When individual philanthropists and institutional funders think about impact, they think about innovative approaches to problem-solving — a new method for mentoring teenage gang members, a unique research strategy for curing Parkinson’s disease, or a groundbreaking way to foster entrepreneurship in developing communities. There is a focus now at many foundations on evidence-based grant-making, which is designed to identify the programs that are having the greatest impact. Once donors or foundations feels they have found such programs, they direct their giving toward them. All the big players do it, from Skoll to Gates. They typically want as much of their donation as possible to go to that specific program or idea at the charity in question. Why? Because they want their giving and their grant-making to have the maximum impact.
Makes sense if you don’t think about it too hard. But if you do, the logic collapses.
That is Dan Palotta in his HBR blog. His basic point is that better to work on impactful funding mechanisms than impactful fundees.
Impactful funding mechanisms are a wonderful thing, but is this logic any sounder? Presumably the effectiveness of what is funded feeds back into the funding mechanism?
In any case, it’s not clear to me that a lack of funds has been the binding constraint in aid. I suspect there is more to Palotta’s argument but I don’t see it.
Hat tip to @pj_blue.
If you are one of the estimated 1,000,000 grassroots groups and movements (by WiserEarth.org), you would most certainly see the lack of funds in aid as a constraint. There is a tremendous discrepancy between the resources that are mobilized or acquired by donors, governments and international organizations for global development, and what percentage of the money actually reaches families, communities, and local leaders.
I’ve had the unique privilege to experience the impact and potential of alternative funding mechanisms that directly support community activists and that, for me, demand much more attention, research, and understanding in our sector.
Like it or not, as aid practitioners, we are often beholden to administering finances before anything else. Therefore, I am constantly asking how donors can restructure and revise their accountability requirements to focus on the minimum structure and financial controls necessary, rather than asking local groups to jump through hoops. In effect, how can funding mechanism help lower the “glass ceiling” for grassroots movements in international aid so that they can, from the inside, genuinely challenge power asymmetries and unleash social change and development?
I’m sympathetic to Pollatta’s idea of using seed money to leverage resources through fundraisers, but this seems like it should be complementary to focusing on impact– otherwise you just end up spending more money badly.
Isn’t it odd that Dan seems to be talking about impact in terms of revenue earned per dollar of initial investment, rather than ‘reduction of HIV/AIDS infection’ as a result of the various examples he mentions? Does making ‘a return of 1,982 times the original proof-of-concept investment’ mean you’ve made a difference in lots of people’s lives – or is that a link that we need to just assume is correct?