What could be wrong with the humble grant?

Grants are what make the social world go round. They are the standard product of exchange between funders (aka grant makers) and social organisations. But grants have a problem – a feedback problem.

The grant recipient, who might give the feedback, is usually going to be seeking more money from the grant provider. That can get in the way of complete frankness. Grant feedback is usually rose tinted and sometimes becomes a matter of how many times you can fit lovely, wonderful, creative, thoughtful and brilliant into each sentence. I remember being very disconcerted when I was a grant maker for a while. My jokes were suddenly funny, my thoughts pearls of wisdom, and my ideas boundless creativity. I found this uncomfortable. Most grant makers I know do too, and while they generally see through it and work hard to do the right thing, it is sometimes a difficult bubble from which to escape.

So here, with as much honesty as I dare, is a list of grant features and their issues. Thereafter I will put down some thoughts on possible alternatives or improvements.

No. Feature Bug

Grantmakers have carefully thought through programmes to which organisations apply. These ensure cohesion and impact

Applicants try to squeeze their work into ill-fitting boxes, refocusing on new measures and creating mission creep. Over time this can create an insidious battle for strategic control with charities playing cynical lip-service to funder wishes and funders becoming more and more controlling.

Grants are for a set period of time, up to three years, to avoid dependency

This means that charities have to fill a one third minimum funding void every year, independent of effectiveness or impact. Continuity of funding is effectively completely un-meritocratic.

Grants are for a set amount of money, to pay for specific things, and are paid according to a clear schedule to ensure the money is used effectively

This is fine when the plan is clear, but doing anything new one learns on the job and should adjust accordingly. Does business investment tell you exactly how and when to spend the money? In that culture change and adaptation are expected, not cause for concern and negotiation.

Applicants should demonstrate that they need the money, as otherwise the grant money could be more effectively used elsewhere

This can create an insidious reverse meritocracy. An effective organisation that looks impressive and organised, with effective financial planning may struggle to get funded. A disorganised one, in clapped out buildings and a handwringing story, may be more successful.

Grantees should not use grants for commercial gain or exploitation, results and any intellectual property should be made public

Many social impact ideas can be set up as social enterprises and seek to compete in a commercial market, but with a social product. They can’t get commercial funding, due to their social focus, but they may also struggle to get grant support because someone one day might make some money.

Grantmakers want to support innovation

So a charity with a long track record programming excellence can struggle to get its core programme funded. Also the required innovation needs to fit within a pre-defined programmatic area. In other words, we would like to support innovation we have already thought of…

Grantmakers want to support the frontline as their money is for saving children, not administration

So charities and social organisations are undermanaged, with poor IT and data systems, and have trouble with senior staff retention as staff leave to do other things if they want to start or support a family.

Put together, these features can:

  • Promote bureaucracy over innovation;
  • Promote mission creep or even fudging;
  • Have unsustainability built in from the start;
  • Are unmeritoctratic and can in fact support the poorer or more needy over the more effective.

Many of these features seem originally designed to fit the needs of foundation trustees or creators, who would like a series of ideas that feel fresh and exciting, that directly affect peoples lives, and that can be cheaply administered. Complicating issues such as commerciality are regarded as too fiddly, and are therefore excluded.

Grants 1.1

Many grantmakers, traditional ones as well as new types such as venture philanthropists, have tried to break at least some of these moulds. For example, many grant makers in the US provide follow-on funding and develop longer term relationships. Esmeé Fairbairn’s social investment fund allows them to be thoughtful around commerciality and social enterprise. The Big Lottery Fund’s Better Start programme aims to provide 10 year funding. Venture philanthropists often allow for more adaptation and provide support to enable the business plan rather than a pre-designed programme. Here are some further experimental grant structures designed to get round some of these issues.

  1. Some grantmakers just accepting that they want to support the strongest organisations in a given area, and then to continue to do so. They can then build long term customer style relationships, developing monitoring and feedback systems to ensure that the charity focuses on the needs of those that it serves and seeks to improve the service it provides. This may sound dull, but it would have a considerable impact.
  2. A success top-up grant. A grant maker provides a three year grant. In the event that the grant applicant is being successful, an additional 50% of the grant value becomes available automatically after say two or two and a half years. The grant maker continues to measure the same impact measures on the new money as on the three year grant, but doesn’t specify how and when the money should be spent. The grant maker can then compare the impact of the follow-on grants it is making with the initial grants. Grant makers should publish the proportion of grants that roll over to set expectations, for example the aim might be say two thirds roll over, or half if feeling more aggressive.
  3. A grant maker could decide an amount of money to tackle a social issue, but then provide a complete mix of different funding, grants, loans, commercial funding, to organisations tackling different aspects of the problem. By doing so, the grant maker learns about the issue from different angles and can add value to those it supports and become a genuine partner. The grant maker can become part of the dialogue around that issue and an agent of change. It could measure itself by the overall impact that it has on the issue, rather than individual grant success, enabling more risk taking and a more holistic strategy.
  4. A grant that converts to equity. To resolve issues of commerciality, grant makers can put the grant in place so that in the event the entity supported receives commercial funding the grant maker can expect to join that first round at the same valuation. They will have taken initial risk, but that is what the grant was for. This idea would need tinkering with, depending on circumstances, but should allay the commerciality concerns.

What are other people’s ideas? I would be grateful for any thoughts on improved grant making structures as I’m not sure I’m being very imaginative here.


2 thoughts on “What could be wrong with the humble grant?

  1. Very interesting ideas. Perhaps independent impact audits are needed. To solve the feedback problem. I don’t think we’ll ever get around the rose-tints as organisations do have a tendency to want to protect themselves, and no-one likes admitting they are not doing the best job.

    But then this adds an extra layer of bureaucracy and costs – and no-one likes this.

    I like you idea of grantmakers taking on a social issue, a very good idea.

    • Thanks Louise and sorry for not replying sooner. Much of this comes down to how much a grantmaker is serving its trustees, its executive, or the social issue. The thought is that, if a grantmaker takes on an issue over a longer period, its expertise rises and the interests all align…

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