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Dec 20, 2012

Creating a Feedback Loop Between Donors and Nonprofits

Our community will be better off if we can foster better dialogue between donors and nonprofits. There is a danger of each side presupposing that it knows what is best for the community.

I was in Cleveland talking to foundation officials about how the forms and terms of a grant can determine whether a grant is helpful or harmful to a nonprofit’s financial sustainability.  One funder responded that, whenever she pushed back about a nonprofit’s priorities in making a particular funding request, she was told “you don’t understand the need out there.”  Yet she does know all the nonprofits in her community and how each addresses various needs of the community.

Her view is that the nonprofit doesn’t have a community-wide view and doesn’t understand how it fits in with the community’s priorities.  The nonprofit’s view is that it knows the extent of unmet needs among its client base and that the funder’s knowledge is abstract and distant from the reality on the streets.

Perhaps this communication problem is a disagreement about role.  Some funders believe their role is to choose the most effective programs and providers and to determine the best way to deliver support.  In contrast, many nonprofits believe the nonprofit’s role is to determine the most effective programs and to determine the best way to deliver support to address the community’s needs.

It is presumptuous for a nonprofit to assert it is the most deserving nonprofit, but it is also presumptuous for a funder to assert he or she knows the best way to address a community need.  Each brings particular perspective, knowledge, and expertise.  The funder has the information to know the full range of nonprofits serving a particular need.  The nonprofit has the information to know which of its services are the most unique and effective and how they address the needs of its service population.

The conventional approach of sorting through grant applications is rarely a dialogue and it does not address this communication problem.  If dialogue does occur, it can often be the wrong conversation – one about merit, operational efficiency, metrics, and accountability.  Both funder and nonprofit should share the overall goal of fostering reliable provision of services that address the unmet needs of the community.  The goal is serving the needs, not perpetuating a particular nonprofit or aggrandizing a particular funder.  To achieve this goal requires a dialogue that taps and shares both sides’ information and perspective.  Chapter 19 in Linking Mission to Money provides suggestions for what communications various constituents of nonprofits should receive as well as key questions the nonprofit should be asking itself

The  foundation community has actively taken steps to foster a feedback loop  so that  foundations  can see  perspectives of each of their constituencies, including nonprofits.  The Center for Effective Philanthropy produces surveys to foster feedback to foundations. Examples of their services are the Grantee Perception Report® (GPR), which provides foundations comparative data on grantee perceptions of key elements of foundation performance. CEP’s other assessment tools are the Staff Perception Report (SPR), the Applicant Perception Report (APR), the Stakeholder Assessment Report (STAR), the Operational Benchmarking Report (OBR), the Donor Perception Report (DPR), and the Beneficiary Perception Report (BPR). More than 200 foundations, most among the largest in the United States, have used CEP’s assessment tools, and many have implemented significant changes on the basis of what they have learned.

A great next step to close this loop is to have a mechanism to provide anonymous critical feedback to nonprofits about the quality, reliability, and timeliness of their services, management, and governance.  Someone want to fill this gap?

A final note:  Many foundations are hesitant to become a referral service for professional service providers to nonprofits, perhaps due to concerns that nonprofits may conclude that using a referral would enhance their chances of receiving grants.  Taking a cue from the commercial service called Angie’s List, the Minnesota Council of Nonprofits is seeking to fill this niche of “where do I get help” by creating its Nonprofit Yellow Pages.  While it does not have the critical feedback of an Angie’s List, it at least does pull together what help is out there.  Perhaps its next step will be to allow commentary and evaluation of providers.