Solving the riddle of good funding

By Benedict Rickey 25 October 2012

The Diana Princess of Wales Memorial Fund and DP Evaluation have published a neat piece of work that helps move forward our thinking about how funders create impact:  A funder conundrum,  part evaluation, part self-assessment tool for funders.

The story begins in September 1997 when the Diana Princess of Wales Memorial Fund was set up. It had four broad funding themes—displaced people, people at the margins of society, survivors of conflict, and those who were dying or bereaved. Between 1997 and 2006, the fund awarded 360 grants (about £52 million in total) to 263 organisations across all four nations of the UK and every continent of the world. In essence, it was a reactive grant-maker.

Then came a change in direction. In 2006, following a strategic review, the fund’s board concluded that two major shifts in its approach would make the fund more effective. First, a change from four broad themes to a targeted programme of work on four areas: palliative care; cluster munitions; refugees and people seeking asylum; and penal reform. Second, the focus of resources on achieving ambitious goals through time-limited activities, with the decision to spend down within 5-9 years (it plans to close in December 2012).

During this time, the fund has gone through a fascinating process of evolution: from a largely reactive grant-maker to a proactive one, from broad-based to targeted, from long-term to spend-down, from isolated to collaborative.

So what did the fund learn? A funder conundrum provides a nuanced response, but the central observation is clear: funding practices need to fit your ambitions. The Diana Memorial Fund wanted to change the world—through large-scale, sustainable change—and to do that its funding practices needed to be equally ambitious. To achieve this it:

  • Had a clear theory of change.
  • Provided more than just funding, supporting grantees and acting as an agent of change itself.
  • Proactively selected the charities best-placed to help it achieve its goals.
  • Engaged in a close relationship with grantees.
  • Took risks, particularly in the area of advocacy where the outcome is rarely guaranteed.
  • Sought collaboration, working with other funders and partners towards shared goals.

The discussion of the fund’s development is fascinating. It shows how a funder can learn from its own experience, grow its ambitions, and change its funding practices to ensure it delivers.

But A funder conundrum is more than just an evaluation of one funder; it is designed to help funders ask themselves: ‘what kind of funder am I?’ and ‘how do I put this philosophy into action through my funding practices?’ To help them with their answers, A funder conundrum sets out a series of spectrums that describe ‘funding mindsets,’ and maps these against a series of funding practices. A funder that aspires to help people, but not change the world, is most likely to focus their efforts solely on funding, rather than supporting grantees or being an agent of change. They are also more likely to have open grant rounds, be hands off, avoid risks and work in isolation. As the authors emphasise, the spectrums are not tools for judging effectiveness—one end of the spectrum is not better than the other—but designed to help funders reflect on what they want to achieve and how. All this is summarised in a neat little guide, Tools for Funders and Philanthropists, a must-read.

It presents some valuable clues for cracking the age-old conundrum: ‘which funding practices are best for which type of funder?’ We hope it marks the start of a more sophisticated debate about what effectiveness means in charitable funding.