July 21, 2005
by Sara Engelhardt
The following essay was prepared for a discussion on the relationship between grantors and grantees in philanthropy—part of a series of six discussions entitled "The Dialogues on Civic Philanthropy: Perfecting Our Grants" (2005-2006). By clicking the links to the right, you can access more information on this series, learn about the Dialogues project as a whole, read other prepared essays, and download discussion transcripts.
We usually think of grants* as firmly rooted in the gift relationship, but a grant’s special characteristics make the relationship between giver and receiver fundamentally different. The main difference is that while gifts are generally made from personal resources, a grant is made from funds held in trust for public benefit. The public’s “ownership” of the money—both before and after it is given—creates a community of interest around the grant that profoundly affects it. Significantly,
If we think of a gift as coming from the heart, a grant is given with the head. The gift of money into a foundation by an individual or a family may have qualities of heart, but foundation grants reflect a formality of planning, documentation, and reporting that is more readily connected to the head. A gift is often associated with altruism, compassion, generosity, impulse, and gratitude, even love—words laden with the emotional connotations. Grants are more likely to suggest strategy, competition, investment, capacity, and impact.
The worth of a gift is frequently found in the act of giving, not in its tangible value. In contrast, the worth of a grant is never in the transaction but in how the grant is used. Unfortunately, because it’s so difficult to judge the effectiveness of a grant in promoting the public interest, the transactional relationship between grantor and grantee tends to bear much of the burden of expectation and critique focused on foundations.
The dynamics of the grantor/grantee relationship
Grantmaking foundations exist to give money away. Without grantees they cannot fulfill their mission and they have no legal legitimacy. This dependence of foundations on nonprofits might ideally create a partner relationship, and indeed, foundations often refer to grantees as their “partners.” Nonetheless, the Golden Rule of Grantsmanship—he who has the gold makes the rules—means that grantees never really call the shots. The grantor’s rules determine the grantee selection process, which in turn shapes the grantor/grantee relationship once the grant is made.
The three predominant systems for selecting grantees use either defined programs, existing relationships, or desired outcomes to drive the process. Program-driven foundations create a competitive process to find the best possible grantees in their areas of interest, an approach that may require substantial resources. This model is widely recognized as the standard foundation practice. However, a majority of foundations (albeit the smaller and younger ones) avoid the competitive dynamic and the expense by not accepting applications but rather “pre-selecting” their grantees. The latest system to emerge is outcome
Sara Engelhardt is president of the Foundation Center.
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