Posts Tagged ‘Jo DeBolt’

Due diligence and advice for grantseekers

A few years ago, I was engaged in the process of conducting workshops for program officers and foundation executives who were seeking ways to more skillfully approach due diligence in grantmaking.

At LaPiana Consulting, we collaborated with Grantmakers for Effective Organizations (GEO) to update their guide, Due Diligence Done Well, and many grantmakers have embraced the principles we presented since then.

As an Executive Director, I didn’t always embrace this process. With some foundations and program officers, I felt we were developing a relationship designed to create positive community change. In other cases, I felt as though I was being quizzed without a clear sense of what the questions were designed to reveal about my organization and its work. Even today, the grantmakers I talk with experience this dichotomy in a similar way, with the most successful experiences yielding strong relationships and the most frustrating never getting beyond a “sales pitch.”

Although one part of the due diligence process might be considered “good hygiene” – collecting the basic legal and financial documents needed to ensure that the foundation can comply with its own requirements – due diligence should primarily be about building a shared understanding of how the grantmaker and grantseeker can work together to benefit the field or community about which they both care.

Given that, how can you as a nonprofit leader participate in the due diligence process to ensure that it is mutually beneficial?

Submitting a proposal or letter of inquiry is just one point in the process. Foundations ask for information in the proposal or LOI to make a basic determination regarding fit with the grantmaking focus of the foundation. If there is a fit, the next steps are all about deepening their understanding of your organization and gathering the additional information to make a funding decision. Even in the presence of an existing relationship, there’s more to learn. Here’s some of the advice we give to grantmakers and its application to you as a grantseeker:

Get clarity regarding the process:

Unspoken assumptions about how the process will unfold will almost certainly lead to misunderstandings or disappointment. Ask the grantmaker about his/her information needs and the best way for you to supply information. Discuss expectations and timelines.

Red flags:

One program officer said that an immediate red flag comes when a grantseeker (wrongly) claims that his/hers is the only program in the region, state or country that provides certain outcomes or works with a particular population. Grantmakers invest time in understanding what is happening in the field and community; you should too. You can point out what differentiates you from similar work done by others, but be realistic in the depiction of those differences. Grantmakers should and will spend time talking to foundation colleagues and others in the field and community as they gather information.

Build a relationship based on mutual respect and trust:

Engage in a dialogue. A meeting with a program officer shouldn’t be regarded as a sales meeting or one-sided communication. Ask the program officer about the information he/she is seeking and discuss the best way to convey that information. If you do plan a presentation, make it short and leave plenty of time for discussion. Also, think about what you want to know, especially if this is a foundation that you haven’t worked with before. What are the expectations regarding measurement and outcomes? What does the foundation know that can help you be more effective?

Be honest. If you’ve had struggles in delivering programs or have faced organizational challenges with your board or in retaining staff, talk about it. What have you done to address these problems? You need to pass the “smell test” – if you are painting an unrealistically rosy picture or trying to gloss over any problems, the truth will eventually emerge and if it comes from another source, it will harm your credibility.

Be respectful. Program officers understand the power differential and most want to “level the playing field” by demonstrating that they – like you – are concerned about how to achieve your mission. Also, just like you, program officers work hard and are juggling multiple demands on their time. I have heard more than one story from program officers about prospective grantees who call the program officer to criticize the time the decision is taking or complain that the program officer is talking to others in the community. I don’t know of any program officer who has decided against making a grant based on the poor manners of the Executive Director, but it sure doesn’t help the relationship. Frame your questions in nonjudgmental ways.

The grant decision isn’t the end — it’s the beginning of a new stage:

If the decision is affirmative, there’s a lot of work ahead. What benchmarks or requirements are set in the grant document? What do you need to do if there’s a change in the budget or if something isn’t working? How often will you “check in” with one another about the grant? You should expect different answers to these questions based upon not only the significance of the grant in terms of your budget, but the significance of the grant in relationship to the foundation’s grantmaking budget.

Always think about the future:

If the decision is negative and your grant application was not accepted, seek an opportunity to learn how you might better communicate your work in the future. But don’t seek that discussion as a way to convince the grantmaker that he or she should reconsider the decision. You may need to accept his/her decision as a learning experience and move on, but you should also conduct a final conversation in a way that can leave the door open for reconnecting in the future. 

See also:

Storytelling for Grantseekers: A Guide to Creative Nonprofit Fundraising

The Ask: How to Ask for Support for Your Nonprofit Cause, Creative Project or Business Venture

The Ultimate Insider’s Guide to Winning Foundation Grants

Image credits: flickr.com, bluenose.com, aicpa.org, greeklaw.gr, thecriticalpath.info.com

 

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Mergers: A cautionary note in difficult times

The current economic climate has everyone scrambling – looking for ideas that will help them weather hard times. Many in the nonprofit sector are looking to mergers as one solution. Mergers are often a good strategic move for nonprofits. This is especially true when the merged organization is able to more fully realize its purpose – greater social good. However, there are also ill-conceived mergers that represent setbacks for those the nonprofit exists to serve; in the midst of this heightened interest in mergers, nonprofit leaders should weigh both the motivation for pursuing a merger and the expectations regarding what a merger should accomplish.

What can we learn from the for-profit sector?

Nearly all of us have experience with mergers. In the financial sector, small local banks have been gobbled up by ever bigger banking systems now stretching coast to coast; Macy’s has become the ubiquitous department store in the United States.; US Airways and America West Airlines (AWA) merged as they and other legacy carriers were being challenged by new low-cost airlines. These mergers have brought some advantages – it is likely that US Airways would not have survived without the merger with AWA. Macy’s has greater “buying power” than the smaller retailers that it absorbed, and that may translate into better prices for consumers. For a time, bank mergers boosted the value of bank stocks, providing a benefit to many individual investors. However, there have also been some significant trade-offs as a result.

Most of these trade-offs relate to the underlying reason for nearly any for-profit merger. It’s a strategic move to enhance the financial value to the owner or shareholder. This is often accomplished through gaining market share by eliminating a competitor. When competition is eliminated, customer service can be compromised. For example, in the post-merger period, there may be some opportunities to reduce redundancy in staffing, but employees are often cut – sometimes to the point at which there is direct impact on the consumer – in an effort to trim costs in order to boost the bottom line. The shareholder’s or investor’s interests are being served even if the consumer’s experience isn’t better – and with fewer competitors for customers to turn to, there may be little downside for the merged corporation. As a consumer, you have probably experienced some of this firsthand.

What’s different about mergers in the nonprofit sector?

Nonprofit corporations exist to serve a very different kind of bottom line. They are in business to provide a social good – to feed the hungry, protect the environment, seek social justice or protect human rights. Nonprofit organizations that are better able than others in their field or community to deliver on their social goals should pursue any legitimate path to position themselves to do more good – including mergers or other forms of partnerships.

Merger is often a wise move that accomplishes both greater impact and achieves greater efficiency when the underlying motivation is to better protect the environment or provide a stronger social safety net. We have repeatedly seen that merged organizations are ultimately more stable; they have larger staffs with more diverse skills and greater sophistication in management; they are able to access more sources of funding and are able to attract the most talented board members. Much of their greater effectiveness and efficiency comes as they reach a scale of operation that allows specialization and more robust administrative systems.

However, we have also seen organizations approach a merger with no goal beyond survival. The organization may accomplish this goal, but it is at times done through cuts in programs and services or through a geographic expansion that simply spreads the same level of programs/services over a larger area. Just as there are exceptions in the for-profit sector – especially when a business is foundering, but a single unit remains viable – there are exceptions in the nonprofit sector. There are mergers that are the nonprofit equivalent of the “friendly takeover” in order to preserve a much needed and successful program in an organization that is otherwise not viable.

Questions to consider

There are a number of questions that nonprofit leaders can ask themselves in contemplating whether a merger or some other form of strategic partnership is a good move for their organization. Is there an overlap in consumers, funders, geographic area served and programs between your organization and others? Who are those organizations and do any share your mission and hold similar values? You may think you know the answer to these questions – and perhaps you do – but this is a good time to take a more thorough and perhaps more objective look at other organizations in your “market.” Talk to your funders and others in the community – what do they think of these organizations and can they imagine you working with any of them? Consider ways you might better serve your shared constituencies by working together. Would a merger allow you to provide administrative services in a more cost-effective manner that will allow you to channel more resources to programs and services?

Ultimately, the measure of success in a nonprofit merger is not whether the organization simply cut costs and survived (as it might be in the for-profit sector), but whether the merger resulted in its mission being better served. For us, that’s the bottom line.

See also:

Nonprofit Mergers & Alliances

The Nonprofit Business Plan

The Nonprofit Strategy Revolution

Image credit: wagemakerlaw.com, communitypartners.org, comstocksmag.com

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