Article In Brief:
- The Problem: Nonprofits find it difficult to build organizational capacity and infrastructure due to challenges securing funding for those investments. The prevailing scarcity mindset has a significant impact on the sector’s long-term sustainability.
- The Context: The old paradigm of funders supporting only discrete projects and not more meaningful investments is real, but it’s changing. Using data analyzed from over 3,200 grants, our author presents a compelling case for why it is time for nonprofits to change their fundraising strategy to ensure sustainability.
- The Solution: Nonprofits and grantmakers can align on the true cost of community-centered work. Doing anything less is missing a strategic opportunity. Every department in your nonprofit has a role to play, from leadership to development and program staff to finance.
Raise your coffee mug if you have heard some version of the conventional advice about how “foundations want to fund programs — not overhead.”
This traditional advice has led countless organizations to write grant proposals and scale program activities without the necessary organizational capacity or infrastructure to sustain that growth. Of course, unsustainable growth is not just a problem for leadership and staff but ultimately affects organizational impact as well.
Consider your own organization. How would conversations — both internal and external — change if you could ask for the funding you most need to sustain your organization and drive meaningful impact?
As those who work in and around nonprofits well know, the previous paradigm has harmed organizations and the communities they serve in countless ways. For example, it has led organizations to prioritize projects over infrastructure, growth over sustainability, and a scarcity mindset over investments in real change. Not to mention that this paradigm is grounded in classist and racist assumptions: namely, that those with resources (foundations) know better than those on the ground (nonprofits and their clients) about how to serve their communities and run their organizations.
At Elevate, we have worked with hundreds of nonprofit organizations to support their grantseeking from strategy to submission. And in doing so, we have collected and analyzed data on thousands of grants we write and submit on behalf of our clients each year.
Recently, we began to observe some hopeful changes among the thousands of grantmakers we research each year. We noticed that each year, funders seemed more willing to invest in succession planning, capacity building, and general operating support that organizations could leverage to strengthen their infrastructure.
We started to observe this shift prior to the pandemic, although the change seemed to accelerate amidst the tremendous needs made plain in 2020. Across the board, we saw our clients’ funding partners reduce restrictions in order to more efficiently put resources into the hands of the organizations working with communities in need.
And it seems like we’re not the only ones to notice this shift. Several articles, including “General Operating Support Is Vital to Advancing Equity, Strengthening Nonprofits, Say Leaders,” in The Chronicle of Philanthropy, have appeared in social sector publications supporting a shift among grantmakers to provide more general operating support. In addition, articles like “Ten Trends for Philanthropy in 2022” emphasize the importance of trust-based philanthropy – a philosophy that includes the flexible use of funding as well as other elements that shift power into the hands of nonprofits.
With our own anecdotal observations and the external context in mind, we wondered what our data might show about the breakdown of funding designated for programs versus general operating support. So, we dug into the numbers.
Our Data Shows Win-rates Are Higher for General Operating Requests
Elevate’s data team examined thousands of grant opportunities and the results challenge the prevailing advice that grantmakers will only fund programs, not overhead. Further information regarding the specificities of this study, for example, data and process, is available on our blog. We assume that our 100+ clients reflect the experiences of the nonprofit community writ large and believe this is a reasonable assumption given the number and diversity of our partner organizations. Our analysis resulted in three key takeaways:
- Grantmakers still offer many — more than 30% — more opportunities to request program-restricted grants than to ask for general operating support.
- Therefore, nonprofits typically secure more than twice as much funding for program-restricted grants than for general operating support.
- However, nonprofits are more likely to win general operating support grants compared to program-restricted grants. Elevate clients won 72.2% of general operating versus 68.8% of program grants — a small but statistically significant difference!
Implications for Nonprofits in General
First, the data shows that nonprofits can and do get general operating support from grantmakers. And while such grants are neither the majority of opportunities available nor the majority of dollars won, we no longer need to consider funding general operating support via grants as improbable or impossible.
However, this does not mean (and the data does not support) the idea that nonprofits should exclusively pursue grants that fund general operating support. Instead, we should think of general operating support as one component of a holistic grant strategy. Grantseekers must first identify where they most need resources, be that for staffing, technology, training, rent, or program materials.
But maybe the greatest need is in general operating support. After all, having ample operating support is often how organizations are able to pay their staff living wages, invest in anti-racism work, and plan for leadership transitions, for example. And so, if this is the case, then we as a sector need to continue to push foundations to be true philanthropic partners willing to invest in the sustainability and capacity of their grantee partners.
To reiterate, it is true that foundations invest more dollars overall in programs than in the operations of their grantees. And again, this will continue to create problems if philanthropists remain unwilling to invest in nonprofit infrastructure, especially if they refuse to invest in core organizational operations as well as offer unrestricted funding. Without core funding to invest in staff capacity and training, technology, organizational planning, capacity building, and critical diversity, equity, and inclusion work, nonprofits are hamstrung. And without unrestricted funding, they are unable to innovate, act swiftly to serve their community or constituents when the need arises or take advantage of unanticipated opportunities. This means that the scarcity framework will continue to fester, leading to widespread burnout (see “Avoiding Burnout and Preserving Movement Leadership,” in NPQ) and irreparable damage to the nonprofit sector if foundations refuse to offer both unrestricted and core funding.
Implications for You and Your Nonprofit
At Elevate, we ask nonprofit leaders a few key questions as we begin to design their grant program strategy:
- What keeps you up at night?
- What are you most excited about?
- What does success look like 5 years from now?
- If you were to receive an unrestricted contribution of $100,000 tomorrow, how would you use it?
The answers to these questions — and the discussions that follow — help us to understand how best to position an organization for a strategic grants program that meets their overall funding needs. A holistic approach typically includes pursuing an appropriate balance of unrestricted funding.
How to Use This Data in Your Day-to-day Work
No matter your position, you can use this data to help inform a holistic grant strategy for your nonprofit.
At the leadership level, nonprofit executives can approach funder relationship-building with a clear sense of the organization’s unmet needs. They should be prepared to tell the story of what the organization could achieve with an investment of unrestricted funding.
Board members should also be at the table, challenging organizational leaders to plan for critical investments as well as unplanned challenges and opportunities. Executive leadership and members of the Board should think of these types of investments as risk mitigation — reducing the likelihood of staff turnover, capacity limits, and urgent unplanned infrastructure needs. Board members can also help to navigate conversations with funding partners about the need for unrestricted funding.
In the development department, staff and grant writers can research aligned opportunities for general operating support. They should also build budget narratives and grant requests that articulate the organization’s needs as well as the impact that unrestricted funding could have on the organization’s outcomes.
To help support the development team, program staff might also challenge themselves to think about what is not getting done with the resources currently in hand. Program staff might consider what more could be done with investments in capacity and infrastructure. They should ask themselves if their teams need more training, more staff, higher salaries, and/or reduced workloads. In general, program staff should consider what resources they need to do their best work for their constituents or community.
Finance staff can also help by ensuring that the full costs of doing business are captured in funding requests. Even restricted grants can and should include indirect expenses, personnel costs, and other infrastructure needs.
Ultimately, everyone in an organization has a role to play in implementing a holistic grant strategy.
This is the Work of Grantors, Too
Of course, this collaboration must also include those who do not work directly at a nonprofit organization. That is, philanthropists and program officers must also help nonprofits develop more holistic grant programs.
They can start by listening to grantees and examining the elements of their grantmaking processes that create unnecessary restrictions and harm nonprofits. For example, grantors must stop capping grantees’ indirect costs at artificially low rates. Instead, if a grantee scales its work each year, they should consider providing resources for organizational capacity to sustain this trajectory. And if a grantee requests less than 20% in indirect or overhead costs, they should consider offering a general operating support grant to encourage investment in the organization’s infrastructure. In general, grantors can help nonprofits by increasing the amount of unrestricted funding available, considering specific investments in grantees’ organizational capacity and infrastructure, and encouraging peers in philanthropy to do the same.
Progress is Possible, and We All Have a Role to Play!
At the end of the day, we all have a responsibility to the nonprofit sector and the communities they serve to advocate for change. We must stop glorifying scarcity and sacrifice among those doing the hard work of social change; it is not only hurting nonprofits and nonprofit staff, but those they serve as well. Instead, let’s celebrate the well-equipped nonprofits — those who serve their communities while also serving their staff. And as a society, let’s ask philanthropy to make more meaningful, less restrictive investments in the nonprofits that better our communities.
Jessica Culverhouse is Vice President of New Client Partnerships at Elevate, where she is responsible for marketing and new business development. Leaning into her own experience as a grant writer and her background in nonprofit strategy, program design, and management, Jessica brings a deep understanding of the “pain points” nonprofits face as well as a strategic approach to addressing these through smart grant programs.
Jessica joined Elevate in 2016 as a team Director and has held roles within Elevate’s management and business development teams since 2018. She is an experienced nonprofit professional with a background in corporate and foundation fundraising, program design, strategy, and partnerships. Prior to Elevate, Jessica worked in development and program management roles at the National Recreation and Park Association as well as the National Environmental Education Foundation, both based in the DC region. She also spent two years in her early career teaching high school biology in Northern Virginia.
Articles on Blue Avocado do not provide legal representation or legal advice and should not be used as a substitute for advice or legal counsel. Blue Avocado provides space for the nonprofit sector to express new ideas. Views represented in Blue Avocado do not necessarily express the opinion of the publication or its publisher.
Katherine Russell says
I’m so glad I came across this article. As someone who has worked in nonprofits for ten years, I can say that the “chaotic nonprofit” narrative doesn’t have to exist. When administration and infrastructure are supported, it trickles down to the staff – and staff mental wellbeing – and the people they are serving. An organization with proper overhead support is a healthier, more effective one!
Jessica Culverhouse says
Here here, Katherine!
Phillip L Iman says
I agree with everything that I just read in the article about funding for non-profits overhead costs. We struggle with this every day. Just having enough staff to meet the demand for services is a struggle. And then paying them a living wage, let alone a competitive wage is a huge struggle. I didn’t see a real answer to this situation in the article, other than things are changing. I would really appreciate more thoughts on what we can do.
Jessica Culverhouse says
The struggle is real, Phillip! Things are changing, and the proactive step nonprofits can take is to have these hard conversations with your funding partners. Ask them (repeatedly, if necessary!) to support these costs. Those who have invested in your work have an interest in seeing you succeed, and you can’t do that without a well-supported, well-paid team.