Unlocking the Transformative Potential of Intermediary Funds

One of the fastest growing philanthropic practices in recent years is the use of collaborative, or pooled, funds — one form of intermediary funding, the subject of a recent CEP report. Like many others, the Ford Foundation participates in multiple funder collaboratives and we value them highly for the many benefits they provide. Some of these are well-recognized, including the ability to:

1. Attract, aggregate, and deploy capital from multiple sources,
2. Hire expert staff who focus deeply on one issue, and know a field well, and
3. Serve as a critical connecting link and source of learning for program officers across different, otherwise siloed philanthropic institutions.

Other benefits receive less attention but are potentially more transformative if donors can be more proactive in optimizing them. These include the opportunity for funders to innovate and experiment with minimal risk and, for the most effective and longest standing funds, mitigating the short attention spans and the frequently shifting strategy shifts of individual funders that are so destabilizing to the work of grantees.

Despite their many benefits, collaborative funds have the potential to contribute and achieve much more — especially if we pay attention to what grantees are telling us.

The above-mentioned CEP report, Bridging the Gap: Grantee Perspectives on Intermediary Funders, provides important initial insights in this regard and also suggests questions that deserve further research with a larger sample size. To me, the single most important finding is that the grantee experience depends more on funder practices than on the form of the funding vehicle. This supports what grantee partners have been telling us for years.

Why we as funders continue to behave as if we can achieve long-term, systemic change on any issue by providing small, short-term, project grants that do not help the grantee organizations we rely on become stronger and more resilient remains a mystery to me. As CEP’s research repeatedly shows, what grantees most need and value from funders is respectful and trusting partnerships — embodied by flexibility in the length and structure of their grants, open and consistent communication with their funders, and funding partners with the kind of deep understanding of the fields in which our grantees work that enable the funder to add value beyond the grant.  

Given the consistency of these responses regardless of the organizational form of the funder, the biggest questions are: why don’t more funders use these practices more systemically? Why do they remain the exception rather than the norm? And, how might collaborative funds evolve to be more powerful?

In 2021, we noticed that the intermediaries hosting donor collaboratives had become a large category of grantee for the Ford Foundation and we set out to understand better how well this mechanism is working, especially in comparison to the impact we are able to achieve through direct funding. We researched our internal practices and discovered that we participate in over 100 collaborative funds across our 14 program areas and 11 offices and we have been able to leverage $3 in additional resources to the problems we focus on for every $1 Ford contributes.

Wanting to learn more, we also commissioned research led by Sampriti Ganguli about the enabling infrastructure for intermediaries and we contributed support for CEP’s research on this topic.

Based on my own experience with Ford’s extensive involvement in collaborative funds and these studies, here are some worthwhile approaches for funders looking to use intermediaries, including collaborative funds, to consider:

• Stipulate the use of best practices like multiyear general operating support as default practices. In other words, the message from either intermediaries or the donors that fund them could be, “If you put your money in a fund housed at our intermediary, we will allocate it in this way.”
• Increase the size of their grants and the amount and kind of non-monetary assistance they provide to grantees.
• Be realistic about the length of time that it takes to produce systems-changing results and move away from the fiction that funds designed to last 3-5 years can fix problems it will take decades, not years, to solve.
• Understand that investments in collaborative funds cannot be a way to reduce headcount or costs. Skilled grantmaking requires people and relationships, and funders often underinvest in the core capabilities that collaborative funds require, treating them more like contractors than partners.
• Systematically seek grantee feedback and encourage and support the intermediary funds you work with to do so, too, through participating in the CEP Grantee Perception Report and publicly reporting the actions they take in response.

Changes like this could vastly enhance the transformative power of these valuable funding vehicles, unlocking the real potential of intermediaries.

Hilary Pennington is executive vice president of programs at the Ford Foundation. Find her on LinkedIn.