From Grantmaking to Changemaking - A Call for Compound Impact

Let’s face it: the nonprofit and philanthropy sectors as we know them may be fundamentally different this time next year. The shift is already underway - from growing political hostility toward equity work, to rising scrutiny of funders' influence, to rapid shifts in federal funding priorities and philanthropic norms. As a result, entire initiatives are being paused or defunded, language around justice and inclusion is being policed, and frontline organizations are being forced to justify their existence in new ways. Our sectors are under a relentless attack as evidenced by just one of the barrage of White House memos. 

One issued Friday, February 7, states: “The United States Government has provided significant taxpayer dollars to Nongovernmental Organizations (NGOs), many of which are engaged in actions that actively undermine the security, prosperity, and safety of the American people. It is the policy of my Administration to stop funding NGOs that undermine the national interest.”

And who decides what work undermines the national interest? The same administration that has gone after diversity, equity and inclusion programs with a chainsaw, along with a host of others.

But while the world is tilting on its axis, so much of philanthropy’s focus is still on the mechanics of grantmaking - allocating funds, measuring short-term gains, and protecting institutional assets. In this landscape, standing still is not a neutral act. It’s a choice with consequences.

Now is the time to strategically double-down, expand, and accelerate our philanthropic commitments to humanity. The crises we face demand more than just grantmaking - they require changemaking. 

Compound Interest vs. Impact

When I recently spoke with the CFO of a major foundation, he described his work in terms of compound interest: asking how today’s $100 million investment could generate the greatest future return. 

We could debate the financial calculations all day. Many funders are weighing whether the cost of making big investments will outweigh potential interest from stock market gains. 

But in this climate, I want to know if there’ll even be a stock market left? 

Is there going to be a nonprofit sector left if we’re so worried about our rate of return?

If the cost of doing nothing is greater than the risk of action, then action is not optional. We have an opportunity to move beyond financial calculations and strategically commit to compound impact. 

A Case for Compound Impact

In the late 1990s and early 2000s, the W.K. Kellogg Foundation made a $300 million bet on the food system. At the time, few funders saw food as a system, let alone an issue worth investing in beyond emergencies like foodborne illness outbreaks. But Kellogg took a long-term approach, investing those funds in supporting leaders, shifting narratives, creating infrastructure, and mobilizing partnerships.

Within a decade, the number of funders investing in food systems grew from five to nearly 60, then it doubled again. By the time the Obama administration took office, the groundwork was laid for major federal policy shifts. That’s compound impact: layered, strategic investments that create new futures. 

Changemaking vs. Grantmaking

Why aren’t more foundations taking this approach? 

Fear. And that fear is being caused intentionally. Those who oppose the true meaning of philanthropy (the love of all humanity) have weaponized uncertainty and hijacked our amygdalas, creating an environment where even brave leaders second-guess their next move.

Many funders are stuck in crisis mode, worried about a possible target on their backs and  focusing on portfolio management instead of taking bold action. I recently spoke with a funder who said, “All we’re doing right now is supporting our grantees.”

That’s noble. And it’s going to make a difference in some people’s lives and well being. But it’s not enough. 

Changemaking today demands clear-eyed realism about our past, a sober assessment of the present, and an unshakable commitment to what’s possible. It also demands a willingness not to bow down to the bully.  Business-as-usual won’t cut it. Making grants is not the same as making change.

I know that debating with “social impact bankers” about spending down their endowments is a distraction. Those unwilling to take that step before won’t be swayed now. The real work lies in building a vibrant, unsquashable ecosystem of social action that isn’t reliant on outdated systems to drive impact.

My point here is that this is not the time to run away scared. I want us to come together and dream out loud: what new structures, strategies, and ways of operating must we build instead? 

I’m dreaming about …

Reimagining Relationships with Grantees: 

What if philanthropy stopped seeing funding as a “gift” and framed it as fee-for-service? Nonprofits are delivering outcomes that institutions can’t, necessarily. Treating their work as services purchased rather than causes supported would shift the power dynamic in profound ways.

In 2019, five major U.S. foundations (Ford Foundation, Hewlett Foundation, MacArthur Foundation, Open Society Foundations, and Packard Foundation) publicly pledged to cover more costs of grantee work, including rent, technology, staff wages. This “full cost” model helps rebalance relationships by treating nonprofit work as essential services worth paying for, not as goodwill gestures in exchange for generosity. Front line leaders have long been saying, “Just fund us.” It’s well past time.

LLCs and Alternative Models:

Traditional foundations may not always be the most effective vehicles for systemic change. Some emerging donors are exploring LLCs, donor-advised funds (DAFs), and direct investment models that allow for greater flexibility, advocacy, and risk-taking.

For example, Pierre Omidyar , founder of eBay, created the Omidyar Network as an LLC-philanthropy hybrid. Over its first decade, it invested roughly $321 million in for-profits and $276 million in nonprofit grants, using whatever tools fit the moment - equity, grants, and/or loans. These diversified vehicles create both a larger portfolio of bets on the future, and allow funders to act with greater speed, flexibility, and boldness. 

Expanding the Pool of Funders:

We also need to broaden the bench. Research shows that when donors closest to the issues are engaged, giving increases in volume, equity, and relevance. Donor collaboratives, identity-based giving networks, and next-gen donor circles are diversifying who makes decisions and directing dollars toward neglected or emerging issues.  

We have to move beyond legacy donors and lift up new philanthropists who may not yet consider themselves funders, but have the affinity and ability to deploy investments into their communities. And who are stuck in the old world order.

Forward, Together

There is a lot of noise right now, and reasonably so. But we must resist the urge to turn on one another and instead, move forward with the same strategic precision that we see in other movements.

Look at the opposition. Whether we agree with their objectives or not, they understand how to wield power. They move in lockstep, with airtight messaging and long-term strategy. 

If philanthropy truly wants to create enduring change, we must adopt a similar level of discipline and seriousness to build new social impact funding systems - self perpetuating vehicles for change. 

And, let’s stop doing the opposition’s work for them. If we individually or collectively can’t speak positively about what’s possible, then let’s stay quiet until we can.

Let’s stop mistaking grantmaking for changemaking and commit to real transformation. Especially today when the threat is real, what matters so much to you that you’d put everything on the line to make it happen? What is so vital that we ensure it can’t be undone - because it becomes the new normal?

A generation from now, we shouldn’t just be celebrating that philanthropy survived to generate another funding cycle. We should be living in the just and equitable world we dared to build.

Are you committed to worrying about the life you had, or the life that you create?