The Challenges Grantmakers Face in This Economy

While nonprofits worldwide are experiencing declining revenues, very few consider that grantmakers are also facing tough times. Many foundations manage endowments that are often invested in the same stocks, bonds and mutual funds the rest of us are invested in. If you've seen your own personal portfolio take a significant decrease, so too have many grantmakers. Kristen Putnam-Walkerly takes us through the challenges faced by foundations and gives us a glimpse of what grantmakers are looking for and what you need to consider when approaching grantmakers for funds. Bunnie

The Challenges Grantmakers Face in This Economy

by Kris Putnam-Walkerly, President, Putnam Community Investment Consulting

No one is immune to the challenges of doing more with less in this economy. From my vantage point as a philanthropy consultant, I hope this blog post helps nonprofits understand how the economy is impacting foundations, and provides suggestions for what grantmakers are looking for from nonprofits.

Six challenges grantmakers face this economy

1. Significant cuts in foundation assets and grantmaking budgets – Foundations lost approximately 28% of their assets in 2008, a reduction in assets generally means fewer dollars available for grantmaking. Some, such as the Gates and MacArthur foundations, are making efforts to increase funding in 2009. However, 67% of foundations surveyed recently plan to decrease funding in 2009. The Foundation Center is tracking how the top 100 foundations are responding to the economy.

2. Reductions in staffing and spending - Most foundations we work with are carefully examining their budgets and cutting where they can. Travel to conferences and professional development spending has taken a big hit. Fewer are funding anything perceived as “new.” Some have laid off staff, such as the Silicon Valley Community Foundation and the Jewish Community Federation of Cleveland.

3. Decisions about how to allocate reduced resources in a changing environment –Resources are fewer and the needs are greater, so many foundations are grappling with whether to shift their grantmaking priorities toward meeting basic needs versus continue funding their priority areas, such as healthcare advocacy or workforce development. On one hand, basic health and human services are desperately needed. One the other hand, now is the time to leverage policy advocacy opportunities and stimulus funds to put people back to work.

4. Concerns about 2010 and 2011 – Some foundations calculate their 5% payout based upon a rolling average of the past 24 to 60 quarters (two to five years). As a result, these foundations anticipate their grantmaking budgets might actually take greater hits in 2010 and 2011 (as more “bad” economic quarters are averaged into earlier “good” quarters).

5. Lack of information & analysis – The economy is changing quickly and drastically, and it’s difficult to for funders to track the growing impact on the communities and issues they care about. This is especially true for smaller foundations with few or no staff. For example, it’s challenging for any of us – including foundations – to understand what stimulus dollars are coming into our communities and how we can leverage them.

6. Stress – It’s important to acknowledge that everyone is experiencing stress during this economy. As a recent New York Times article pointed out, even those of us who still have our jobs and homes can be feeling tremendous anxiety. Being in a position of “power,” as many grantmakers are, doesn’t make anyone immune to the fear of job loss, loss of savings, inability to pay for a child’s college education or a parent’s health care, and generalized fear about the future.

What Are Grantmakers Looking For?

Focus on results – Nonprofits must be able to demonstrate effectiveness through evaluation. With limited resources, funders want to know their dollars are making an impact. It’s no coincidence that three foundations have contacted my firm in the past week asking for assistance with evaluation.

Take steps to address the downturn – Nonprofits that are making adjustments in this new economic reality will be viewed more favorably by funders. One of our clients recently received several requests from grantees desperate for emergency funding to keep their doors open. While she wanted to help, she was disappointed that none were making any changes within their organization to address their funding shortfalls. They had no plans to reduce budgets or staff, re-organize, streamline services, or partner with others to increase efficiencies.

Communicate with your funders – Now is the time to step up communication with your donors. They can’t help you unless they understand what you need. Educate them about community priorities and how they can help you leverage stimulus dollars. A nonprofit recently requested a foundation grant to purchase solar panels, which would save them $80,000 a year on their electricity bill. It was an unusual request, and this foundation funded it anyway since it was an investment in this nonprofit’s sustainability.

Copyright © 2009 by Kristen Putnam-Walkerly. All rights reserved.

Contact Kristen at http://www.putnamcic.com/press.html