Too Much Feel-Good Funding—Nonprofits' Recipe for Disaster

Too Much Feel-Good Funding—Nonprofits' Recipe for Disaster

By Nika Elugardo, EGC Leadership Systems Architect

Most people enjoy the immediate gratification of giving money to organizations that count impact in letters from children, goats delivered, or shoes donated. Grant-making organizations, too, want to see as much as possible of their money going towards visible impact in the community.

For this reason, non-profits and ministries often fund much of their work through "project" grants and donations. Project funding covers a specific event, program, or service, allowing organizations to add immediate value to the people they serve. If the project funding is properly aligned to a ministry's mission, it also keeps the ministry attuned to their near-term impact outside their walls.

But serious problems arise if a ministry relies too heavily on project money to fund their entire organization.

RECIPE FOR DISASTER: 4 PROBLEMS WITH a PROJECT-HEAVY FUNDING STRATEGY

1. Priority Drift

Project funding can create incentives for ministries to “follow the money", instead of working to discern which ministry activities would most strategically advance the vision. This "feel-good funding" at times may be driven more by emotion or trends than by commitment to system-wide, sustainable impact.

2. Custom Evaluation + Reporting

While project monitoring and evaluation are necessary for any ministry, project funding often creates additional burdens on the ministry to track special types of changes the funder cares about most. Such customized reporting requires additional personnel hours to satisfy, eroding the bottom-line benefit of their funding dollars.

3. Short-term Gains

Project funding often measures impact in near-term project outcomes, not in markers of sustainability. Focus on funding for short-term success can distract us from the equally important need to fund the longer-term viability and ultimate impact of the project and the organization.  

4. Unfunded Sustainability Work

“Their dollars go further when they invest in ministries with the discipline for proper organizational self-care.”

Project funding is restricted to use on staffing and expenses for specified projects, defined activities, and target populations. Activities critical for organizational health, like partner development and project redesign, may be invisible to project investors. Organizations who value long-term sustainability—and all healthy organizations do—still must spend significant time and resources on these activities—but unfunded.

Broken for Good, a new documentary film about why non-profits are paralyzed because of the way we think about funding.

THE ANTIDOTE: BALANCE PROJECT + STRATEGIC FUNDING  

1. Make the Case

Ministry leaders must make the case to funders that investing in ministry sustainability is just as important as saving babies, or whatever the ministry goals may be. Successful return-on-investment is about more than short-term outcomes—it's also about how the funding is ensuring the organization's health and stability for long-term impact. Demonstrate for funders how their dollars go further when they invest in ministries with the discipline for proper organizational self-care.

2. Report on Organizational Health + Sustainability

Wise strategic funders see the crucial role of activities like professional and leadership development, collaboration building, and communications, and they want to see regular progress in those areas.

Healthy organizations and their funders need reports with concrete indicators of sustainability work as the tangible fruit of their investment. For example, report on leadership trainings, new partnerships, and progress in vital infrastructure.

3. Look for Funders Who Value R+D

No two communities are the same—each demands contextualized services and relationships. Keeping up to date with the changing needs and priorities of the community requires significant, ongoing investment. Ministries that last:

“When a ministry is new or growing, strategic investment funding is even more critical than project funding.”

• keep their finger on the pulse of community demand for their work

• continue to learn from new models and best practices

• build relationships with stakeholders who care about the community at all levels

• recruit and develop leaders who will invest in long-term community transformation

• craft stories and multimedia to communicate the real-time impact of their work

Strategic investors will underwrite the critical cost of research, development, and innovation that allow ministries to function robustly over the long-term.

When a ministry is new or growing, strategic investment funding is even more critical than project funding. Cultivating local ministry relevance grounded in data, strong leadership, and communication takes time and money—long before visible community impact.

4. DON'T BE AFRAID TO SPEAK BUSINESS LANGUAGE

Philanthropists with a business background understand that you have to pay for innovation if you want to a company to survive. Investing in leadership development, partnerships, infrastructure, technology, and communications is essential practice for most for-profit entrepreneurial ventures.

But these investors may not be accustomed to viewing non-profit ministry this way. You can draw on the management values they understand intuitively, in service of a humanitarian goal.

New and growing ministries, who work tirelessly for the well-being of the community, deserve no less than the basic supports required—in any sector—for a robust impact.

Nika Elugardo

EGC's Leadership Systems Architect, Nika began her career as a coalition-builder and advocate in 1996, managing the National Consumer Law Center’s Foreclosure Prevention Project, a research-driven, private-public sector partnership. Nika’s work since has focused on equipping corporate, nonprofit, and public leaders to work together to plan and impact sustainable and data-informed social movements. She holds a B.S. from MIT, a Master’s in Public Policy from Harvard’s Kennedy School of Government, and a J.D. from Boston University. Before attending law school in 2007, Nika worked at EGC for seven years in development and consulting. She has also served on EGC’s Board of Directors.