Funders Can Do More to Help Grantees with General Operating Costs

Leaders of the five of the wealthiest foundations in America recently pledged to do more to help their grantees cover overhead expenses. To support this effort, our own Lisa Eisen, Co-President of the Schusterman Family Foundation, and Barry Finestone, President and CEO of the Jim Joseph Foundation, teamed up to urge the Jewish nonprofit sector to follow suit. Lisa and Barry’s op-ed, “Raising Up Overhead: How We Can Do Better,” underscores the importance of providing grantee partners with general operating funds.

They explain that helping grantees cover the true cost of their work would:

Build trust and strengthen the funder-grantee relationship.
General operating grants, particularly multiyear ones, are a vote of confidence. They signal to grantees that funders believe in their ability to think long-term and execute an effective strategy over time. Unrestricted funding also helps to change the dynamic of the funder-grantee relationship. By design, general operating grants take some of the pressure off of short-term programmatic goals and instead shift the focus to achieving long-term impact. Rather than participate in constant oversight and reporting, funders and grantees have the opportunity to work together as partners in pursuit of a common vision.

Allow grantees to be more creative and take more risks.
The Jewish community is relying on organizations to think differently and to test and scale new ideas. This is true across many sectors. Funders need grantee partners to be nimble, forward-thinking and open to experimentation to achieve significant impact. But creativity and risk take both time and leeway, two things that are only made available when funders free up restrictions and extend the timelines of our grants. Indeed, the more runway a grantee has to apply their expertise and get new ideas off the ground, the greater their impact will be.

Achieve better programmatic and organizational outcomes.
Funders should continue to monitor and track programmatic outcomes. But, as Lisa and Barry argue, general operating grants have also been proven to contribute to specific and overall success metrics. That is because general operating grants allow organizational leaders to take a holistic look at their needs and adapt accordingly. Additionally, in the business world, investors know that a successful organization requires a strong operation. We should take a page from their book and make it a priority to ensure our grantees can invest in the technology, talent and programmatic elements they need to strengthen their work.

Lisa and Barry’s article is just one of many contributions to an ongoing, sector-wide conversation. The Schusterman Foundation team looks forward to continuing to be part of the discussion and learning about how others are implementing this increasingly important philanthropic best practice.

We invite you to read Lisa and Barry's article in full.

Want to learn more about the impact of general operating grants? Start with these resources:

• “Five CEOs of Wealthy Foundations Pledge to Do More to Help Charities Pay Overhead.” Chronicle of Philanthropy.
• “Looking at Overhead.” Baltimore Jewish Times.
• “Nonprofit Overhead Costs: Breaking the Vicious Cycle of Misleading Reporting, Unrealistic Expectations, and Pressure to Conform.” The Bridgespan Group.
• “The Nonprofit Starvation Cycle.” The Bridgespan Group.
• “Don't Compromise "Good Overhead" (Even in Tough Times).” The Bridgespan Group.
• “Before the Next Recession, Philanthropy Needs to Redefine Efficiency” Stanford Social Innovation Review
• “What Financial Challenges Do Nonprofits Face?” Grantmakers for Effective Organizations.
• “How Can We Be More Supportive of Nonprofit Financial Stability?” Grantmakers for Effective Organizations.
• “What is General Operating Support and Why is it Important?” Grantmakers for Effective Organizations.

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