Developing a Grantmaking Strategy That Works for Your Nonprofit

One of the most important roles a nonprofit can play is that of grantmaker. Nonprofits understand complex issues and community needs better than almost anyone else, and so how they direct their funds can have a major impact on people's lives.

But as any seasoned nonprofit professional knows, grantmaking isn’t simple — it’s a complex science. Determining to whom and how to direct your funds requires careful research, a well-thought-out data review process, and sound judgment. With a winning grantmaking strategy, nonprofits will not only improve their constituents’ lives, but also cement their own organization as more trustworthy and sustainable. Without a strong process, nonprofits risk squandering precious funds, damaging their reputation and jeopardizing their longevity.

So, how does a nonprofit go about crafting a successful grantmaking strategy? While there’s no one-size-fits-all approach, there are a handful of key strategies that any nonprofit can deploy — whether a small, regional organization or a global one with hundreds of staff members.

Understand Your Mission and Strategy

Grantmaking should enhance an organization’s mission, not stretch it. Before you begin crafting your grantmaking strategy, zoom out: Do you and your team have a strong understanding of your organization's mission? This may seem like a silly question, but many organizations suffer from scope creep and muddled messaging. Take the time to distill what you stand for and what you want to accomplish into clear, crisp language that all stakeholders can agree on. Think about your organization's founding, its audience, its staff, its theory of change and the types of work you don’t want to fund. If you don’t take the time to do this orientation up front, your grantmaking strategy may not accurately represent your organization’s goals.

Understand the Nuances of Grantmaking

Grantmaking is a broad term, and there are many different ways that nonprofits can support the people and projects most important to them. As you work on your grantmaking strategy, it’s crucial to understand the different avenues available to you. Here’s a quick glossary:

• Responsive grantmaking provides grants to accommodate requests from nonprofits for programs within a mission. In other words, they come to you first.
• Strategic grantmaking entails a foundation directing grants to address specific needs with a defined impact in mind.
• Proactive grantmaking identifies organizations targeting specific issues that foundations want to fund over a long-term timeline, ranging from three to five years.
• Initiative grantmaking convenes or collaborates with other organizations and foundations to focus on new ideas for the future.
• Collaborative grantmaking means working with other funders to mutually support areas of interest.

Take note: These types of grantmaking are not mutually exclusive and can often be combined for added impact.

Timing Matters

Ensure you’re developing your grantmaking strategy at a time that makes sense in the broader ecosystem of your organization. The clearer your understanding of the context for your work, the more effective your grantmaking strategy will be. For example, your nonprofit may also be developing an overarching strategic plan to hone or change its mission. Adopting a new grantmaking strategy as you finalize your strategic plan gives your organization a clear vision and consensus to focus and fuel your work.

Build a Big Tent

One question that nonprofit leaders inevitably ask themselves during this process is: Which members of the organization should be involved with developing the grantmaking strategy? The answer: As many as is reasonable. You might feel an impulse to develop the strategy with just top leadership, but that’s a mistake. Instead, take a grassroots approach.

Gather input from all of your employees — from vice presidents to interns — as to how your grantmaking strategy can better reflect the goals of the organization. You need to hear from all corners of the nonprofit: those in charge of finances, those in charge of programming, those in charge of operations, the boots on the ground and so on.

Nonprofit leaders should also engage those outside the organization when developing a grantmaking strategy. Consider hiring an independent consultant to evaluate the field and the industry and gather information to inform your planning. Speak to fellow nonprofits for advice, and survey past and current grant recipients for input.

Be Detailed — Very Detailed

Once the time comes to put pen to paper and craft your grantmaking strategy, don’t be brief. First, your strategy should include a landscape analysis — what is the state of your core issue(s)? Think about the world that we live in now and the sociopolitical and economic contexts.

Next, take a look back at your last grantmaking pivot, and see what’s changed. Did you develop new stances and positions? If so, why? Are they still relevant? Next, be sure to carefully review your internal resources to ensure your grantmaking strategy is fully aligned with your organization’s goals and capacity. Scrutinize your budget, staff, staff expertise and what makes you stand out from others in the field. Also, what makes you prone to faltering? Think about where the funds for your grants will come from. Small dollar donors? Large gifts? Federal funding?

Lastly, craft your grant guidelines — the rules for how potential recipients should apply, why they should apply and what you’re seeking to accomplish. The more detail you can plug into each step of the process, the more clarity you and your team will have for the road ahead.

Think Long Term

Remember, a good grantmaking strategy is never short-sighted. You're building something that’s sustainable and resilient — a document that can last for years. Oftentimes, grantmaking strategies last anywhere from three to five years, which allows them to be most effective. Of course, you can change and revise your strategy during this time. People, organizations and the wider world change, so strategies should be fluid, not completely static.

Analyze, Analyze, Analyze

Once your grantmaking strategy is finalized and deployed, don’t let it collect dust. Instead, hold yourself accountable by gathering data and setting clear goals — and then checking regularly to see if you’re meeting those goals. You want to ensure at the outset that you have clear metrics your team can review as you move forward. Make sure every dollar of every grant has maximum impact and furthers the goals of your organization. And as I mentioned, if the data suggests the impact is not occurring, you can always course-correct.

Crafting a winning grantmaking strategy is essential to any nonprofit’s success. Whether you’re a regional food pantry or an international nongovernmental organization, how you spend your precious funds is the most important decision you can make. With all of this guidance top of mind, you can set your nonprofit up to succeed at grantmaking — and, as a result, succeed more broadly.