One of a series of articles focusing on nonprofits, needs, and those helping.

Second of two parts. See Part 1, Dec. 11, 2009,  “Amid downturn, non-profit funders focus on ‘safety net.’”

By MICHELE MILLER HOUCK
DavidsonNews.net

Even before the economic downturn, the way regional funders give away money had already begun to change. Last year’s Charlotte United Way scandal prompted questions about how federated charities — those that pool money and distribute it to member agencies — are running their organizations. Many funders are scrutinizing proposals more carefully or changing the questions that they ask of grant-seekers. Funders large and small are interested in knowing their investment is being used wisely.

“One of the things that really has changed for me is that I am getting out into the community more,” Goodrich’s Kelly Chopus says. “We are really engaging with agencies that we support – on the phone, in meetings — we really have to build an ongoing relationship with the agencies we fund.”

Agencies who are responding to this need on the part of funders, providing information on programming and really making an effort to engage funders, are being rewarded for their efforts with bigger grants and active board members.

Non-profits are also reporting a generational shift in how involved some donors are in the agencies that they support.

“The older generation gave money to charities and just trusted that it would be used correctly,” says Eileen Keeley, vice president of Institutional Advancement at Davidson College. “The younger generation really wants to know what their money is doing to support the institution. They want to have some say about how it works. It is in our best interest to accommodate these requests where appropriate, because the more engaged donors are with the college the more likely that they will continue to support us down the road.”

Ms. Keeley says that Davidson College has also seen a shift in foundation giving patterns. Some of the foundations who were supporters of higher education changed their focus to support K-12 programs instead. The emphasis has changed to early intervention — leaving higher education to seek funds elsewhere.

Then the economy shifted and endowments shrank. Foundations had to pay out on pledges made before the downturn, so even less funding was available to go around. Another result of the downturn is that some corporations are eliminating or scaling down matching-gift programs — a major source of funding for some organizations.

However, some large funders like The Duke Endowment and the Foundation for the Carolinas have been through a complete overhaul of their grant-making process over the past year, guided by outcomes guru Hal Williams at The Rensselaerville Institute (TRI).

Mr. Williams started the institute when his small non-profit did not get a grant over a larger, less efficient organization. “We were outraged,” Mr. Williams said, “that the funder didn’t care about the results we were able to show – they cared about the proposal or how we met their requirements. So we wrote a book about our approach, “Outcome Funding.” The first year we sold 800 copies – now we sell 800 copies a day on Amazon(.com) some days. People have started to come around to our way of thinking.”

What TRI wants funders to focus on is direct and simple results – accomplishments versus activities. What the non-profit uses to measure success, Mr. Williams says, is much more important than what the funder’s definition is.  So funders are transformed into investors, in Mr. Williams view, and investors are in the results business.

With this philosophy, funders stop getting and grading proposals and start asking:

• What am I buying?
• What are the chances I will get it?
• Is this the best agency to do the job?

When they started to advance this idea, they got what Mr. Williams describes as “major” push back” from some funders. Funders didn’t want to be a burden to non profits by adding more work to already stretched-thin executive directors. What they realized is that the existing proposal process that tried to meet all of the funders’ requirements was much more burdensome than simply asking the non-profit where they wanted to go and how they were going to get there.

“Not everything is new, creative or innovative,” says Georgia Krueger, executive director of Ada Jenkins Center, in Davidson.  “If we are doing it right, get out of the way and let us do it. Sometimes it is better to invest in what exists and build its capacity.”

TRI encourages funders to start asking the non-profits three questions

• How do you define success for each of your programs?
• How do you know when you have achieved your goal?
• How do you know when you are half-way there that you can achieve the goal?

According to Mr. Williams, this process began adding energy to non-profits by helping them define what they were trying to pull off and how they wanted to get there.  This simplification of the process is important, Ms. Krueger said.

“Funders really are looking more like investors these days,” says Ms. Krueger. “Many of them really understand what outcomes are — how non-profits are changing people’s lives in our community.”

The Duke Endowment has been using the TRI process for about a year, and the Foundation for the Carolinas has just launched its new grant-making processes.

“The TRI method discourages focusing on anything but the results,” says Foundation for the Carolinas’  Holly Welch Stubbing. “They say trust the organization to get what they say that they can do done. See if they can do it. Don’t rely on old pre-evaluation tools. Don’t ask ‘Can they do something like this with the money that we will give them?’ That has been a big shift for everyone.”

Ms. Stubbing describes the process as almost like a venture-capital firm. TRI has encouraged Foundation for the Carolinas to give the money and trust the organization to get results. According to Ms. Stubbing, the evaluation tool restates goals and asks the organization to report on results and outcomes. When the goals are quantitative it is much easier. But when an organization’s goals are hard to measure they have to work on how to articulate and quantify results.

For example, she says, one of the initiatives the foundation funds, Crossroads Charlotte, is focused on building social capital. So how do you measure the depth of relationships that you have built between racial groups in the community?

“Organizations should understand that all funders are moving toward rubric of outcomes measurement,” says Ms. Stubbing. “Larger organizations have more resources to do this, and more dedicated staff to support the process. But the message to organizations large and small is: If you don’t have a way of capturing results, you have to figure it out now.”

“It is a little bit strange right now because on the one hand you see funders saying, ‘Whatever you need to help people get through this crisis, let us know,’” said Ms. Krueger, of Ada Jenkins Center.  “And on the other hand, we know that programs that are not emergency food, clothing and shelter are also critical to making systemic changes. Programs like our after-school program exist to provide early intervention for kids who are attaining an educational level that no one in their family has ever achieved. This is what we want funders to invest in to make real change happen in our community.”

“We are seeing more staff time being dedicated to donor relations,” says Davidson College’s Ms. Keeley. “The increased accountability is good; donors are interested in the results that their money is getting. But a $25,000 gift can take as much time to manage as a $2 million gift in this environment.”

A sea change is taking place in the non-profit world right now, and organizations that are poised to respond will likely survive and thrive in this new atmosphere. As economic concerns reduce some folks ability to give; others are digging deeper. As funders look more like investors and non-profits get into the results business, more change is likely to come.