How are funders supporting development organisations to be more effective?

20 October 2021
SERIES Rethinking organisational development 20 items

In my last post, I described what an organisation is and how it might be made more effective, drawing on three schools of thought. In this post, I describe what funders are doing to improve organisational effectiveness (among their grantees), drawing on a recent OTT paper.

Many organisations receive general or programme support and senior management have a high degree of flexibility in how they use these funds. But we found that they choose not to use these grants to improve the effectiveness of the organisation. Instead, managers might have to subsidise other funders who have chosen not to cover an organisation’s indirect costs. They might prioritise salaries or programme expansion ahead of effectiveness.  Managers might feel that paying for organisational-effectiveness-related services might be frowned upon by the funder (with the alternative being to hide such investments in the accounts). Alternatively, managers may be reluctant to admit that they might be experiencing organisational problems for fear of their funders deeming them less worthy of funding.

When grantees have made requests for support, some funders (through programme officers, POs) have not always been ready to respond. When foundation leaders were asked to describe the top three challenges their foundation faced in providing support to grantees in a survey, lack of internal staff capacity or time topped the list with 64 per cent of foundation leaders mentioning this. Often POs simply do not have the ‘bandwidth’ to respond to grantee requests.

Given this context, a number of funders have made additional efforts, beyond standard grant-making, to address their grantees’ organisational effectiveness. We reviewed work by:

  • William and Flora Hewlett Foundation;
  • David and Lucile Packard Foundation;
  • Ford Foundation;
  • Meyer Foundation;
  • Evelyn and Walter Haas Junior Fund;
  • Think Tank Initiative (TTI); and
  • Open Society Foundations’ (OSF) Economic Justice Programme (EJP).

We found these funders did one or more of the following things:

  • Created in-house positions or teams for organisational effectiveness or capacity building as a complement to the programme officer role.
  • Gave grants that are either partly or entirely focused on improving a grantee’s organisational effectiveness.
  • Directly invested in organisational effectiveness service providers.
  • Established peer-based learning opportunities and grantee communities of practice.
  • Collaborated with other funders.
  • Offered workshops and skills development opportunities, sometimes in partnership with organisational effectiveness service providers.
  • Lent staff capacity to grantees through volunteering and serving on grantee boards.
  • Convened or hosted retreats.

We found that providing this additional support had a number of benefits, including a better grantee–funder relationship. This stemmed from: grantees placing more value on their funders given their interest in their effectiveness; reduced pressure on thematic POs; and more honest conversations between grantees and those working on organisational effectiveness within the funder organisation about problems being experienced.

We also found evidence that additional support to operational effectiveness helped grantees identify and respond to important organisational challenges. For instance, targeted funding for strategic planning or other operational effectiveness activities helped senior managers within grantee organisations make investments in their organisation rather than in programmes and avoided the political challenge of having to justify diverting resources from already scarce general operating funds.

Additional operational effectiveness support led to specific improvements in organisational practices. For instance, the final report in the familiarisation phase of the evaluation of Ford’s BUILD programme reports that grantees have used support to:

  • Create space to step back from day-to-day operational concerns to critically reflect on their work (which included reflecting on the need for transitions from dysfunctional boards that had been largely taken for granted in the past).
  • Stabilise what had become somewhat lopsided or distorted organisational structures (especially during times of leadership transition) or after a period of rapid growth.
  • Strengthen important capacities that were long recognised as needed, but unlikely to be funded by other donors.
  • Focus more internally on diversity, equity and inclusion issues, and take a stronger intersectionality approach.

However, we did also find evidence of organisational effectiveness interventions having mixed success. For instance, in an evaluation of the Think Tank Initiative (TTI) Christoplos et al. (2019) suggested that supplementary operational effectiveness interventions (beyond the core grant) yield mixed results. Although some grantees reported significant benefits, for many, TTI’s interventions were not seen as important input. The authors question whether a global initiative with an extremely heterogeneous range of grantees can be sufficiently tailored to such diverse needs.

Finally, factors that enabled and/or constrained work to improve grantee effectiveness included:

  • A good funder–grantee relationship (which is a pre-condition as well as an outcome).
  • The grantee, founder and third parties (such as consultants) reflecting and deciding on the roles and responsibilities they take in relation to the work and to each other.
  • Funders and intermediaries positioning themselves as ‘a guide by the side, not a sage on the stage’.
  • Providing grantees with a high degree of freedom in how they structured or made use of additional support.
  • Enabling grantees to find/identify their own community rather than funders doing this for them (where funders have encouraged grantees to work together in communities of practice).

Establishing additional support to grantees to help improve their organisational effectiveness beyond core or programme support can be helpful, but how it is set up and with what intention can determine whether it proves a success or a failure.

Read the good practice paper “Improving organisational effectiveness: what are funders doing beyond providing general operating support?” here.