Active shareholders and foreign investors help drive sustainability strategies

Suggested audience: Top leaders, foundation leaders and staff, corporate giving professionals

Takeaway: To increase the organizational effectiveness and ability of partners to achieve their goals, foundations should provide non-financial support and ensure goal alignment. However, corporate givers should be aware of the potential drawbacks of more intensive oversight and deploy this tactic only when organizational management capacity (rather than program development capability) is the desired organizational improvement.

Researchers examined survey responses from 242 nonprofit organizations that received funding from foundations. They analyzed how non-monetary factors in the grantee-grantor relationship are linked to a nonprofit’s organizational capacity, or the ability of an organization to improve its effectiveness and achieve its goals. In particular, the researchers considered how operating support, goal alignment, and performance oversight are linked to increased resource and management capacity and program development capacity among nonprofit partners. 

Key findings:

• Goal alignment between foundations and nonprofit partners increases a nonprofit’s organizational capacity development.
• The amount of nonfinancial support provided by a foundation increases the organizational capacity of the nonprofit partner.
  • The size of the grant strengthens this relationship: organizations that receive larger grants also report higher levels of nonfinancial support that contributes positively to the grantees’ organizational capacity.
• Stronger grant oversight mechanisms increase the resource management capacity of nonprofit partners, but not their program development capacity.
  • Stronger oversight may impede trust between grantors and grantees.