Walking the talk: grantmakers get own houses in order. (Grantmaking).

Recent controversies concerning the disbursement of September 11 funds have led to increased attention on the nonprofit sector from government, media, and the public. There are demands for increased high performance and accountability.

In hopes of bolstering accountability and performance, a growing number of foundations are partnering with their grantees to help them improve their effectiveness. At the same time, grantmakers realize they need to "walk the talk." Instead of acting like the parents who, with cigarette in hand, tell their children not to smoke, these funders are demonstrating a commitment to continuous improvement in their work and holding themselves to the same standards they expect of nonprofits.

But what does it take to become effective? Since foundations work to affect change in complex social issues, there is no simple recipe for foundation effectiveness. And the philanthropic sector is comprised of diverse organizations, so there is no one-size-fits-all approach.

Those who are working to strengthen their organizations are entering somewhat uncharted territory Foundations have worked to improve effectiveness before; however, what they have learned individually hasn't necessarily been translated to the field as a whole.

To improve effectiveness, grantmakers are both focusing internally on strengthening operations and, equally important, they are looking outside the organization to build relationships with the nonprofits and communities they serve.

At the annual conference of Washington Grantmakers, a regional association of grantmakers in Washington, D.C., this past May, some 150 area funders convened to address ways they can improve philanthropic effectiveness to strengthen the region's nonprofits. The conference content revolved around three key ingredients to foundation effectiveness -- technology, ethics and evaluation.

Working better, faster

Many foundations and nonprofits alike look to technology-based solutions when working to improve operations. While it can have as many pitfalls as potential, technology if implemented correctly, can streamline processes, expand impact and speed operations. Technology is most effective when it is working to support organizations' missions, not complicate operations.

Equally powerful is technology's potential to aid in knowledge collection and dissemination that yield benefits beyond the individual grantmaker.

The Web site of the W.K. Kellogg Foundation, www.wkkf.org, provides a great example of the potential of knowledge sharing. The Web site includes a database of all Kellogg grants active from 1991 to the present as well as links to Kellogg publications and other materials on topics related to Kellogg's grant programs. This and other knowledge sharing systems promise benefits to the philanthropic sector including accelerated learning, more replication rather than recreation, better service and measurable results.

Clarifying values

Sound ethical practices are crucial for effective grantmaking. Many funders are looking critically at their organizations and asking tough questions: What are our values? How do our ethics fit with our values? Are we treating our grantees equitably and with compassion? With a strong ethics system, grant makers can work more consistently in a complex environment.

For many foundations, ethical grantmaking is about showing respect for and strengthening relationships with nonprofit grantees. In its ongoing efforts to achieve and maintaining strong performance, the Mary Reynolds Babcock Foundation in Winston Salem, N.C., relies on nonprofits in the community for guidance. The foundation asked grantees what they thought effectiveness meant for foundations. The responses yielded three common themes:

* First, an effective foundation clearly articulates the values it tries to enact and the vision it strives toward. To do this, the grantees said a foundation should explain why it makes certain choices about values and mission, stay focused on the long-term vision of the foundation, and seek Out and cultivate wisdom.

* Second, the grantees said an effective foundation uses its resources to carry out its values and vision. To do this, foundations should build relationships with grantees that help mitigate the power imbalance between giving and receiving funds, model good management and provide clear information about guidelines, application procedures, deadlines and decision-making processes.

* The third theme identified by nonprofit partners of the Babcock Foundation was that an effective foundation practices and expects accountability. Grantees said foundations should be clear about their expectations and expect results without holding nonprofits to onerous standards.

Measuring impact

Evaluation helps grantmakers demonstrate the impact of grant programs and learn better ways to approach problems in the future. Weaving evaluation into the everyday operations of grantmaking can be daunting, but by evaluating the results of their giving, funders can encourage reflection, determine the impact of their grantmaking and build capacity within their own organizations.

When The Roberts Enterprise Development Fund (REDF) wanted to measure the social outcomes resulting from investments in nonprofit enterprises that employed homeless and low-income people, it took the needs of the nonprofits to heart. REDF wanted the outcomes of its evaluation efforts to match the organizations desired outcomes, thereby creating information that would benefit both the nonprofits and the funder. The question at hand was whether employment in a social purpose enterprise leads to a better quality of life for low-income or homeless individuals.

Once the REDF staff solicited feedback from the nonprofits, they learned that each organization had different needs and expectations. To address these individual needs, REDF launched the Ongoing Assessment of Social ImpactS (OASIS) project in 1999. The goal of OASIS was to build customized, comprehensive, social management information systems within nonprofits.

The end result was both a process and a product. OASIS requires reflection about an organization's programs and services and their anticipated out-comes. The reflection is then linked to a process to determine the information the organization needs to be effective. The OASIS tracking system was built with funder requirements in mind but was not limited to them.

As other funders who have had success with evaluation processes have done, REDF has posted a report that details the background and process of the OASIS project on their Web site, www.redf.org. Sharing knowledge and experiences such as this is one of many ways funders are working together to broaden the impact of evaluation.

In another effort to avoid the "do as I say, not as I do" mentality, foundations are challenging themselves to evaluate their own effectiveness. Evaluating grantmaker effectiveness, however, is a tall order in a time when many funder portfolios are dominated not by narrowly focused projects but by more broad-ranging initiatives. To evaluate the outcomes of such farreaching changes, many grantmakers are using logic models and theories of change. These funders have found that clearly defining the work they plan to do makes it easier to gauge the outcomes.

Future possibilities

To generate a broader understanding of how grantmaking can have the broadest impact, Grantmakers for Effective Organizations (GEO) and The David and Lucile Packard Foundation have commissioned The Urban Institute to conduct the first ever national assessment of foundation attitudes and practices concerning effective philanthropy.

The study, called Knowledge, Attitudes, and Practices Concerning Effective Philanthropy will explore questions such as:

* How do foundations today define "effective" philanthropy?

* What practices do grantmakers use to increase their effectiveness?

* What are the major influences on foundation attitudes and practices concerning effective philanthropy?

* What obstacles to achieving greater effectiveness do foundations encounter and how are they overcome?

Phase one of the study will gather information through multiple methods that include a national survey of foundations, personal interviews with foundation staff and leaders and case studies of individual foundations. In phase two, researchers will solicit feedback from nonprofit grantees to assess their views of funder effectiveness.

The interview process has begun, and the national survey will be released later this summer. The results will be made widely available in early 2003. Regular updates on the research will be posted on GEO's Web site, www.geofunders.org.

When the study is complete, grant-makers will be able to see how their peers strive for more effective grantmaking as well as common practices and challenges in the field.

Currently there are more questions than answers about foundation effectiveness, but what is known is the overall positive influence philanthropists have had on society. The Rockefeller Foundation funded Dr. Max Theiler's Nobel Prize winning research on the yellow fever vaccine in 1936. The Field Foundation of New York helped desegregate the textile industry in the Carolinas in the 1960s through a contribution to the NAACP Legal Defense Fund. In 1987, two dozen Chicago-area foundations joined together and committed $52 million to strengthen the local public school system. And currently the Bill and Melinda Gates Foundation is working to eradicate polio through $750 million in funding for vaccination initiatives.

These are just a few of many contributions foundations have made, and the list continues to grow. As more grantmakers make a commitment to improve their own effectiveness, the impact of the philanthropic sector will have a ripple effect as it moves from strengthening foundations to improving effectiveness in nonprofits to creating a strong and lasting impact on the individuals and communities the sector serves.

Kathleen P.Enright is executive director of Grantmakers for Effective Organizations in Washington, D.C.