Documents/6Q2MEP/5: Grantees/5.5.1: Organizational Health

5.5.1: Organizational Health

Understand what a grantee is trying to do and what it will need to get there

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Funding mistake #1: Investing in programs at the expense of organizational health We know that strong organizations -- with efficient IT and financial systems, thoughtful people management, compelling fundraising campaigns, etc. -- are necessary for long-term success. Yet many funders view "infrastructure" investments such as hiring a talented senior team or installing new technology (investments that would virtually be automatic for a growing for-profit) as excessive "overhead" within the non-profit context. Instead, grants go primarily to support specific programs, particularly new program initiatives. And non-profits are asked to restrict nonprogram spending to unrealistically low levels (often 15% of costs for government grants). In this way, the funding world sends an unambiguous signal: do not invest to recruit and develop the best people. Do not invest in the systems needed to support these people. And do not waste leadership time on smarter planning and management. Deliver great programs on the cheap -- and do it year after year. The result is an organizational version of chronic fatigue, with non-profit teams stretched and less able to deliver the outcomes we collectively seek. How can you avoid this pitfall in your giving? First, avoid using set ratios for giving to program vs. non-program investments. Instead, take the time to understand what a grantee is trying to do and what it will need to get there, then determine where your gift can have the most impact. (For a deeper dive on the overhead challenge and what grantees need to succeed, see The Nonprofit Starvation Cycle.)