Recently Jake Hayman, founder of The Social Investment Consultancy, and a trustee of charitable funder LankellyChase, threw a substantial rock into the otherwise relatively calm pool of grant-making.

The trust and foundation world is often extremely polite, even to the point of obsequiousness. But in his blog, Jake claimed ‘organisations that finance it [social change] are so bad at their jobs, that they make the rest of us [charities and social enterprises] bad at ours’. He went on to list 19 practices that he said were both prevalent within funding practice and damaging to those they fund—from hoarding power and encouraging competition over collaboration to failing to share insight from their work as funders.

It’s unusual and rather refreshing to see such direct criticism being aired from within the funding sector. But is Jake right? And what, in the long term, is the best outcome?

Diagnosis and difficult questions

NPC has warned for years that funders who claim a commitment to achieve social change too often fall short. As far back as 2005 we said: ‘Good charities achieving (or with the potential to achieve) impressive results deserve funding…It is not the reality at present for too many charities—funding is not generally connected to results.’ Some practices by funders, our Chief Exec argued last year, are ‘completely nuts’.

Along the way we have published everything from guidance for funders to research into their practice, and from gentle encouragement to improve practice to bleaker assessments of the dysfunctions of the sector.

Diagnosing the problem is easier than solving it, though. As Jake acknowledges, it comes down to a question of power. If the funder has the cash, and charities need that cash to do good, how do all parties negotiate this troublesome dynamic?

Not all funders want to engage with these tough questions. Some don’t claim to be changing the entire infrastructure of the world in which they work, and nor do they want to. For some, their impact is focused just on giving grants to sensible organisations that do some good, an approach which is relatively straightforward. Equally, if a funder is trying to maximise or maintain the value of their endowment for the future whilst making some sensible grants, again this takes little soul searching about how they fund.

But funders who are aiming for more must embrace the hard questions (and, I’d suggest, many more of them should). How do they ensure that funding decisions are driven by evidence, expertise and insight, not by vested interests and personalities? How do they encourage those they fund to work together for greater impact, rather than against each other to win funding? How do they ensure we’re all learning and improving together?

Funders who genuinely want to achieve results and tackle social problems will engage with these challenges. Some do—it was encouraging to see the recent paper commissioned by the Gulbenkian Foundation and Big Lottery on some of these issues. But many don’t go far enough and need to be encouraged, or even forced to do so. So who can bring this influence to bear?

Searching for solutions

Charities themselves hold a huge amount of latent power over funders, if only they could organise themselves to exert it. If all the charities with a mission to improve the lives of children in the UK came together, for example, to develop a shared theory of change and a plan underpinning it to coordinate and align their activities, they would hold all the cards in negotiations with funders. But in reality charities do this very infrequently.

We tried this approach ourselves in developing the Inspiring Impact programme, collaboratively, with a group of key organisations as partners, and taking this agenda proactively out to funders. We would like to see a great deal more of this in the sector—charities getting on the front foot in the relationship with funders.

The thing is, neither charitable funders nor charities exist for their own benefit. As charities, they’re here to benefit those they aim to serve. As I’ve argued before when hinting of the danger of drifting into an anti-social sector, if we aren’t clear that we’re making every effort to maximise impact for our beneficiaries, we’re not doing our jobs properly. We may even end up in a situation in which we’re serving our own organisational interests, with charities and funders losing sight of the beneficiary almost entirely.

Grant-makers should be crystal clear about how they will maximise the impact of their resources. And if they don’t, or won’t, charities should try and make them.

A funding world driven by the expertise of effective charities? Now that would be revolutionary.