Nonprofit Characteristics Foundations Seek Before Making Grants

Whether your nonprofit is a well-established, mature organization or a brand-new one trying to get off the ground, it’s always good to focus on the basics, especially in these trying economic times.

The competition for foundation grants is greater than ever with charitable service demand at an all-time high. So to ensure your organization is in position to grab the attention of grantmakers, make sure you're set up with the pre-grantseeking needs foundations look for.

In the webinar “Before Your Seek a Grant: A Checklist for New Nonprofits,” Caroline Herbert, manager of multimedia and on-demand training at the Foundation Center, laid out the characteristics of successful nonprofit organizations that foundations look for and the key elements to obtaining those characteristics.

Characteristics of successful nonprofits
“A fully functioning, effective nonprofit organization does not just appear out of thin air,” Herbert said, noting that there are different stages in the nonprofit life cycle: idea stage, startup stage, growth stage and mature stage.

“Ask yourself where you are in the lifecycle continuum” to determine where you are in the process, she advised. Don’t expect to be ready for a grant application if you’re early in the life cycle.

“Funders are looking for successful organizations. They’re looking at not just what’s your great idea, but what assurances can you give me to achieve your mission,” Herbert said.

The Grantmakers for Effective Organizations suggest that fundraisers ask themselves: Does your organization have the ability to fulfill its mission through a blend of sound management, strong governance and a persistent rededication to achieving results? To answer yes to that question, you must have:

• A compelling mission — a mission statement of needs and problems that your organization solves, something that differentiates you from the pack.
• Capable leadership — you must have an effective board and qualified staff.
• High-quality, well-regarded, relevant programs — “You want to build your reputation as a high-quality service provider,” Herbert said. “Foundations look to see what your reputation is, and it must be relevant. Why do we need another nonprofit addressing your issue?”
• Efficient operations and support systems — can you deliver on your promises?

Other characteristics of successful nonprofit organizations include:

• Regular organizational planning and evaluation.
• Adequate facilities — technological facilities, physical locations, etc.
• Solid finances with diverse revenue streams — “Fundraising will stay with you for the lifetime of your organization,” Herbert said. “You need to think about all the ways you’re going to bring in support. Foundations don’t like to see you rely on one or two sources.”
• Track record/history — a stumbling block for new organizations, Herbert said. If your organization is still relatively new or doesn’t have much of a track record, foundations may look to leadership of the organization: Who are the leaders? What kind of experience do they have? What are their track records? Planning can also help convince a funder that your cause is worthy as well when your history is brief.

Key elements of getting started

Mission statement
Developing your mission statement is a critical first step, Herbert said. Clarify your mission, answer why, your purpose, discuss general goals, the what and the how, who is going to benefit, etc.

“No matter how clear the mission statement sounds in your head, talk it over with people to make sure it conveys what you want,” Herbert said. “All these words are very important. Some say your mission statement should be so simple and succinct that if fits on a business card, but I think it’s more about clarity than length. You want to have a clear mission statement that includes the purpose, service and beneficiaries.”

She provided the example of the United Way of York County, whose mission statement is "to inspire the people of York County to make a difference in the lives of their neighbors through financial generosity and volunteer commitment."

Board of directors
The Association of Fundraising Professionals defines a governing board of directors as people elected or appointed to establish policy, exercise fiscal responsibility and oversee management of an organization. So why do nonprofits have boards of directors?

• To ensure the organization operates within the framework of its mission;
• To earn and maintain public trust;
• To provide legal and fiscal oversight; and
• To maintain high standards of accountability.

Herbert then shared key board responsibilities from BoardSource:

• Maintain integrity and accountability — Nonprofits are accountable to the public at large, Herbert said. The board of directors is the public face of an organization and accountable for its performance and making sure it operates legally and with integrity, she said.
• Determine mission and purpose — “Boards help you grow and shape your mission and purpose, and guide you through the process as you mature. They make sure you’re not straying too far from the mission,” Herbert said. For example, say your mission focuses on unemployment and job training for adults, and your main program is computer training and you have a computer lab set up for the program. If a funder comes to you and wants to do computer training for children who are immigrants to help them learn English, it gets away from the core mission of helping adults. Your board should step in and say it’s probably not the right fit.
• Select and oversee chief executive — responsible for hiring, evaluating and if necessary firing the chief executive.
• Lead organizational planning.
• Ensure adequate resources.
• Strengthen programs or services.
• Assess own performance.

When putting a board together, be sure to enlist committed board members and establish responsible board policies. Committed board members possess the talent, time and treasure (or wisdom, work and wealth) dedicated to your organization.

• Talent/wisdom: It’s situational for every organization. You want experts in a certain program area, lawyers, accountants, PR people, etc.
• Time/work: People willing to put in time to help the organization be successful. Board members may need to do some of the work, especially for startups, and have to come to meetings.
• Treasure/wealth: Board members must be able to write checks and find others who can and will as well. “I don’t want you to think you have to find only wealthy people to be on your board,” Herbert said. Not everyone on your board has to be rich, she added, but the people on your board need to do a couple of things:

1. Personally support the organization — “That doesn’t mean they have to give you huge amounts of money, but making an amount that’s significant to their means,” Herbert said. “From an external point of view or foundation point of view, if your core stakeholders (your board members) aren’t giving to your organization, why should anyone else?”
2. Help bring in other resources — be willing to help fundraise.
3. Establish board policies — conflict of interest policies, disclosure statements; must put loyalty to the organization above personal preferences.

Foundations also look to see that nonprofits are incorporated and have their IRS 501(c)(3) tax-exempt status, that their programs and services are headed by a strong executive director, and that operational concerns — finances, employee benefits, etc. — are accounted for. Herbert suggested looking into joining state associations for health benefits and more, offering the National Council of Nonprofits as a resource to find the appropriate state associations for your organization.

Fundraising planning
It’s vital to diversity your funding sources, Herbert said. Possible funding sources include:

• Government/public funding.
• Earn income (membership dues, product/service fees) — “It’s a misconception in our sector that nonprofit means you can’t earn any profit,” Herbert said. “That’s actually not true. You can earn money, charge for services; however all the money has to be put right back into the mission. You can charge people on a sliding scale to come to an interview prep workshop, rent out space to other organizations, sell products. There are many ways to generate income. Set yourself up with a membership program — though that can be troublesome because there must be benefits for being a member.
• Private giving — institutional philanthropy (foundations/corporations) and individual gifts (donors/bequests).
• Fundraising events.

The best way for fundraisers stand out to foundations and other grantmakers is to ensure their organizations have as many of these characteristics as possible before applying for any grants.