Giving 2.0™ Guide: Evaluating Grantees: A Partnership in Learning
Overview
Philanthropists often fund in areas of society where inefficiencies, as well as a lack of information, accountability and transparency, make realizing social change goals difficult. Unlike business, philanthropy has no market-forcing functions, easily measurable metrics for success or requirements of public accountability. Transparency, excellence and accountability are almost entirely self-imposed. In the absence of consistent regulation, only a fraction of philanthropists operate under norms of regular and robust evaluation of their social investments. Given the complexity, urgency and sheer scale of the societal issues that philanthropy strives to address, objectively monitoring grantee progress and outcomes are essential aspects of ensuring that good intentions translate into real impact.
“The onus is on philanthropists to make nonprofits feel safe telling us what their challenges are. Just hoping for transparency is NOT a strategy. Nonprofits depend on funders for money and they may feel that sharing probs will make us run away. The reality is, no organization is free from problems or challenges. We need to state up front that we want to fund your challenges—and help you overcome them. We need to let them know through our actions and funding that we are on their team.”
-Laura Arrillaga-Andreessen, Stanford GSBGEN 381, 2018
Evaluation entails systematically collecting, analyzing and sharing information about a particular process, program or intervention. Effective grantee evaluation before, during and after a grant’s duration, as well as public transparency about the results, helps prevent the incessant reinvention of the social change wheel. By identifying both effective and ineffective interventions and by sharing information with other funders, philanthropists can better gauge the effectiveness of their own work, make course corrections and iterate on their strategies.
Approaches to grantee evaluation will vary, reflecting the philanthropist’s or foundation’s values and, as well as the type and amount of investment. In an effort to minimize the associated nonprofit reporting costs (in time and in dollars), philanthropists are increasingly simplifying the grantee reporting and evaluation process.
What follows is an overview of the evaluation and measurement questions philanthropists typically consider when making grants of $10,000 or more. Remember that these considerations are situationally specific; their importance will vary relative to the grant type and amount, as well as the philanthropist’s or foundation’s capacity and values, among a host of other factors.
Considerations Before Making a Grant
Can the nonprofit readily articulate its indicators of success (short-, intermediate- and long-term) for its social change goal?
Are there aspects of the nonprofit’s programs that, if measured and evaluated, could accelerate greater impact in the field?
What other nonprofits are engaging in similar work and how does this nonprofit provide unique value within its ecosystem of service provision?
What research currently exists to inform the viability of the nonprofit’s social change goal and theory of change?
How does the nonprofit plan to collect data about outputs related to the projected grant goals?
While this may be more difficult for organizational capacity and general operating support grants, the funder and recipient should still establish a plan to communicate relevant output measures to evaluate during the grant duration.
What are the associated risks (strategic, financial, organizational, reputational, etc.) of the grant and how might you monitor, solicit feedback and evaluate grantee progress to ensure that the organization has the opportunity to make informed course corrections along the way?
How does the organization collect and incorporate beneficiary feedback into program development and iteration?
For example, Listen4Good, an initiative of the Fund for Shared Insight, works with nonprofits and philanthropists to build rigorous and systematic feedback loops. The project is designed to build key evaluation infrastructure in the field, thus enabling grantees and philanthropists to better partner with and understand target beneficiaries.
How deep of an assessment is needed before making a grant? Note that different situations call for different depths of assessment.
For example, a grant of less than $10,000 to a nonprofit that has a proven track record of success, strong capacity and a history with other trusted funders will likely require a light review.
On the other hand, a large investment in an early-stage (zero to five years old) nonprofit, an organization undergoing a major transition (e.g., leadership, revenue model or programmatic change) or one that poses a potential credibility risk to the philanthropist will require more extensive assessment.
Is the nonprofit open to a third-party external evaluation?
If you are requiring an evaluation or an interim assessment of grantee effectiveness, you must be willing to cover all of the associated costs.
Philanthropists will ideally provide net grants—the total cost of the grant that includes all associated costs of managing the grant itself (e.g., the cost of proposal writing, providing funder updates, conducting an evaluation, etc.).
Does the organization have in-house evaluation measures for its programs/services in place, and if so, what are they? How does the nonprofit define success? How will the nonprofit know if it has achieved its goals or is making progress throughout a grant’s duration?
If the organization has evaluation measures, were these evaluations paid for by other funders or something that the organization includes in its annual operating costs?
If you require an evaluation, what percentage of the grant needs to be allocated to evaluation costs? Remember, evaluation is costly and will take significant staff time and expertise.
If this is an early-stage (zero to five years) organization, might your funding provide the objective evidence to prove that the organization has a viable theory of change?
In this scenario, think about evaluation in terms of its ability to create a unique inflection point for an organization by establishing the evidence/proof of concept for program effectiveness. Nonprofits often struggle for seed funding. In 2015, only 5% of impact investors on EnableImpact targeted early-stage nonprofits, with the rest focusing on later-stage organizations. By choosing to fund an early-stage organization, your funding could increase a nonprofit’s credibility, and its improved organizational capacity may also attract other funders (signaling effect).
Considerations During the Grant Duration
What is the most effective and efficient mode of communication between you and the grantee? How much communication is necessary to ensure the effectiveness of this grant?
Is there an opportunity to co-design an evaluation or interim assessment with the grantee?
When co-designing an assessment/evaluation, you may ask the grantee:
“What specific aspects of the program/service do you need to learn more about in order to drive greater program or organizational effectiveness?”
“What parts of your service delivery do you feel that you could improve upon? What specific questions might provide information that would inform those improvements?”
“What specific feedback do you want your beneficiaries to provide and why?”
What midcourse corrections are necessary to improve the impact of this grant? How might additional funding support the achievement of grant goals?
How might you improve your practice as a funder in order to better support the grantee to achieve their mission? Remember, given the philanthropy’s unequal power dynamic, third-party evaluators can more objectively solicit, analyze and communicate critical feedback.
Considerations After the Grant
What did you learn from this grant, and how might you best share this learning to drive more effective grantmaking—both for your own practice and the field at large?
Are there opportunities for you to spotlight the work of your grantees and drive greater support for this nonprofit and/or issue area?
Do you need to refine your own philanthropic strategy, social change goal(s) and/or theory of change?
Learn More About Grantee Evaluation
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Very few philanthropists participate in formal education programs. More, however, take part in giving circles or venture philanthropy partnerships like SV2, the Silicon Valley Social Venture Fund, that combine grantmaking with peer-to-peer education. Through formal programming and participation in grant rounds, partners develop and refine their grantee evaluation skills through first-hand experience.
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The Center for Effective Philanthropy offers foundations and philanthropic leaders the opportunity to obtain grantees’ feedback from a Grantee Perception Report. The GPR is the most widely used grantee survey that provides funders with candid feedback and insights based on grantee responses to an online grantee survey.
References:
To learn more about monitoring, evaluation and feedback, review Fay Twersky’s “Time for a Three-Legged Measurement Stool” in the Stanford Social Innovation Review (Winter 2019).
To learn more about ways to incorporate beneficiary feedback, visit the Fund for Shared Insight’s Listen4Good initiative.
For tools to better understand a nonprofit’s health and capacity—areas of strength and ways to improve—consult the Hewlett Foundation and Informing Change’s “Guide to Organizational Capacity Assessment Tools.”
Jeff Carlson et al, “Seeding Mission-Driven Startups,” Stanford Social Innovation Review, September 21, 2015, https://ssir.org/articles/entry/seeding_mission_driven_startups, (September 30, 2022).
“Evaluating Grantees: Learning From a Top-Performing Funder” and its accompanying case study highlight how the Inter-American Foundation codesigns grantee evaluation to drive successful outcomes (February 1, 2016).
Consult the Center for Effective Philanthropy’s “Understanding and Sharing What Works” report (November 2018) to learn how philanthropic leaders approach understanding the effectiveness of their grants and sharing their learning.