The Boston Foundation recently announced it would shift its focus to providing unrestricted funds to its grantees. As Dan Pallotta notes on his Harvard Business blog, this is significant in that it is a sizable foundation (over a $700 million dollar endowment) taking the initiative in radically changing the donation paradigm that has dominated foundation thinking for decades.
In the for-profit sector, investors invest in ideas and leadership teams they have faith in, period. There are no categorical restrictions, earmarks, etc. Restricting how non-profits use donated monies has never made sense to me. If you can't trust an executive team to use your money effectively, why would you donate to them in the first place?
If an agency is incompetent, earmarking monies doesn't make them less so. If an agency is competent, earmarking monies only ties their hands so they can't maximize the impact of donated dollars.
The Boston Foundation deserves a lot of credit for being a first mover in what needs to be an industry transition to an unrestricted funding philosophy. My hope is the Boston Foundation outcomes evaluation team will be able to do an effective pre/post analysis of grantee outcomes. I anticipate that over time it will quantitatively bear out that unrestricting funds will allow high impact, innovative non-profits to achieve greater success, and that poorly managed, underachieving organizations will be more easily identified and defunded.
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