The Grant Trap

The Grant Trap
Wednesday, October 12, 2005
by Tony Silbert

Win, win, win. A whole industry has grown up around the desire to win grants. Hundreds of books, thousands of training seminars, innumerable web sites, even this newsletter speak to the insatiable desire to win and win big. Well I am here to tell you that grant success can, and often does, have a down side. You see, grants can be powerful; grants can be transformative; and, yes, grants can be dangerous. Don’t fall into The Grant Trap!

The Grant Trap is not the “be careful what you wish for” day you get a grant and realize your work has just begun – although this is certainly a problem. The contortions that some organizations will go through to get a grant border on the comical (if not, criminal). But there’s nothing funny to the poor program person – or even worse, development person – who has to make good on an ill-conceived grant proposal. Even the best grant-funded projects require extra work that goes uncompensated. If nothing else, a grant brings an additional level of accountability and stewardship. Consequently, the euphoria of getting a grant is often followed by the sobering, even rueful, realization that the organization is committed to performing and reporting on a proposal that was developed months ago – and may not be as exciting or as high a priority as it once was. But that is not The Grant Trap.

The Grant Trap is the deterioration of organizational initiative and planning that comes with transformative grant success. It probably happens most often in small organizations, but larger institutions are not immune. Here are three ways grants can hurt your organization:

Fundraising Malaise.
For an enthusiastic, active board of directors, grants can put wind in their sails, validating their commitment and bolstering their fundraising efforts. Large, prestigious contributions from well-known foundations are tools they can use to leverage greater support from their network of donors. But for the reluctant board, grants provide a reprieve from the onerous burden of raising money. The board members celebrate the grant because it allows the organization to go forward without any additional effort or sacrifice on their part. Indeed, they may view their fundraising responsibility as being decreased in direct proportion to the grant amount. Thus begins a death spiral into board lethargy that is difficult to recover from.

Example:
When I came upon Organization A, it was a tiny, grassroots, 100% volunteer endeavor run out of the founder’s front bedroom. The total budget was around $30,000 – all from individual donors. We began asking for project support, explaining that, as a new organization, we needed grants to sustain operations while we increased other forms of giving. Seven years later – after grant funding had allowed them to move into a large office/training facility, hire an Executive Director, and grow to a staff of four – proposals still contained the same language and individual giving was still around $30,000! Although there were periodic efforts to build the board and a sustainable base of support, it was never pursued seriously because it did not have to be. Grants always “saved the day.” Inevitably, a cyclical grant lull – coupled with extraordinary expenses and no operating reserve – threw the organization into chaos and a struggle for survival.

Budget Bloat.
For an organization that has no history of grantseeking, institutional philanthropy provides new, fertile ground for raising funds. A concerted effort in this area will likely yield successes within a year or two. However, unlike individual giving, these successes do not necessarily constitute a “base” of support on which to build. More likely, they represent the low-hanging fruit of the grant world. The opportunity may or may not exist to repeat this success from year to year. However, institutions have a tendency when budgeting to look at last year’s numbers and bump them up. And, even worse, may plan on a growth rate similar to the one that brought them from nothing to something. The thinking goes, “Gee, you were able to build our grant revenue from $0 to $50,000 in the first year of grant seeking. Another year and you should be up to $100,000!” Naturally, this creates an unsustainable budget expansion that will soon lead to year-end deficits, drawing on reserves, lay-offs, and other cutbacks.

Example:
For decades, the philanthropic group that founded Organization B had provided much of their annual budget. But when the philanthropists decided they wanted to support other endeavors, they began weaning the Organization. With a long history of service to a needy part of town, we were successful in getting grants from the major foundations. But I was disconcerted to see that our second year in business projected a 50% increase in grant revenue over our first. Where was it to come from? Who knew? Fortunately, in this case, we made a major capacity building effort the first order of business. Now, it is just a race against time to see if that effort brings in enough revenue to cover for the unrealistically high grant expectations.

Program Paralysis.
Being the grant guy can be like being the fairy godmother. We wave our magic pen and someone’s wish for a new program is granted, literally. But then what happens to all the other wishful Cinderella’s in the organization? They line up, waiting for their dreams to come true. And, sometimes, they wait and wait and wait. Whereas previously they may have lobbied internally for launching a new program, or developed it as far as they could with available resources – in short, been resourceful – they now sit on their hands hoping lightning will strike.

Example:
Organization C has a plan for an innovative revolving loan fund that will allow them to increase the number of clients they serve by overcoming short-term barriers to program access. The cost of seeding the fund is less than half of one percent of their annual budget and less than 2 percent of current operating reserves. Ultimately, the expanded program capacity could possibly enable them to increase the annual contracts that support the program. And, yet, the promise of a grant to get this started has kept it from moving forward for more than two years. Is it a good grant opportunity? I think so. But at what cost? 

So, what does this mean? Don’t go for grants? Of course not. But be very wary of your success and get the organizations you serve ahead of the game. While they feast at the table of Dionysius, it is your job to be Damocles and point out the sword hanging precariously above. Watch for the syndromes listed above, warn them of the dangers ahead, and provide them the guidance necessary to survive grant success.
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Publisher:

CharityChannel LLC

Editor:

Michael Wells
Mr. Wells is joined by a body of contributors who are well-respected leaders, observers, and pundits in the field.

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