For ultra-high net worth (UHNW) donors who aim to be more focused and structured with their philanthropy, grantmaking is an integral part of their efforts. Whether you are operating through a family office, a donor-advised fund, or starting your own foundation, a well-thought-out grantmaking process can maximize the impact of your philanthropic endeavors.
But when you are just getting started, this can feel daunting. In fact, you might not even know where to begin. Below is a comprehensive 10-step guide to help you understand the steps involved:
1. Assessing Your Capacity
Before you begin it’s essential to assess your capacity to effectively manage your grantmaking process. Evaluate the people, knowledge, and expertise you currently have. Identify any gaps in these areas and consider whether you need to engage additional people to help, such as board members, family office staff, or consultants. Determine your collective knowledge about the issues you want to fund and whether additional information or support is needed. You might need to increase your capacity or scale back your approach to align with your capabilities.
2. Establishing Clear Guidelines
The next step in your grantmaking process involves setting clear guidelines for potential grantees. These should include specific details about the types of projects or initiatives you wish to fund (and what you won’t fund), the available funding, and the criteria for selection. This provides clarity and enables potential grantees to better align their applications with your goals.
3. Streamlining the Application Process
Next, design a straightforward and accessible application process. Ask yourself: What information do we want to learn about this organization that we will actually use to make funding decisions? How will we solicit applications and proposals? Utilizing grants management software can simplify this process, making it easier and more efficient for potential grantees.
4. Reviewing Proposals
One important step in the grantmaking process is designing your proposal review process. This involves determining who will review proposals, criteria you will use to make decisions, and how they will be evaluated. The process can range from a thorough read-through and vetting by donors or staff to a more complex approach involving pre-screening, site visits, and group discussions.
5. Carrying Out Due Diligence
This involves collecting relevant information about potential grantees to help you make funding decisions. Information such as a list of board members, staff qualifications, IRS determination letter and Form 990, audited financial statements, and the organizational budget are crucial. You might also want to learn who else is funding this nonprofit, who they collaborate with, and how they are positively impacting the community. This step ensures you have a comprehensive understanding of the potential grantee’s operations and credibility.
6. Conducting Site Visits
Site visits and meetings with potential grantees can be a helpful part of the due diligence process. These visits allow you to assess the nonprofit’s operations, meet the leadership, and ask any follow up questions you have after reading their proposals. They also provide an opportunity to build relationships and trust with the grantseekers, promoting a stronger partnership in the long run. Be mindful of the time and effort it can take for nonprofits to prepare for and host the site visit.
7. Awarding Grants Responsively
When deciding to award grants, it’s essential to be responsive to the grantees’ needs. Consider offering multi-year grants for general operating support or capacity-building. Providing flexible terms regarding modifications to the grant agreement can also contribute to a more productive relationship with your grantees.
8. Creating Effective Grant Reporting Requirements
Establish clear and concise grant reporting requirements to assess grantees’ progress and generate valuable insights. Keep reports simple and focus on essential information, whether through written documentation or alternative methods such as interviews or video debriefs. Again, only ask for information you plan to read, learn from, and use.
9. Communicating Effectively with Applicants and Grantees
Take the initiative to develop relationships with grantseekers and grantees and maintain regular, open, and honest communication. This ongoing communication helps you stay informed about their work and is an invaluable component of your entire grantmaking process. By establishing a foundation of trust and maintaining clear lines of communication, you can also address any challenges promptly and effectively, fostering a collaborative and productive partnership with your grantees.
10. Learning and Improving
The final step in your grantmaking process involves learning from your experiences funding your grantees and using this information to enhance future grantmaking practices. Educating your team on successes and opportunities and rethinking norms can transform your practices. This iterative learning process ensures the ongoing improvement and efficiency of your philanthropic approach.
Embarking on this journey can seem overwhelming, but remember, you don’t have to go it alone. Strategic philanthropy advisors can guide you through each step, ensuring your philanthropic efforts are impactful, fulfilling, and aligned with your vision.