Reflections on Grantmaking
"Governance does matter," Chuck Hamilton said, as prologue to his keynote address at the Governance Matters general meeting on Feb. 12. "There is no more leveraged task than to tend to the care and feeding of nonprofits boards."
Hamilton is the outgoing executive director and secretary of The Clark Foundation and, as of this month, will be the 2009 Senior Fellow of New York Regional Association of Grantmakers.
The current economic situation is horrifying, Hamilton noted, but the proper response is to implement good grantmaking, that is, to do what foundations should have been doing all along: providing general operating support and technical assistance, building management capacity, developing leadership, and fully costing out programs.
Within the next year, 10 percent of all nonprofits may be out of business. "That will be tragic, painful, horrible, and lead to better uses of resources, more effective provision of services, and doesn't need to gut the community infrastructure," he said.
Based on his 40 years of experience as a philanthropist, Hamilton summed up the basics of good grantmaking in three observations and five practical ideas.
- Philanthropists are not nearly as special as they think they are. "We need to get off our high-horse, listen more, pontificate less, and learn from our peers in the not-for-profit sector."
- Guard against playing around with your grantees, such as by ending grants for specious reasons or asking for a proposal when you know you are going to say "no." Philanthropists can be guilty of arrogance, self-aggrandizement and short-sightedness, as demonstrated by anecdotes Hamilton related. "As much as philanthropy may derive from love of mankind ... it is eternally laced with self-interest, pettiness, and vices too numerous to count," he said.
- Philanthropy is about implementing simple, common decency. As he grows older and wiser, he has come to distrust "all grand schemes, systems and lofty views of philanthropies ... I more and more believe in hard work, smart work, and evidence," he said. "Success is about the little things."
- Respect boundaries. Foundations don't know everything. Help in ways beyond money. Grantmakers need to listen and to let nonprofits do their work.
- Foundation staff should have real experience and real skills. If you haven't met a payroll, don't apply. Staff should have practical and significant experience in finance and other areas.
- Foundations should give one-half the grants, for twice the length of time and for twice the amount as they do now.
- General operation support or negotiated general operating support should account for 80 percent of all grants, with clearly stated definitions of success and measures of success. The nonprofit should be given autonomy in spending the money. Funding "direct" costs but not "indirect" costs is impractical at best and, from the audience response, risible.
- Governance really matters. Foundations and nonprofits leaders are not good enough at developing and managing their boards. Most problems that have arisen in the current economic crisis should have been seen first by boards. As a starting point in assessing the involvement of the board, Hamilton suggested that the board chair be on hand whenever you visit a prospective grantee. "Just seeing how they interact with the executive director and staff tells you volumes about how engaged they are and what they know," he said. And always ask grantees about how much their board members personally give and what their board attendance percentage is.
Organizations, both nonprofit and for-profit, can fail because of their boards, he said. Governance does matter.
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