The Random Grant

The Webber Family Foundation makes grants to 501(c)(3) organizations focused on education. We started with a broad definition of “education” but that quickly led to a problem: too many organizations competing for a limited grant budget. Even after filtering out “bad” requests, and selecting for “best in class”, the aggregate amount requested was often four times (or more) the size of our overall grant making budget.

At that point the decision process became essentially random. For every grant we approved there were three other grants we denied, with no really good reason for denying them. They met all our criteria. They were best in class organizations. There was nothing wrong with them other than simple arithmetic: we didn’t have enough money. This felt unfair to grant seekers; we put them (and our staff) through all the work to get to that point and then said no to 75% of them for no reason they could control.

To fix that, we narrowed our focus to some very specific areas of the education universe, which in effect ruled out many programs in advance and reduced the pool of requests to a size that better matched our available budget. This ended the oversubscription problem but of course sent many generally good and deserving educational organizations into exile from our Foundation.

I wanted to find some way to still allow for the occasional grant in education areas outside our narrow focus but without reintroducing the “oversubscription leads to random decision making” problem. My solution? Explicitly random decision making!

It works like this: Of course we still allocate the bulk of our grant making budget to our standard, deliberate, detailed decision process. But we set aside a smaller piece of the pie for something we call Random Grants. In applying for a Random Grant an organization only writes a one-paragraph description telling us what they would do with the money. They can send it in by email. That’s it; almost anything (educational) goes. Occasionally staff will have a question or two and follow up with the Random Grant applicant but usually just the one-paragraph request is all we go by (the most common follow-up would be to see the IRS determination letter if we aren’t already certain of the organization’s 501c3 status). Random Grant request sizes can be any amount up to $10K.

We accumulate the Random Grant requests and twice a year, at a Board meeting, we award them… RANDOMLY!

It works like this: Staff briefly reviews each request with the Board so that Board members may object to any particular request if they feel there is something amiss. In practice no request has ever yet been thrown out this way. Then staff numbers the requests 1 through N; this time around we had eight requests so they were numbered 1 through 8.

I then go to www.random.org which, conveniently, has a random number generation interface right on its home page:

In the above capture I have already filled in the Min/Max with 1 and 8 as we had eight requests this time. Then while everyone watches I push the GENERATE button and whichever number comes up becomes the first Random Grant that we approve. It’s just exactly that simple!

So, yes, the Random Grant is usually quite oversubscribed, and, yes, that makes the decisions random. In fact they are explicitly random!

If we have more money left in the budget after awarding one Random Grant we do the process again, but this time only including any remaining grants that “fit” within the remaining dollars. We keep doing that until the amount of money left is less than any of the Random Grant requests. This method provides some incentive for organizations to not necessarily ask us for the maximum amount we allow in this process ($10K) because smaller requests will usually get multiple chances to win a grant.

Since the inception of this concept in 2012 we have made $198,500 of Random Grants. The feedback we’ve gotten from applicants has been positive. Of course how could it not be – it gives them a chance to compete for grant money they otherwise wouldn’t even have a shot at, and it’s a simple, lightweight process with an easily-understood yes/no mechanism.

To prevent the list of grant requests from continuously increasing over time we have a rule that once you apply, whether you win or lose, you cannot apply again for two more Random Grant cycles (which means approximately one year since we do this twice a year). That helps keep the applicant list size under control and also allows a wider variety of organizations to have a decent shot.

It’s probably not for everyone, but I do encourage other grant making organizations to consider this as a way to allow for some amount of “outside the lines” grants. I can understand an objection that if you believe your grant making criteria are good criteria, extending them randomly makes no sense. My counter would be that no criteria are ever perfect; thus I think having some nominal amount of random variance in the grant portfolio is a good idea.