Little more than a decade ago, grants were the leading source of funding for the not-for-profit sector, but there has been a long-term decline in grant funding due to public reductions, which puts a greater premium on how foundation donors choose to spend their money.
Consequently charities must explore new revenues, contracts, social investment and fundraising innovations to avoid overreliance on grants, as Minister for Civil Society Rob Wilson commented recently. But there is also a case for grantmakers to make the funding they provide go further through a fresh ‘grants plus’ approach, with grants blended with organisational support.
The experience of other sectors is that money plus skills goes further than money alone. In the private sector it is common for venture capital to be used for growing the infrastructure of a company and investors seek a place on the boards of companies they put money into. This contributes skills and networks that the organisation needs and keeps an eye on how investors’ money is spent, but has been found to be too interventionist for some in the charity sector, so the task is to find an equivalent that sits better with the sector’s culture.
Venture philanthropy is one approach which has gained advocates among private donors who want to be more involved in their investments. Some trusts and foundations are also seeking to be more interventionist and provide capacity building support in addition to frontline cash. This has become known as ‘grants plus’ and is usually structured as a blend of a grant and a voucher to pay for consultancy time.
Esmée Fairbairn has pioneered a ‘grants plus’ scheme for charities offering direct support, connections with other organisations, meeting space, training and advice. This adds a practical side to the assistance Esmée gives, developing organisational capacity and making support go further. Unfortunately it remains a very small part of Esmée’s overall offer – in 2015 Esmée spent £197,000 on grants plus, which is less than 0.5 per cent of their total funds.
City Bridge Trust do something similar by providing a grant to organisations to fund charities that need a specific type of support, such as the financial health check and mentoring schemes we provide at Eastside Primetimers.
We are also seeing equivalent innovation in the social investment space. Fred Payne, our new board chair at Eastside Primetimers and chief executive of the Bank Workers’ Charity (BWC), has introduced social investment into BWC through social investment funds and equity participation in social businesses. There is evidence of the trend for investors to introduce skills onto the investees’ boards, in particular financial or marketing capabilities designed to support business growth and sustainability. Access to markets, such as the financial services sector for wellbeing-related services, is helping both investees in their growth phase and partner charities supporting service delivery who are seeking to build scale and income.
There are challenges around this emerging model such as measuring the impact of the added skills. But a bigger challenge still is there is very little ‘grants plus’ provision among the thousands of charitable foundations and grantmakers in the sector. We conducted a study recently of organisations involved with it, but found fewer than 10 engaged in ‘grants plus’ at the current time. Of these, Lloyds Bank Foundation, the Lottery and Esmée Fairburn stood out as standard bearers.
‘Grants plus’ is a promising way of enabling funded charities to access specialist support and boost the impact of their grant money, but it is one the sector needs to get grips with and show greater willingness to grow. Current provision for it is not adequate, given the benefits it could yield to help build more sustainable not-for-profit organisations.
Richard Litchfield is CEO of Eastside Primetimers. This blog originally appeared in Charity Times on August 15th 2016