Innovations in Granting: Evidence-Based Grantmaking

A Little Evidence, A Little Money; A Lot of Evidence, A Lot of Money

This is the second of four posts in a series focusing on innovations in the grantmaking process. In addition to this series, others in this publication focus on innovations before and after the selection process. Head back to the table of contents for an at-a-glance look at the whole publication including our introduction on the importance of open and effective grantmaking innovations for improving the legitimacy and effectiveness of grant-based public investments.

Summary: Greater openness in grantmaking processes has the potential to lead to the availability of more and better evidence, which, in turn, could enable funders to use data to help steer money toward interventions that have already been proven to create economic and scientific value. One example of this technique involves giving more money where there is more evidence and being more entrepreneurial by giving smaller amounts to riskier endeavors.

Traditionally, grantmaking organizations have had to rely in large part on the text of a grant application and the submitting organization’s reputation when facing funding decisions. In recent years, however, government and private funders have been experimenting with more evidence-based grantmaking strategies.

The trend toward evidence-based grantmaking is part of a larger movement, enabled by better tools for managing data, toward evidence-based policymaking, generally. The United States Government is leading the way in this Pay For Success movement with new policies and over $100 million invested in such initiatives, including over $10.6 million dollars allocated in 2016 for Pay for Success social innovation grants to be awarded by the White House Office of Social Innovation and Civic Participation to nonprofits, state and local governments trying to develop projects using data-driven decisionmaking. The Laura and John Arnold Foundation has also prioritized Pay for Success by providing support to the Urban Institute’s Pay for Success Initiative, among other investments.

As authors of Moneyball for Government write: “Building evidence about the practices, policies and programs that will achieve the most effective and efficient results so that policymakers can make better decisions; investing limited taxpayer dollars in practices, policies and programs that use data, evidence and evaluation to demonstrate they work; and directing funds away from practices, policies, and programs that consistently fail to achieve measurable outcomes.”

Part of pay for success is the idea of starting small and agile — and waiting for results before going big, rather than merely evaluating after the fact. This was the strategy behind the Department of Education’s Investing in Innovation Fund (i3), which provides tiered grants contingent on the degree of demonstrated results. By dividing grantees into “development,” “validation,” “and “scaling-up” stages, each with different maximum grant amounts, i3 helps advance the principle that better evidence should be a prerequisite for bigger grants. The tiered approach could also enable funders to use data to help steer money toward interventions that have already been proven to create economic and scientific value.

Some funders have recognized that small, entrepreneurial, early-stage investments can help generate the evidence to support later efforts to scale up. John S. and James L. Knight Foundation’s Prototype Fund, launched in 2012, gives small grants of up to $50,000 for innovators to “research, test core assumptions, and iterate before building out an entire project.” Similarly, the J.M. Kaplan Fund’s new J.M.K. Innovation Prize will award up to $50,000 annually for three years to “high-risk, early stage ideas being piloted or prototyped by dynamic visionaries.” Starting on an even smaller scale, the Awesome Foundation gives $1,000 dollar grants on a monthly basis to projects deemed “awesome” by a chapter of the foundation.

New policy preferences for evidence-based grantmaking is part of the solution. In addition, new technology platforms like The Giving Common in Massachusetts can help funders to collect and make sense of more data. The platform invites non-profits to “tell their story in their own words in an organized, detailed way” to provide potential donors with more comprehensible, uniform, and useful data on different entities. Prospective donors can then search by issue area, geography, and other variables.

Other tools, like Foundation Center’s Foundation Maps, show who is funding what and where, so funders can connect with others who have supported a given organization and learn about the structure of other grants they have received. Mandates to collect more information coupled with the policy of openness and sharing what funders learn have the potential to lead to more innovation.

Why Do It:

• Cost Savings: In an era of limited government funding, evidence-based grantmaking can help funding bodies avoid duplication, inefficiency, and waste.
• Entrepreneurial Innovation: So-called “tiered” grantmaking — where increasing amounts of evidence yield increasing amounts of funding — can help unproven projects scale up while providing incentives for sharing evidence as they progress.

Why Not Do It:

• When Impact Is Less Quantifiable: While evidence-based grantmaking has tremendous potential in domains where funders seek to affect quantifiable outcomes — e.g. health, safety, or learning outcomes — other areas, e.g. beautification projects or cultural offerings, may present challenges in defining or gathering measurable or easily comparable “evidence.”

Click here for the next post in our series on innovations in judging and awarding grants, or head back to the table of contents for an at-a-glance look at the whole publication.