Enabling innovation and risk-friendly grantmaking

It is often assumed that in funding innovative or high-impact projects, grantmakers take a big risk with their funds. In fact this does not have to be case. Grantmakers can manage risk in a way that enables innovation and meaningful impact, rather than limiting it.

The developmental approach

One way to manage risk in a way that encourages innovation among grantees is to take a developmental approach. A developmental approach encourages grantseekers to talk to you when their idea is in its very first stages, well before they start to fill out an application form.

Some practices you might implement in a developmental approach to grantmaking are:

  1. Being up front. Encourage grant recipients to invest in the scoping and research stages of a project. Consider providing grants for feasibility, business analysis or marketing and planning projects.
  2. Making connections. Help your grantseekers to get to know one another. It might result in an exchange of information or, even better, in new partnerships and collaborations.
  3. Chunking. Breaking a project into manageable chunks can dramatically reduce its risk profile. If those stages are designed to be independent of each other, then all the better, because then good outcomes can still be achieved even if some stages don't go ahead or other stages under-perform.
  4. Partnering with other grantmakers. You can fund projects together or separately, but either way you streamline reporting and accountability requirements for grantees. One grantmaker might support less risky components (this might especially suit government grantmakers) while the other might support the more innovative elements.
  5. Supporting learning and growing. Organisational development work is crucial, but for many small community organisations it's difficult to resource. This does not help with risk management or innovation. Consider allocating some of your grants each year to capacity building through training and organisational development. This can include strategic planning processes, training, professional development and even marketing plans.
  6. Taking the mindset that grants are not just about dollars. You should ask three things of every project: What might the applicant not have thought of yet? How can we help lower the risk? How can we add value?

This help sheet has been taken from a presentation delivered by Jacquie Thomson, then director of grants and community at Lotterywest WA, at the 2007 Australian Best Practice in Grants Management Conference.