Over the years I have had the opportunity to sit on both sides of the funding conversation…funder and grantee. As I sit back and reflect on these interactions they could often be described as a well-choreographed dance. My motivation for writing today’s blog is to challenge our nonprofit funders and the organizations they support to speak honestly about their goals for our community. I am asking for each of you to set aside the trappings of this imbalanced relationship for the greater good of our community.

When I moved to Greenville in the early 1990’s I started my volunteer work by serving as a committee member, and ultimately as the chair, of the Community Foundation of Greenville’s Grants Review Committee. Each year we would receive numerous grant applications for the Foundation’s Community Enrichment Grants. As you might imagine, these requests far exceeded the $80,000 we had to allocate.

As it continues today, an essential ingredient in the Community Foundation’s grants review process is the involvement of committed volunteers. These engaged individuals are responsible for making funding recommendations to the Foundation’s leadership. To do this they must first review and analyze written applications. Personal presentations and site visits follow. And then much deliberation!

I clearly remember many of these interviews and the organizations that I was introduced to at the time. One organization, which will remain nameless, begged for funding by telling a story that literally brought the committee to tears. The Executive Director of this nonprofit actually slumped away from the interview crying. While I don’t remember whether this applicant received the requested funding, I do remember feeling disturbed and disappointed by the interview. I knew there had to be a better way for us to discuss that organization’s mission and understand its community impact.

We, as individuals, often support nonprofits that tug at our heartstrings. However, I believe that funders have a deeper responsibility, extending beyond contributions to “tearjerk” causes. Funders should seek out strategic nonprofit partners that have the vision, infrastructure and leadership to address important community needs.

With a primary goal of getting the “right people” in the room, DNA recently hosted a Shine the Light workshop that offered a “safe place” for funders and grantees to talk. A big thank you to my friend, Gage Weekes of the Hollingsworth Funds, who helped me tackle what many in the field might consider a delicate topic. We really didn’t know how it would play out. As 16 funders and 120 local nonprofit professionals gathered around tables at the Kroc Center the conversations began. Our ground rules included: honesty, respect and candor.

A common thread of the discussions that day revolved around the overhead myth. Here is a question that was articulated by many.

One of the biggest struggles we face as a nonprofit is that most funders don’t want to pay for overhead. Without this support, we must reduce operating costs at the expense of our programming and the clients we serve. What can funders and nonprofits do to end this “Starvation Cycle?” ~William

As the illustration demonstrates when unrealistic overhead expectations are placed on nonprofits they try to conform; leading to reduced spending and misleading reporting. The Starvation CycleHistorically nonprofit donors have considered 15-20% overhead as excessive and irresponsible. Compare this to the 25 to 35% spent on overhead in the for-profit arena. William, nonprofit executives need to be open about these funding challenges and clearly demonstrate the benefits of “good overhead.”

Funders should consider the importance of investing in the people running organizations and the required systems infrastructure. Strong leadership is required to achieve the results that nonprofits and their supporters seek. It makes business-sense to provide overhead funding for talent retention, development and positioning. These leaders will also need the proper infrastructure to support their work.

Nonprofits must be honest about the investment that is really required to deliver on their strategies. They should avoid making commitments that are not feasible given the resources they have available. At first glance being transparent may seem risky, however, this honesty will allow for better funder-grantee relationships. In addition, it will provide a more solid foundation for securing the necessary funding to effectively fulfill your organization’s mission.

For 3.5 hours on June 13th, funders and grantees were encouraged to voice their opinions…and they did. In all actuality we could have spent the whole day together. The challenge moving forward is to pick up where we left off and continue this all-important conversation.