It is no secret that over the past few years, more and more foundations have been asking nonprofit organizations to demonstrate their impact. As the sector is pushed to run themselves like a business and to show their ROI, foundations are increasingly asking organizations for specific short-term and long-term outcomes that will result from their funding support. It seems like the right approach. After all, don’t we all want to know what we’re going to get in return (whether via financial or social impact) before we commit to investing in anything?
But there is a negative side to this, as Paul Shoemaker points out in “Reconstructing Philanthropy from the Outside In.” The result of the focus on investing only by demonstrating impact means that there is less and less general operating support to be awarded to nonprofit organizations. Sure, organizations can and should identify other unrestricted funding sources, such as individual contributions, interest from investments and social enterprise ventures. But these are not realistic solutions for all nonprofits to pursue – especially if they are in the infancy stages of growth. This puts a tremendous amount of strain on organizations.
Let me be clear: we shouldn’t be providing general operating support to any old nonprofit. But if the organization’s mission fits squarely with that which the foundation is trying to accomplish, and if they can demonstrate a commitment to an assessment of the landscape, needs, assets, etc., then why not support the overall organization? As Paul Shoemaker suggested, if we believe enough in the organization to consider giving it a grant to support its programs, then allow the organization to decide how best to spend the funds to achieve the social impact they – and we – are seeking. In general, the private sector doesn’t accept revenue sources that are constrained to isolated spending purposes, so why should we expect nonprofit organizations to do the same thing?