Given that this week is all about #GrantmakingMemes, we wanted to share a new extract from our forthcoming book Modern Grantmaking that we think might inspire potential meme-creators reading this. This one comes from Chapter 5 “What big questions should all funders debate from time to time?” - it's part of a series of big questions that every funding organisation should conciously debate from time to time...
Dilemma no. 6: Should we worry about the financial sustainability of the organisations we fund?
'Funders can be too simplistic when it comes to sustainability – asking for a ‘sustainability plan’ is more about a comfort blanket than it is about enabling organisations to improve what they do and become more resilient.'
—LOUISA SYRETT, director of an international nonprofit
Most funders are keen for the organisations they support to thrive. It is uncomfortable to think that a grantee might simply shut up shop if we stop pouring money into it. It feels like a failure.
Consequently, it is quite common for funders to ask grantseekers to explain how their organisation plans to achieve sustainability once the grant is over. This is a classic case of funders speaking in code. What it really means is ‘Tell us how you’ll keep making money after we stop giving you it’.
Achieving sustainability isn’t, however, the unalloyed good it may seem to be at first or even second glance. For starters, we don’t want to encourage the continued existence of particular kinds of organisation that should be trying to put themselves out of business. A charity dedicated to eradicating a disease ought to be pushing for a world where it is no longer needed by eliminating the disease altogether. The permanent existence of such an organisation is a mark of failure!
Much more problematic, every time we as funders ask a grantseeker to explain how they will achieve sustainability we are nudging them towards adopting a commercial business model. This means encouraging nonprofits to charge for what they offer or to develop whole new products and services designed primarily to bring in revenue.
Now, in some areas of social impact work, this kind of social entrepreneurialism is a good thing – it brings fresh ideas and services to the table. We’re all for that. But in other contexts the drive towards generating commercial income is a bad thing because it can distract organisations from doing work that cannot generate profits, and pushes them into areas where a profit might be turned (e.g. consultancy or trading).
We especially enjoyed Phil Buchanan’s acerbic take on this, in his book Giving Done Right:
'What’s the alternative to a mix of philanthropic and government support for, say, Horizons for Homeless Children, which provides high-quality preschool for homeless kids in Massachusetts? Ask the four-year-olds to start a moneymaking ‘social enterprise’ and cover their own costs?'
As a Modern Grantmaker, you should make sure that your organisation’s decision makers have a serious debate about the extent to which you do or do not want to encourage or demand that grantees develop non-grant income streams. In particular, you should have a clear-eyed conversation about the sorts of social impact activities that seem compatible with self-sustaining business models, and those where the drive for sustainability actually goes against your organisation’s mission and goals.
Once you agree your position on financial sustainability, you should make sure that your application forms and guidance reflect that choice, so that grantseekers are not encouraged to tell you lies that you never needed to hear in the first place.