A Smart Investment to Multiply Impact for Five Foundations
Many foundations are shifting their funding strategies towards core support for nonprofits. But few foundations are yet taking seriously the organizational development (capacity building) of grantees. Now, more than ever, we need to invest in strengthening civil society organizations. In such an environment, five Swiss Foundations–Laudes, MAVA, Mercator, Oak, and PeaceNexus–stand out. They have all invested in organizational development of their grantees. Earlier this year, these five foundations reflected on, articulated, and shared their learning about supporting nonprofits this way. They concluded that “organizational development is a smart investment to multiply impact.” These foundations are convinced that supporting organizational development increases the likelihood of achieving their missions and therefore should be a key part of the daily work of any foundation.
Their fascinating report—Funding Organizational Development: A Smart Investment to Multiply Impact: Views from Five Foundations—shares insights on how to engage in organizational development, discusses the institutional set-up needed, explores the organizational development process, and highlights ongoing dilemmas.
They address key questions
What is organizational development?
For these five foundations organizational development is a strategy to deliver on their core outcomes through the improvement of a partner’s organizational health by increasing the resilience and sustainability of partner organizations, thereby helping them achieve their goals. It can include core organizational development needs (e.g., strategy, governance, structure, and sustainability planning) to internal systems (such as HR, finance, monitoring, evaluation and learning, and digitalization) and external relations management (e.g., fundraising, communication and advocacy). PeaceNexus (See PeaceNexus Practice Paper on their partners’ lessons learned from strategy development processes) and Mercator have found strategy development to be a frequent entry point for organizational development.
Why invest in organizational development?
Almost all foundation efforts to transform society take place through funding projects within organizations. But as with a car, if it has a flat tire, a broken gear box, or problems with steering, however much fuel (or funding) is put in, will not make much of a difference. Foundations have to pay attention to the organizational vehicles through which they work. Foundation funding will only have an impact if the grantee has the capacity to bring about change.
Some funders believe that they can ignore the organizational aspects of grantees because they say: ‘we only fund competent organizations’. Yet we know from our own experience that there is always room for improvement, irrespective of size or strength. We also know that COVID-19, changing aid flows, and increasingly restrictive governments are placing even more onerous demands on civil society organizations throughout the world.
Having the end insight tends to focus the mind on what is most important. For example:
“when MAVA reaffirmed its decision to end its grantmaking in 2022, it was clear that the sustainability of its partners was a key component of the sustainability of its impact. Therefore, MAVA put an emphasis on organizational development to make sure MAVA’s key partners are robust and financially autonomous enough to pursue their activities after MAVA’s closure.”
What do partners need to benefit from organizational development?
The five foundations agree that the partner’s readiness for change represents a key precondition for success. They point out: ‘The level of dissatisfaction with the current situation should reach a point where apathy or resistance to change can be overcome, on the basis of a shared vision and some first steps to implement it. A critical mass of change champions, willing to invest their time in organizational development, is critical to ownership and success. Consequently, organizational development is typically provided to those partners that exhibit readiness for change and have a high strategic relevance for the funder.’
What does organizational development require of foundations?
The foundations recognize that organizational development and investment support is a significant commitment, one that requires specialist insight. They found organizational development needs:
- To be a core part of strategy. Organizational development needs to be anchored in the foundation’s overall strategy. It cannot remain as a ‘nice-to-have’ add-on. Organizational development has to be a part of both the overall direction and underlying theory of change, and therefore needs strong leadership support and commitment from the board.
- Dedicated organizational development staff and engaged program staff. All five foundations hired staff (ranging from 0.3 to 10) to develop and implement their organizational development work. The organizational development manager develops the strategy, sets priorities and acts as an organizational development expert for program staff as well as for partners. The foundations also expect all staff to see organizational development as part of their daily jobs (Oak and Laudes Foundations work closely with INTRAC to increase POs’ capacity to engage with organizational development.).
- Quality consultants. Consultants play a critical role in organizational development in all five foundations. They bring ‘a neutral layer between the funder and the grantee, permitting more openness during the organizational development process, but also bringing the relevant skill set and contextual know-how’. Most of the five foundations have been seeking to strengthen the supply of quality consultants (such as MAVA Foundation and PeaceNexus Foundation collaborating in West Africa). Several foundations have exchanged experiences to set up a dedicated online database.
- Trusting relationships. Organizational development is only successful where there is trust. The foundations seek to build that trust through increasing core funding; treating transparency as a mutual obligation; managing and clarifying expectations on both sides; and establishing an “art of failure” attitude. All five foundations try to be flexible and hand partners as much decision-making in organizational development as possible, such as deciding organizational development priorities, timelines, and consultants.
Does this mean that organizational development is only something that larger foundations can do? Are small foundations exempt? I do not think so. Organizational development and investment is an approach, a way of working, that even the smallest funders can encourage and support.
How do you know what difference organizational development is making?
Impact assessment in organizational development remains a complex challenge for all five foundations. Immediate results are often incremental and intangible, while longer-term results are difficult to measure and attribute. It is almost impossible to make any reliable assertions that we can directly attribute change ‘a’ to input ‘x’. Because impact is so complex, it is more promising to look at the ‘contribution’ organizational development support makes – something the foundations are currently working on together.
Join the organizational development and investment learning journey!
Despite the lack of incontrovertible proof, the five foundations are convinced, ‘beyond reasonable doubt’ that organizational development is a smart investment. Their first-hand experiences over many years demonstrate that organizational development support not only enabled grantees to overcome challenges like leadership crises, outdated strategies, and overstretched, failing systems, but also to thrive and have greater impact.
The foundations also found that learning from each other is incredibly valuable. This has helped them create more internal ownership, shared buy-in, and new insights on what works and what needs further improvements. The current group of five is keen to welcome other foundations to share their learning journey.