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Philanthropy and Digital Civil Society: Blueprint 2023

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The post Report: Giving Big: The Impact of Large, Unrestricted Grants on Nonprofits appeared first on Forum of Foundations in Israel.

A study of MacKenzie Scott’s early giving reveals how transformational generous general operating support can be.
By Phil Buchanan & Ellie Buteau Nov. 15, 2022

MacKenzie Scott’s giving has shattered conventional norms for big donors and foundations. Consider this: In her first three rounds of giving, between the summers of 2020 and 2021, the median grant size was $8 million, according to the data we collected for a just-published report entitled Giving Big: The Effects of Large, Unrestricted Grants on Nonprofits. That compares to a median grant size of $100,000 among larger, staffed funders whose grantees our organization, the Center for Effective Philanthropy (CEP), has surveyed in recent years.

Scott’s gifts have been huge, by conventional standards, and they have also been unrestricted. It’s totally up to recipient organizations, and their leaders, to decide how to use them. For decades, nonprofit leaders and advocates have argued that nonprofit organizations need more unrestricted resources, in the form of general operating support, to do their best work. It makes sense. A lack of unrestricted resources impedes planning, curtails the ability to invest in staff salaries and organizational capacity, and, at its worst, leads to mission creep in which organizations chase project funding to keep the lights on.

So, understanding what a fascinating natural experiment Scott’s giving represents, we set out to study the effects of Scott’s large, unrestricted giving on the organizations she supported. But what we found is that, in addition to impacting the recipient organizations, the grants were transformational for leaders. It affected them personally and professionally—profoundly shifting their mindsets. This matters because it shows that a different approach to giving can shift leaders’ thinking, emboldening them to dream of what’s possible for their organizations—and for those they serve—in new ways and act on making those dreams a reality.

“For me, as the ED who’s been doing this for a long time and has had many sleepless nights wondering and worrying about the next payroll, I don’t have to spend as much time with that kind of worry,” explained one leader. “I can spend my time now thinking about where can we make the greatest impact in our community? What are the things that we can do that we’ve never been able to dream of before that are really going to make a difference? So, that’s huge.”

In interviews, more than three-quarters of leaders discussed the shift in their thinking that accompanied the receipt of this gift. A scarcity mindset was replaced with an opportunity to pursue transformational possibilities, as leaders were able to reimagine their organizations “in the ideal way to achieve the biggest impact that we could have.”

Close to two-thirds of interviewed leaders described a sense of relief and breathing room after having received their grant. Many told us of the opportunities to innovate and take risks that their grant has afforded them, knowing their organizations are now more financially secure. “It’s an opportunity to be innovative and creative because we have more foundational support,” said one leader. Another said, “For us to have money to pilot something to see how it goes is just a miracle from heaven.” Other leaders put aside a specific portion of the gift specifically for bold or risky ideas.

Leaders of color, in particular, spoke to us of the power of Scott’s gift—as an affirmation of their leadership and a striking contrast to their typical experience with funders. “I’ve been told about two million times that organizations led by women of color get less than others,” one leader told us. “So, I was nervous about this because I’m thinking, man, I hope that who I am doesn’t cheat this organization out of opportunities, you know? And that’s a sad thing to even admit to you, but I did think that.” The grant from Scott was powerful for this leader because, as she put it, “it positioned being a woman of color as an asset, not a liability.”

The affirmation leaders experienced has also changed their approach to fundraising. “It has emboldened us to be more strategic in our fundraising,” one leader told us.

The results have been positive. Despite worries that Scott’s giving would lead other funders to pull back from recipient organizations, we found that nonprofits who received gifts from Scott were more likely to report an increase in fundraising that they attributed to Scott’s gift than a decrease. “The Scott gift made us believe that we are worthy of a gift of this size and importance,” said another leader.

Admittedly, it can be difficult to disentangle effects on an organization from effects on a leader. But we were struck by the deep sense of personal validation leaders of Scott’s grantee organizations described. In two decades doing research on the way funders and nonprofits interact, we have encountered plenty of emotion from nonprofit leaders, but that emotion has typically been frustration, even anger.

Studying Scott’s giving, we saw powerful, positive emotion we had not expected—or previously encountered. That matters not just because tears of joy are better than tears of disappointment. It matters because emboldened leaders with the freedom to dream big can do more good—for their organizations and for the issues and communities they serve.

Read more stories by Phil Buchanan & Ellie Buteau.

Phil Buchanan is president of the Center for Effective Philanthropy (CEP) and author of Giving Done Right: Effective Philanthropy and Making Every Dollar Count.

Ellie Buteau is director of research projects and special advisor on research methodology and analysis at CEP.

They are co-authors of Giving Big: The Effects of Large, Unrestricted Grants on Nonprofits a report on MacKenzie Scott’s giving and its effects. Disclosure: CEP received a $10 million one-time gift from MacKenzie Scott in 2021. The study referenced has been funded separately by other funders and conducted independently of Scott and her advisors.

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