The cost of grantmaking: how Service Design helps to reduce the price
Here at Hyphen8 we pride ourselves on staying up to date with the latest news and trends in the non-profit sector. A number of us have grant-making backgrounds and take a particular interest in issues affecting the world of funding. Recently we came across a though-provoking report from the Commission on Civil Society: “Giving Pains: The cost of grant-making” by Caroline Fiennes, Gemma Bull and Sarah Sandford. This report delves into the cost of application processes and the impact this has on the sector. It is especially relevant in the midst of the UK’s cost of living crisis, with many charities struggling to make ends meet.
Applying for grants costs £900 million a year
The report sheds light on the staggering amount of money spent on applying for grants each year. It reveals that charities in the UK collectively spend around £900 million on applications to charitable trusts and foundations. What’s concerning is that smaller charities bear the brunt of this burden, often submitting numerous applications that are either ineligible or have little chance of success. Black and minority ethnic-led charities are heavily impacted as they tend to be smaller in scale and face higher barriers to accessing funding. Grant-makers who strive for equitable funding should pay close attention to the implications of this report.
Huge amounts are spent on unsuccessful applications
One of the most eye-opening findings of the report is the sheer magnitude of resources wasted on unsuccessful applications. It is no secret that most funders are inundated with requests for financial support. Many are currently facing exceptionally high levels of demand, as are the community groups and charities applying for their funding. In fact, according to research from Bath University, around two-thirds of applications end up being unsuccessful on average, which means that out of the £1.1 billion spent on applications, only £374 million goes towards successful grants, leaving a staggering £726 million devoted to unsuccessful attempts. That is a lot of wastage for funders and applicants alike.
Why does funding cost so much?
So why does the process of funding come with such a hefty price tag? The report identifies four main factors driving these issues:
- Lack of design: funders do not tend to purposely design their processes; rather they evolve organically over time.
- Lack of information: neither funders nor charities consistently track the costs of application processes or the gains that could be made by improving them.
- Lack of incentive: there is little external pressure or incentive for funders to improve their approaches, and charities are more strongly motivated to build relationships with funders than to share their views or data about application processes.
- Lack of skills: many funders do not employ staff with service design or digital skills. They are often focused more on holding down their staff and other organisational costs than on developing capabilities which might improve the efficiency or effectiveness of their grant-giving practices.
How service design can help
The good news is that service design can play a vital role in addressing the challenges outlined in the report.
Designing purposefully: by engaging the expertise of service designers and conducting a process review, funders can make purposeful improvements to grant-making processes. This approach involves identifying pain points, eliminating inefficiencies and streamlining more time-consuming and costly elements of an application process. It has the bonus of freeing up more time for funding teams to spend on value-added tasks. Alternatively, when designing a new fund, taking a user-centred approach and co-designing with the communities that will benefit from the funding leads to a process that better meets their needs. This empathetic approach helps to reduce the burden placed on small organisations by understanding their unique challenges and incorporating their ideas.
Measuring improvements: to measure the effectiveness of improvements, it’s crucial to establish baseline measurements for average processing time from initial contact to award or unsuccessful feedback. Surveys can also help gauge how much time it takes for users to complete application forms, while user observation provides valuable insights into the most frustrating or time-consuming aspects of the process. All of this data can help build a picture or where improvements are needed and provide a baseline for demonstrating tangible gains.
Getting feedback on user experience: applicants and grant holders are more likely to give honest feedback to third parties because they don’t worry about potential negative repercussions on their relationship with funders. Hyphen8 offers a Grantee Experience Review package that can help grant-makers to understand how funding processes are experienced by users. Insights gained through surveys or focus groups can really help to ensure funding processes are equitable and do not disadvantage smaller organisations or those led by people with lived experience.
Build skills and capacity to improve efficiency and effectiveness of your grant-making practice. If your organisation lacks the necessary expertise in service design, don’t fret! There are solutions available for all budgets to counter the costs associated with grant-making. Our service design team is here to assist you and provide guidance. We also offer an Introduction to Service Design one day course that helps equip your team with tools and techniques needed to make improvements and prioritise user experience.
