Innovation Funding IS Strategic Philanthropy

I don’t know about you but I seem to have a perpetual stack of professionally related paper to read. Yes, even in this age. Long air trips are the times I make a dent in this stack. A series of recent trips have done wonders to lighten the load – but much more remains. Perhaps I need to travel even more.

The advantage of reading so much in such a short time is that it becomes quite clear what trends or issues seem to be on everyone’s mind in the philanthropy world. Some of these are old issues that resurface every few years. It is as if a new group of grantmakers and philanthropy commentators reinvent the grantmaking wheel and share those insights as if they are new. In fairness, they are new to them. They have never heard these insights before, even if it is true that many have written or spoken or advised about all of this for years.

Other times, it is clear that there are evolving trends and attitudes. Ideas and approaches, once fresh, mature. Funders learn what works best, where, and why – and as important, when they don’t. Or they discover that approaches developed in one context may be worth considering in another. And, to be sure, new contexts, challenges, and technologies challenge and revise established norms and orthodoxies.

Beginning with this post, I will be commenting on some of the issues that surfaced, by various authors in a many different publications ,which raised meaningful issues for those of us in the funder realm to consider. This is #1.


Twelve years ago, when I was conceptualizing what become the NYU Academy for Grantmaking and Funder Education, the issue of Strategic Grantmaking surfaced in conversations with every organization with which I consulted and collaborated: [E.g., COF, ASF, NCFP, Forum of Regional Associations, etc.] At the time, there was a major push to help experienced funders and those new to the field to transition from “checkbook” or “feel good” or “noblesse oblige” philanthropy to more systematic decision-making. “Strategic” in this context meant helping funders align their values and priorities to their funding practice in plan-ful ways. Learning how to use available data and resources to make judgments on effectiveness, transparency, responsibility, and even efficiency of those nonprofits being considered made a huge difference. Indeed, it was hardly surprising that the 2nd level course in the then new NYU Academy was called “Strategic Grantmaking” for the first several years of the program.

After a while, though, that proved to be much too limited a description. Over time, in our field, “strategic grantmaking” morphed into “strategic philanthropy”, and began to reflect a very particular approach to grantmaking. “Evidence based”, “metrics” “demonstrated outcomes” and a variety of other terms suggested that there is a better or right way to do grantmaking. Good grantmaking, in this approach, is to identify proven outcomes and fund accordingly.

This is an eminently reasonable adjustment to an older form of grantmaking focused more on the giving than the outcomes. United Way, among many others, was indispensable in developing a methodology focused on logic modeling or theories of change based on evidence. Faced with so many n-f-p’s claiming to address the same constituencies in the same ways for many years, this approach helped impose new discipline on the nonprofit sector as well as grantmakers.

Alas, this discipline became a straitjacket for [too?] many funders. New or innovative approaches and projects were suspect because, of course, there couldn’t be evidence – otherwise it would not really be new. New organizations were not likely to have a record of 990’s or a sophisticated board or meet the arbitrary if well-meaning benchmarks for infrastructure/program expenses. As enticing as many of these projects may appear, when funders matched them against more experienced organizations with “data” on their side; it was no match at all. [In a variety of case study exercises I have done with many groups in many settings, invariably the “safe” grantees win. Surprisingly, when I recently did such an exercise with a group of social entrepreneurs, they too endorsed a safe established organization over an innovative one!]

Moreover, those who fund artists or provide fellowships or sponsor leadership programs could hardly use some of these systematic methods. Many of you, I am sure, have participated in attempts to rank applicants using a comparative numerical ranking system. We all are aware that this is hardly “scientific” but simply numbers, subjectively arrived at, to compare potential grantees. As long as we don’t assume that this is any more “objective” or scientific than any other ranking system it is fine.

After all, we all realize, or should, that even the most “objectively” derived data are subject to subjective interpretation and judgment. To get back to the NYU course, in order to reflect what we really were teaching and wanted to convey, we changed the name from “Strategic Grantmaking” to “Grantmaking Strategies.”

But there are more significant issues at stake than the title of a course. Who is to say that evidence based grantmaking is better? It assumes that the evidence is built on answering the right questions. All too often, though, time reveals a divide between what the data shows and the intended impact of all that funding. Following the evidence based funding herd might yield demonstrable results, just possibly the wrong ones.

Moreover, evidence-based grantmaking works against risk and innovation. Often the only way to make a difference is to do something different. Change involves risk – and risk might be informed by evidence but isn’t limited by it. Solving problems requires seeing beyond previous orthodoxies and common wisdom. Thus, a mandate for innovation.

It is a great irony: some view strategic philanthropy as diametrically opposed to innovation funding. Nothing could be more wrong. It is impossible to imagine fulfilling any funding strategy, with a commitment to addressing a problem, without including innovation funding.

Experienced funders and foundations realize this dilemma. Very few funders are prepared to devote all of their funds to startups and high-risk projects. Yet very few thoughtful and strategic funders want to preclude risk and innovation. Most of us advocate that funders should consciously set aside some portion of their grantmaking portfolio for innovation, use a different and discreet decision-making process, and admit to a higher risk tolerance in our innovation investments.

The lesson: it is an unfortunate characterization and problematic practice of “strategic philanthropy” if it leaves no space for risk and innovation. On the contrary, I would posit that authentic strategic philanthropy requires it.

Richard Marker teaches and advises funders from around the world through both the NYU Academy for Grantmaking and Funder Education and the Wise Philanthropy Institute, both of which he founded. His blog can be found at Wise Philanthropy.