Every day nonprofits work on the front lines to deliver critical services to those in need, advocate for those who cannot speak for themselves, educate the public on important issues, and improve untold lives throughout the world. Philanthropic dollars are critical to delivering this impact. Every stage in the philanthropic process—from a donor's sourcing of potential nonprofits to fund, to the initial research into a potential grantee, to decisions surrounding how much money to give, and what other supports to provide, to how a donor evaluates the success of a philanthropic gift—can be an opportunity to enhance, or detract from, a strong donor-grantee relationship. A complicating factor to this relationship is the vast difference in power between donors, who have the money, and grantees, who need it. Effective philanthropists are aware of this challenge and respond accordingly at each stage.

Researching a nonprofit you're thinking of funding

Conducting the right kind of research on a potential grantee is one of the most important keys to effective philanthropy. It takes proper due diligence—that is, learning enough about the results, leadership, financials, and operations of an organization, while respecting the limited time of its busy leaders—to determine whether you and a potential grantee are likely to be a successful match. Researching a potential grantee will help you uncover key information such as whether the nonprofit's mission aligns with your personal philanthropic goals, whether the organization is well-positioned to carry out the proposed project, and whether you can successfully partner for the results you seek.

Of course, the breadth and depth of your research will largely depend on factors such as the size of the grant you wish to make, the scope of your goals, and how involved you intend to be beyond the money you give. To help guide you, we've created the multi-part Donor Decision Tool, which advises you on various stages of your nonprofit research. Choose to start with the Light-Touch Approach for grants that are smaller or less critical, then move to a more intensive approach as your grant warrants.

Even if you intend to make a large or critical grant, you may want to start with the Light-Touch Approach to learn (as anonymously as possible) about the organization from publicly available documents and other sources. As Venture Philanthropy Partners Founding Chairman Mario Morino points out, it's easy to raise expectations of potential grantees. "You have to avoid getting yourself in positions where you have to say no," he says. Doing anonymous preliminary research will arm you with the basics and will help you prepare to meet people from the organization only if you need to go this route or as you become more certain about funding the nonprofit. You could also conduct (potentially confidential) interviews with other funders of the organization, and other stakeholders in the field. This will help you get smart both about the organization and the broader landscape that the nonprofit operates within. In this phase, you won't raise a grantee's expectations about receiving funding, and you won't waste its leaders' time if there are some obvious reasons to walk away.

That's important since, as mentioned, there is a vast difference in power between you and the potential grantee. A nonprofit will try to comply with your requests because they need the funding, but responding to such requests can be incredibly time-consuming and taxing for nonprofits. So to the extent possible, look for materials that already exist. In addition, only gather research to the extent required to make a decision. Part of that research may uncover weaknesses of a nonprofit, but be realistic in your assessment. Depending on the size, age, and growth trajectory of a nonprofit organization or a particular program, its capabilities will look quite different. For example, a startup will likely lack efficient systems or CEO-succession planning, but such areas offer excellent opportunities for partnership: You may choose to provide funding for leadership development or new technology to measure results and improve performance over the long-term. You may also choose to get personally involved by offering your strategic expertise, or making introductions to other funders.

Creating true collaboration with nonprofits you've decided to fund

So what do good outcomes cost? Just as in the for-profit world, nonprofits require essentials to achieve success, like top-notch workers, effective employee training, performance measurement systems, and adequate information technology, to name just a few. "The for-profit world does not measure success by focusing on overhead," writes author Ann Goggins Gregory, "but if it did (by looking at sales, general and administrative costs as a percent of total sales), the average rate would be 25 percent." In other words, in the for-profit world, no one expects a company to achieve success without adequate funding for overhead, and yet, many expect nonprofits to do just that.

Relationships between philanthropists and the nonprofits they fund are complicated. In addition, achieving results in philanthropy can be difficult and complex. Still, at the heart of philanthropic work is the donor and grantee relationship, and helpful guidelines do exist, such as those offered by Thomas J. Tierney and Richard Steele in the abovementioned The Donor-Grantee Trap. Here are three:

• First, resource it right. Make sure you are identifying what resources grantees need to be truly successful against your expectations.
• Second, pursue partnership. All too often, Tierney and Steele say that donors feel that simply donating money earns them the title of "partner." In reality, true partnerships are marked by shared goals—are you and your grantee really trying to achieve the same thing?—and a productive working relationship. Aligned goals and a productive working relationship can likely only be attained over time, with candid conversations that allow for "give and take."
• Finally, donors and grantees should seek to get better together. This relies on true partnership and requires collaborating to learn what is and what isn't working.

To these points, a number of the philanthropists we interviewed for the Conversations with Remarkable Givers Video Series provide firsthand insight on how establishing trusted relationships and working to define success together can be critical to achieving success in philanthropy. Some philanthropists we interviewed provide more flexible funding, such as covering overhead and making unrestricted grants. This gives nonprofits the leeway to adapt their strategy as needed, to develop nonprofit leaders, and to identify quickly what works (or doesn't) in order to course correct, if necessary, and stay on track. Some of these philanthropists also work on behalf of nonprofits to attract government funding or funding from other donors.