101 | Outcomes-based grant making – changing the way grant funding impacts on our communities.

Outcomes-based grant making is a relatively new approach to funding organisations and programs that focuses on achieving specific, measurable outcomes and long-term impacts.

For grant seekers, focusing on measurable outcomes and supporting these with evidence-based evaluation can help to demonstrate and communicate how they are achieving their intended results. This, ultimately, leads to more effective and efficient use of funding.  

This approach also allows grant makers like Lotterywest to better understand the impact of our grants, and to make informed decisions about how to allocate resources in the future. 

Positive impacts for funding organisations

For grants organisations like Lotterywest, one of the key benefits of outcomes-based grant making is that it allows us to be more accountable to our stakeholders about our own impacts. By supporting our grant seekers to set clear and measurable goals, and to demonstrate their impacts through data and evidence gathering, Lotterywest can show that the grants we provide are making a real difference in the community and share those insights and learnings.

We can use the data captured to help to build trust and validation both for us as a grant making organisation and, more importantly, for the organisations we support. Additionally, by focusing on outcomes we can more easily identify, support, scale-up and replicate successful programs and initiatives. This can help to improve the cumulative impact of our grants across the diverse sectors with which we work. 

Outcomes-based grant making can help to facilitate innovation and creativity. By focusing on outcomes, we, as grant makers, can have a tolerance for risk and variation that traditional ‘financial acquittal’ models cannot reasonably absorb. This risk tolerance can encourage organisations and projects to think creatively and establish innovative ways to achieve their goals, leading to the development of new and more effective programs and initiatives. 

Emerging internal observations and outcomes reviews are demonstrating that in linking payments to outcomes, outcomes-based grant making has the potential to lead to more efficient use of funds. By setting clear goals and objectives, and measuring progress towards achieving those goals, we believe that organisations can identify what is working and what is not at relevant time gateways, adjusting if required before costs are sunk into ineffective practice.

Our assumptions are that this will help to reduce the amount of funding wasted on ineffective strategies, or programs not achieving their intended outcomes. Collecting data and insights from our grant making over time will be key to ensuring that we can verify this as a trend. We intend to capture data on the volume of variations to grants, and to monitor whether the move towards an outcomes focus shifts the needle with regards to how flexible funding affects progress measurement and the ability to respond to externalities in an agile way.

Challenges for grant makers

There are also some challenges associated with outcomes-based grant making. Setting clear goals and objectives can be difficult for organisations that work in complex or rapidly changing environments, or that serve populations with complex needs. Additionally, some smaller organisations may struggle to adapt to the new requirements of outcomes-based grant making, especially if they are not used to setting specific, measurable goals and evaluating their achievement.

While a blunt measure of achievement, traditional funding models (those primarily based on financial acquittal against invoices rendered) are certainly simpler to communicate a state of completion against than an outcomes-based model. This is because the total effect of impacts might not be immediately obvious to grant recipients and evaluators at time of acquittal and may take time to manifest in a community. These issues can present an equity issue for grant seekers and a complexity issue for grant makers. 

Outcomes-based grant making can also have cost and time implications, as it requires regular reporting and evaluation. This can be difficult for some organisations to manage, particularly if they don’t have internal resources with expertise in the evaluation space. 

Occasionally responsibility for this can devolve to the grant maker, if a grant is large or complex enough to warrant an externally designed evaluation process, who may provide support or additional funding to underpin the evaluation processes required to capture outcomes. As an example, Lotterywest very occasionally makes an evaluation process a condition of grant approval. In this instance, we might fund the evaluation process as part of the grant. However, this is not applied routinely to grants, and generally would be applied only to grants with a high level of risk and / or complexity. 

Despite these challenges, outcomes-based grant making is increasingly being recognised as best practice. Fundamentally, it is changing the way grant funding impacts our communities. By addressing challenges with outcomes-based funding transparently, and working closely with grant recipients, grant making organisations can help to make a real difference in the communities they serve, which ultimately, is our aim.