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A Half-Century of the Five Percent Rule

In the philanthropic Dark Ages (before 1969) there was no rule that said foundations had to make any grants with their money. Congress more or less closed that loophole with the Tax Reform Act of ’69. There were complications and ambiguities, but in 1976 the “five percent payout requirement” was set in stone. It’s been the default standard for grant-making foundations ever since.

It’s About More Than Money

Writing proposals and winning grants are important elements in the ecosystem of philanthropy. It’s easy to see the world through that lens – find the money, ask for the money, get and spend the money, rinse and repeat – but it might be helpful to think about the process in a different, more holistic way.

Balancing Data & Drama

Nonprofits are often urged to “use storytelling” to make the case for support. There’s nothing, they say, like a compelling story to drive home the nature of the problem or the opportunity for action. At the same time, foundations ask specific questions and make specific requests for data to make the case: how many, how fast, what metrics, how to monitor and measure and plot your impact.

Name Dropping?

It’s time for the board to come up with names of people with whom the nonprofit should make contact—for a request, for inside information about a community program, for any good purpose that benefits the growth and thriving of the organization. “Well, let’s go around the table and share some of the people you know so we can reach out,” suggests the development director.

Proposal as the Tip of the Iceberg

There’s a lot of blood, sweat and tears involved in creating a compelling, persuasive and fundable proposal. No wonder nonprofits put a lot of eggs in that basket. At the risk of a ticket from the metaphor police, maybe we need to spend more time caring for the chickens and ensuring that those eggs are well-nourished. A lot of work needs to be done before, and in preparation for, a terrific proposal. These are some of the important elements of the iceberg which lie below the surface.

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