BUILD-ing capacity for an impact-oriented philanthropy

With an annual grant-making of more than $500 million a year, the Ford Foundation is one of the largest and more innovative players in the philanthropic scenario. Over its 80 years of activity, it has been through many evolutions – but one thing has been constant: the Foundation invests in individuals, in ideas and in institutions to achieve long-term social change.

Our interview with Kathy Reich, Director of the BUILD Program and Leap Ambassador, stems from this premise to focus on one of Ford Foundation’s latest efforts: the Building Institutions and Network (BUILD) initiative, a unique $1 billion program launched with the goal of empowering non profit organizations by giving them the means to strengthen their capacity, reach sustainability and increase their ability to create social change. A real journey going beyond overhead to define what grantees actually need to become high-performing organizations for the sake of their beneficiaries.

As one of the main grant-making foundations in the world, could you describe the Ford Foundation’s philanthropic approach? Did you experience an evolution of this model over the years – I am referring for example to Mr. Walker’s j’accuse of the “overhead fiction”…

Since Mr. Walker has become president in 2013, the Foundation has focused its mission around reducing inequality in all its forms (political, economic and social), both in the United States and around the world – about 45% of the current grantmaking is for the benefit of people who live outside the United States.

Our vision is to focus on non-profit organizations as the long-term drivers and stewards of social change: this has entailed a really dramatic change in how the Ford Foundation manages its grantmaking. We want to be sure, in our role of funders, that we can prove good partners to our grantees and that we are enabling them to learn and innovate: we want to allow them to go beyond a “hand-to-mouth” attitude towards a perspective of sustainable growth. With this goal in mind, in 2015 the leadership of the Ford Foundation introduced an initiative called FordForward that envisions three main drivers:

• a shift towards general operating support. Previously the majority of the grants by the Ford Foundation were on project support: that has changed dramatically in just two years.
• For grants that are still destined to project support, we have doubled our overhead rate to 20 percent to better reflect what it takes to actually manage a project and to effectively run robust organizations capable of executing projects.
• The third piece is BUILD – that I have the privilege of directing – a 5-year $1 billion initiative to strengthen the capacity of key non-profit partners around the world who focus on reducing inequality. I have been here for about one year and a half, and it has been an incredible experience to see the impact this program is already having around the world.

“We want to be sure, in our role of funders, that we can prove good partners to our grantees and that we are enabling them to learn and innovate”

The BUILD initiative: a program that arises from understanding that grantees need more than restricted cash funding to become resilient, sustainable – and high-performing. It would be interesting if you could help us explore this unique initiative. First of all, how did you come to develop the Theory of Change of the program?

It was a highly participatory process that started among the staff of the Ford Foundation across program areas and regional offices. We used their inputs to create a draft Theory of Change, but we also wanted to bring some external voices to this process. So we organized focus groups and webinars with organizational development experts, at a global level, and we had a focus group with other capacity building funders. We also invited some of our grantees to advise and comment on the strategy. This process not only strengthened and empowered our Theory of Change, it also gave our stakeholders a sense of ownership and co-creation.

The process was slow, about six months until we had a final Theory of Change but it’s important to actually take the time and make sure that you are very clear about what you want to accomplish and how you want to get there. If I hadn’t had that clarity through the Theory of Change, I wouldn’t be able to talk about BUILD now, to convince others it was a good idea, and to assess the team’s own progress and success.

How would you describe BUILD grant making model and its funding criteria?

All of the BUILD grants are 5-year commitments: most organizations receive a 1-year planning grant followed by a 4-year implementation grant combining different types of support.

The first component of the grant is general operating support for the organization to pursue its mission. We place no restrictions on that funding.

The second component of the grant is what we call “core support for institutional strengthening”. This is also very flexible support but the organization must use it to build internal capacity for the long term: there are about a dozen different large categories amongst which they can choose to invest it, from strategic planning, to leadership and governance, to financial management planning, fundraising, creation of financial reserves, monitoring, evaluation and learning and so on. The choice is theirs.

The amount of the grants varies widely, because BUILD grantees are very heterogeneous in terms of size and reach, but the average grant size is about $5 million in the United States and $2 million in the global South where organizations tend to be smaller. In terms of allocation choices, a little more than 60% of BUILD’s grants are used for general support, with the remaining 40% for long-term institutional strengthening investments.

The program is only open to a small percentage of Ford Foundation’s current grantees: if you are going to engage in a five-years funding relationship with anyone, you do need to know them very well; if it’s going to be a highly flexible partnership, you really have to trust them, and they have to trust you.

However, it’s my hope that, as the Foundation comes to value this grant-making approach and its potential, it will be extended towards the point where most of our grant-making will be focused on general support and institutional strengthening. We are already starting to see that happen: for example, our Southern Africa office in Johannesburg is planning to move all of their grant-making to a BUILD approach. The BUILD initiative is able to strengthen 300 organizations around the world that work on inequality – that is a remarkable outcome; but, if the Ford Foundation is able to change the way it grants $500 million a year that could really be a game-changer.

Which are the key drivers to building positive yet effective relationships with grantees and how can you balance monitoring grantees’ performance while avoiding data are perceived as something to fear?

We are evaluating the BUILD program rather intensively. First, there is a monitoring protocol for BUILD grant program officers in order for them to spend a significant amount of time with grantees in a given year, discussing what they are learning, the challenges, and positive changes. This ensures that all of us are learning from these grants and that we can adjust along the way if something is not working.

Secondly, we have commissioned an external developmental evaluation of the BUILD program that will follow this program for the next four years. It is very important to emphasize that we are evaluating the BUILD strategy, and not the performance of individual grantees. By looking at the strategy level overall, we want to see if this program actually helps organizations become stronger and more resilient, more networked with each other, and more impactful in their field as a result.

I have struggled, for my entire career as a grant maker, with the fact that organizations should not feel that they are being judged and that their funding could be taken away if they make a mistake. I think that a key here is that these grants are solid 5-year commitments: the grantees do not need to worry their funding will disappear if there is a mistake – that is huge shift and immediately changes the character of our relationships.

The other thing that we emphasize again and again to grantee organizations is the fact that, for us, the primary purpose of an evaluation is not accountability: it is learning. If you look at it that way, it is fine to fail. That’s a very hard concept to believe in for many organizations, but in our perspective evaluation is a tool to help people assess their progress and course correct if needed.

“The primary purpose of an evaluation is not accountability and compliance: it is learning”

I am very proud of the initiative: this is the kind of support that NPOs had been wanting, needing and asking for from funders for at least a decade now. We have got to start thinking with our grantees and treating them as partners. I am thrilled because we can already see the change in relationship and the thinking that this funding approach has brought: people are focusing on the strategic change we want to see, and not so much on how they will get the next grant.

Which are the most significant areas in which NPOs decide to invest thanks to your support?

When a BUILD grantee organization proposes to the Ford Foundation what they are going to focus on with the grant, the most popular use of the funding (more than 80%) is in the area of strengthening core operations – this includes finance, fundraising, communication, monitoring evaluation, IT and human resources. These are core parts that every NPO needs to be strong in but that are chronically under-funded by donors.

The next more popular use of funding (close to 60%) is the area of clarity and coherence, in terms of strategic planning.

It’s interesting that as of today, only about 20% of BUILD grantees are choosing to put money into financial reserves. We don’t allow BUILD’s funds to be permanently restricted, but we do allow our organizations to create or strengthen reserves.

Only about 13% are choosing to put money into growth. We think that this is very good, because we always say growth is not the core of the BUILD program – effectiveness and impact are. We don’t think these organizations necessarily have to get larger or expand in order to be effective.

The organizations have full autonomy with their grant to decide what areas of institutional strengthening they are going to focus on, and how they are going to measure success. We do tell them to focus, to choose three to five drivers over the course of the years.

To conclude I’d like to focus on impact assessment in three bullets. First of all – evaluation: always – often – sometimes?

Monitoring – always. Whether you are a funder or a non-profit, you should always have some metrics by which you can assess your own success and progress, so that you can adjust over time.

Evaluation – often. Evaluation is bringing in an external party to take a deep look at a program or an organization, and it’s on a longer-term basis. I don’t think you need to do it all of the time, but there are times in an organization’s life cycle in which external evaluation is really crucial for a number of reasons. Firstly, for credibility in the field if you are hoping to replicate or get others to adopt your approach. Secondly, it is crucial to have a fresh, external, unbiased look on your work. I think we all fall in love with what we are doing, and it becomes harder and harder for us to see where we might be falling short. This is where an external evaluator can be very helpful.

Culture of failure: a reality – a work in progress – a myth?

I think it’s a work in progress. The philanthropic field, and the non-profit sector as well, have made significant progress in the last five years in acknowledging failure, talking about it, and learning from it. This is a very positive development. But, I still think we have a long way to go before failure is seen as something truly acceptable in our field. I do think we need to be more comfortable with failure if we are hoping to advance our results.

Cost coverage: who should pay for impact evaluation?

My perspective is that monitoring and evaluation should be a core function of any NPO and that if funders want grantees to be successful they need to support NPOs’ core functions. Whether the foundation pays for an evaluation or gives adequate general support so that the NPO can create and manage that function, it doesn’t matter: I just think funders need to pay for it. 

“Whether the foundation pays for an evaluation or gives adequate general support it doesn’t matter: funders need to pay for it”

For further information https://www.fordfoundation.org/