 18 years working with the Board, staff and grantees to ensure that JSF is a Foundation that makes quality grants serving as catalysts for effective change. Prior to his work with the Foundation, he had a 26-year career in law and is currently a member of the Bar.