Grant-makers, as I define them, are organisations who give money to other organisations, or individuals, to carry out good work – in effect, outsourcing their charitable objectives to a third party. Grant-makers have a range of options in how they position themselves, choose grantees, and develop ongoing relationships to deliver their mission: their strategic choices, as I call them. There is a tendency to think that grant-makers are all rather constrained in how they decide who they can give grants, and how they do it – and with good reason.
Grant-makers are all too often ‘stereotypical’ in their approach: they have chunks of money to fund projects, and after an extended application process, they make a grant and request monitoring of their grant’s effectiveness. This approach is summarised in the diagram in the middle of this piece (figure 1), and alongside the stereotypes, are the alternatives choices that grant-makers have. I am arguing for greater strategic diversity in the way that grant-makers do their work.
I have divided the choices that grant-makers have into four areas: the positioning of the grant-maker, the application process, the kinds of grants, and the type of grant relationship. The titles in blue indicate approaches that are, in my view, the stereotype or the strategic norm. The titles in purple might be considered less typical.
Choices on the strategic positioning of grant-makers
The vast majority of grant-makers are funded by investments of one sort or another. Typically, a benefactor gives an endowment, whether in the legal or colloquial sense of the word. This is then invested to derive an income, which is used to fund grants. The number of grant-makers who have used this model is huge. Examples include Henry Smith, John Ellerman, Garfield Weston and the Gates Foundation.
I find organisations that don’t follow that model particularly interesting, as they are both raising funds from a mass audience, and are grant-makers. Good examples of this include the People’s Postcode Lottery, the National Lottery Community Fund, and the other lottery bodies.
Most grant-makers are pretty overt about their activities. It’s obvious that they are a grant-maker. They have an application process, and the world knows what they do: good work through funding other organisations.
Not all grant-makers are so overt. For example, BBC Children in Need and Comic Relief are grant-makers, just as John Ellerman or Henry Smith are. However, I would argue that their public image and brands don’t make that clear. It is not unreasonable to suggest that a person might watch a BBC Children in Need or Comic Relief telethon and think that the projects featured were run by those respective organisations. Whether they hide their grant-making is up for debate, but I am not sure they are overt about it. Both Comic Relief and Children in Need are not stereotypical in the sense that they are funded by fundraising, and not by investments.
The final area of strategic positioning to consider is how grant-makers create policy and deliver programmes directly. Most do neither; they don’t run any of their own programmes, campaigns, or develop policies designed to change the world in which they work. If they want to do that, they do it through grantees.
However, some grant-makers do run their own programmes and demonstrate that they use their grantees to learn about how the world could be a better place. Oxfam fits into both these categories. It provides grants to other organisations (typically using the term ‘partner’), as do most overseas development organisations. Lloyds Bank Foundation (England & Wales) is increasingly using its work with its grantees to create policy about what makes life harder for the small organisations that it funds.
About the application process and grant programmes
Many grant-makers are happy to accept applications from any size of organisation. It’s the projects they fund that matter, not the size of the organisations who run them. Being blind to the size of the organisations they support is the norm for most grant-makers. However, some grant-makers will only fund organisations below a certain size - £1 million in the case of Tudor Trust, for example. The reason for this funding of smaller organisations, centres around the much greater importance of grant funding to smaller organisations, and the greater difficulty in fundraising for them.
One of the most obvious questions for grant-makers is who to fund. Many organisations are generalist in their approach, while others are quite specialist. There is less of a stereotypical approach in this area than in many of the others strategic choices discussed. Specialisms can be centred around geography (e.g., only funding organisations in Cumbria), by cause (e.g., only funding animal welfare) or by discipline (e.g., only funding governance reviews). Many of the specialisms of grant-makers are rooted in the interests of the people who donated the money originally.
There seems to be far less variety in how grant-makers choose to find their grantees, compared with who they choose to fund. The vast majority of grants that are made are given following applications: the grant-makers don’t go out looking for the organisations they give grants to. This is for both practical and strategic reasons. The practical is that if an organisation is inundated with applications reactively, it need not spend valuable time or resource looking for additional applications.
The strategic one is that if a grant-maker were to go looking for grantees, it would need to have a clear idea of the kind of organisations it wanted to make grants to. This would require a clear idea of the kind of activity programme that it wanted to create or facilitate. This scenario is perfectly plausible, but requires a strategic approach that is closer to those organisations that run programmes than those that hand out grants.
Choices about the kinds of grant made
The stereotypical grant is made to support a particular programme or project. The application process is designed to gather information about different projects, and the organisations running them. Even grant-makers that support smaller organisations will often still want to give to a particular project.
The flipside of this is to provide unrestricted or core funding – money that goes to support the organisation as a whole and pay for salaries, rent, or whatever else the organisation needs funds for. This kind of support is still only a minority fraction of all grants made (though it’s hard to establish how much). Often the organisation supporting smaller grantees through grants also give core funds – 92% of Tudor Trust’s grants are made to core funds.
Alongside whether grants are for projects, is a subset of project grants: whether grants are for revenue or capital. The former being a grant for ongoing costs, and the latter being when a grant is to pay for a capital or one-off cost for a building purchase or renovation or the like. A few grant-makers specialise in capital grants, but typically this requires larger sums of money. The Wolfson Foundation extensively makes capital grants.
If you ask grantees about their ideal kind of grant funding, they tend to say multi-year unrestricted grants. This is the perfect grant type for many charities, especially smaller ones, as it allows them to plan ahead with a degree of stability and predictability. The pandemic has shown how the world can change very quickly. Multi-year unrestricted funds allow organisations to react to those changes, without having to worry about whether the funds are meant to be used for one purpose only. However, the most common type of grant is still the single year grant for a specific project, even if charities wish it were not so.
Choices about the grant relationship
Grant-makers want to know how their grants are being used – how the funded project is doing (monitoring), and whether it is doing what it said it would do (evaluation). That’s understandable. The issue is how extensive that monitoring and evaluation is. Many charities complain that the report writing for a grant can be onerous. One grantee told me about a quarterly report for a £1,500 grant. It is a grant-maker stereotype to ask for regular reports and feedback. The question many grantees would ask is how is that feedback used, and whether the extra effort in reporting back justifies the time taken vs the size of the grant. Some grant-makers are moving towards a less frequent model of reporting.
Most grants are given on a stand-alone basis. You apply, you get a grant, and the grantee tells the grant-maker what a great job they did. A few grant-makers like to give grants which require co-funding, or the requirement to work in partnership. Most grantees, in my experience, are quite happy with the stereotype in this case!! Co-funding might typically mean, for example, needing to find match funds for whatever grant is awarded. This brings with it all sorts of possible challenges – what if the matching funds are not secured, or the second funder wants to tweak the project, or work to different timescales? The idea behind co-funding is to help secure more funds from other sources, and spread the risk, and it is not the most common funding arrangement. As an idea, it broadens the range of strategic choices for a grant-maker. However for a grantee, it can increase the uncertainty because if they don’t get the co-funding then the work cannot go ahead.
There has been a trend in recent years to give additional support to grantees. This is sometimes called ‘funder plus’. While the stereotype is just to hand-over a grant and not much else, there is a lot of interest growing in giving additional support. The logic is sound – many organisations want more skills and capacity to fundraise, to evaluate, to have sound financial management. Funders such as Lloyds Bank Foundation (England & Wales) have helped organisations with a whole raft of additional skills and capacity-building.
The purpose of this piece is to point out that grant-makers have a lot more choices in how they deliver their grants than the ‘stereotypes’ suggest. While there are a few bold and pioneering funders who are innovative and push the envelope in terms of the things they try, they are too few and far between. Whenever I talk to grantees, they want more diversity, more innovation, and less stereotypes. By highlighting these strategic choices, my hope is to try and nudge funders to go beyond their comfort zones and do things differently.