The Chicago Community Trust Follows Ford’s Lead

(The Chicago Community Trust President Terry Mazany)

The Ford Foundation appears to have struck a nerve.

Following the grant-making giant’s announcement in June to provide more funding for nonprofit operations support, other groups are following suit. Terry Mazany – president of The Chicago Community Trust – announced that his organization will begin offering grants from between $35,000 to $300,000 to Chicago’s “anchor organizations.” The grants are designed to explicitly fund operations budgets.

Mazany acknowledged the shortcomings of hitherto applied grant-making criteria in a speech at his foundation’s “State of the Community” event:

As foundations, we have been rightfully accused of creating too much administrative work that takes nonprofit resources away from their mission and establishing grant requirements that distort a nonprofit’s mission in order to satisfy funder priorities. Some of the things we do actually undermine your ability to be successful.

It may take years before this new framework proves its worth, but the logic behind it is predicated on basic business concepts. When invested with unrestricted capital, businesses can grow dynamically. Nonprofits, however, have long been bogged down by onerous requirements attached to their funding. The results-based, programmatic approach that demands concrete reporting on the progress of carefully delineated line items does not typically give nonprofits flexibility.

No-strings-attached funding provides nonprofits with breathing room, allowing them to accrue staff, make technology improvements, and increase overhead with the goal of improving overall efficacy as opposed to supporting individual projects.

Mazany also announced that, like the Ford Foundation, the Chicago Community Trust will begin focusing inequality and social justice causes. In strong words, he remarked: “We must stop kicking the can of racism down the road for the next generation to resolve.”

Key Elements Group LLC will continue reporting on this trend in grant-making.

Ford Foundation: Inequality, Operations Spending Represent New Era

The Ford Foundation – the second largest grant-making organization in the United States – made big news on June 11 when it announced a major shift in its grant priorities and funding strategies. Last year, Ford Foundation president Darren Walker surveyed grant recipients on their most pressing issues and concerns, compiling over 2,000 responses from today’s most active nonprofits.

This pulse reading has resulted in what could end up being the decade’s most significant and influential sea change in philanthropy.

Under Walker’s leadership, the foundation has announced its new priority to focus exclusively on fighting global inequality. In addition, it will also dedicate a full 40 percent of its funding for no-strings-attached operational support.

The new focus on inequality breaks down into six areas where nonprofits are fighting to improve people’s lives: civic engagement, racial and gender equality, inclusive economies, internet freedom, creative pursuits, and educational opportunity. This rhetorical revolution has big implications, as the language of social justice emerges from the margins and becomes a mainstream language used to describe positive social change.

In an op-ed penned by Walker, the foundation’s president explores the overarching importance of acknowledging – and tackling – inequality, and how it relates to virtually all of today’s most urgent problems:

We have affirmed that inequality extends far beyond the wealth gap. Inequality is political, social, and cultural in nature. It contributes to deficits in democracy and discrimination along racial, ethnic, and gender lines. It is reflected in rising extremism, acute poverty, and even in the consequences of climate change.

As part of the “grand bargain” for revitalizing Detroit, the Ford Foundation has taken a leading role in promoting the arts. With the new shift in focus, artistic grant applicants will now have to focus on the discourse of inequality and social justice. Furthermore, nonprofit organizations that contextualize their work within the global context of inequality will stand a better chance of receiving one of the foundation’s highly coveted grants.

This is immensely significant. As research has shown, younger generations care passionately about issues revolving around inequality. Whether it’s racial, gender, or economic, inequality is at the forefront of younger generations’ mindset. Not only is the Ford Foundation’s change in priority reflective of the cultural zeitgeist in the United States, it will also contribute to this evolving mentality, and in turn generate a movement to strike at inequality’s root causes.

The second big piece of news from the foundation’s announcement is that it will dedicate 40 percent of its funding toward operations. Nonprofits – with thinly stretched resources and staff – are often expected to spend their funding on short-term projects. With pressure from donors to produce results, nonprofits often adhere to a fire sale model in which they sponsor many short-term projects at the expense of cultivating well-structured institutions. 

This model, however, precludes the kind of comprehensive, long-term planning that the private sector values and that often sets successes apart from failures. Uncharitable – the influential (and controversial) book by Dan Pallotta – explores these themes by discussing how to strengthen the philanthropy sector and equip nonprofits with the resources they need to make real, positive change. According to Pallotta, nonprofits need investment just like any other institution to grow and be successful. In order for this to happen,  he argues that the nonprofit sector needs to move past its insistence on demonstrating high programming expenditure and low overhead.

The Ford Foundation’s move toward operational spending is a bold step toward a growth mentality. By investing in operations, nonprofits will see assets and value grow, and will be able to organize for long-term successes. Indeed – should other foundations follow suit – we may be entering a new era of nonprofit funding, one that will produce more efficiency and able institutions.

Success – however – is contingent on patience and diligence. The Ford Foundation’s experiment will be meaningless if, after a short time, the philanthropy switches back to its old model. To see whether operational investment makes the profound difference its proponents claim it will, the model has to be set in place for years. As exciting news as the Ford Foundation’s announcement is, it’s significance will largely be determined by the foundation leadership’s commitment to this visionary framework.

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