VUCA and Philanthropy: Why Are General Operating and Multi-Year Support So Hard to Find?

posted on: February 25, 2013

By Kevin Laskowski

Only one in six grant dollars is for general operating support.

Only one in ten funders reports any multi-year grantmaking.

These findings from NCRP’s recent “The Philanthropic Landscape” confirm what nonprofits have known for years: Despite the benefits of general operating and multi-year grantmaking, long-term, flexible foundation funding can be incredibly difficult to find. Why is that? Why haven’t these statistics moved much in a decade of nonprofit and association advocacy? What can be done to encourage grantmaking that builds organizations and not just programs?

This will be the subject of a NCRP Pulse webinar this Wednesday, February 27. Join Grantmakers for Effective Organizations’ J McCray and me as we discuss Cutting the Strings: The State of General Operating and Multi-Year Support. (Space is limited. Register now.)

Ahead of the webinar, a grantmaker emailed NCRP with an answer to our question. “VUCA,” he said, or Volatility Uncertainty Complexity Ambiguity. He wrote:

“We live in a VUCA landscape now that is not a rough patch but a new normal. We have all been pummeled with political and economic uncertainty in recent years and philanthropy behaves even more timidly in this kind of environment. The greater the uncertainty the fewer multiyear grants you will see.”

Growing up, I heard FUBAR, SNAFU and VUCA just as much as I heard jet noise, so I knew the term. There is a great deal of truth to this, but I’m not sure it’s the whole story.

For instance, the economy certainly affected multi-year grantmaking. According to our analysis in The Philanthropic Landscape, in 2009, reported multi-year giving declined 21 percent to $5.5 billion from its $6.9 billion peak the previous year. If the nation’s largest grantmaker, the Bill and Melinda Gates Foundation, were excluded, reported multi-year grantmaking would have decreased by more than a third.

But our analysis also demonstrated that, among those funders that make such giving a priority, such giving happens regardless of the circumstances. Reported multi-year giving never comprised more than 28 percent of total grant dollars or 6 percent of grants authorized from 2004-2010. However, among foundations that do report multi-year giving, though, it has comprised as much as three-quarters (75 percent) of total giving and 29 percent of grants authorized. Foundations that do report multi-year funding provide such grant dollars at consistently substantial, if not exemplary, levels.

For its part, general operating support as a share of grant dollars has remained steady for a decade.

Those that make it a priority to provide flexible, long-term capital to nonprofits do so. Others do not. The question is why? I think the true culprit here is “strategic philanthropy.”

Somewhere along the way, the annually-reviewed (and possibly renewed) program grant became a hallmark of the serious, thoughtful, strategic grantmaker. This well-meaning but misguided preference for short-term program grants persists despite the evidence, despite nonprofits’ stated needs and despite VUCA circumstances that should have finally prompted foundations to cut the strings. It is the very opposite of strategic, and it has to change.

But what do you think?

Grantmakers, have you increased or decreased general operating or multi-year support in recent years? Why? Grantseekers, are you having more or less success in finding long-term, flexible grant dollars?

Did your nonprofit’s multi-year funding increase or decrease during the past several years?

Let us know in comments, and join us this Wednesday, February 27 to discuss Cutting the Strings. Space is limited. Register now.

Kevin Laskowski is senior research and policy associate at the National Committee for Responsive Philanthropy (NCRP). He frequently blogs about trends, accountability and effective practices in philanthropy. He didn’t watch the Oscars.