How Lean Thinking Can Help Philanthropy Create More Value

We’re noticing an increasing number of grantmakers who want to take the opportunity of moving to a new system to rethink their grantmaking process. This is a great idea, but it also raises a lot of questions. Whose needs should be prioritized? How many approvals is enough? How do we even define what it means to improve a grantmaking process?

To begin to answer these questions, I looked to the for-profit sector, which has been doing process improvement for decades—knowing that directly applying their frameworks may be misguided but that there likely would be insights we could translate to a philanthropic context. This led me to “lean thinking”—a set of ideas and principles that can be used to guide and direct process improvement work.

What is Lean Thinking?

You may have heard of lean in the context of manufacturing, as the ideas originated from Toyota, or in the context of lean startups, where they are gaining popularity. While those examples are best known, the underlying principles of lean are broadly applicable to many more domains. As a result of being widely used, exact definitions vary, but here’s one I found helpful:

“The core idea [of lean thinking] is to maximize customer value while minimizing waste. Simply, lean means creating more value for customers with fewer resources.”

For some of you, hearing “lean” and “minimize waste” may sound like a thinly veiled reference to downsizing. This is an unfortunate result of some companies looking for quick cost savings in the name of lean, while ignoring underlying principles. True lean thinking highly values staff because it is the people doing the work who have the best insights about how to improve it. You can’t create a culture of continuous process improvement if people think it might cost them their jobs. While it’s possible that some foundations could conclude that they are overstaffed for what they are trying to achieve, I anticipate that in most cases, staff will be able to shift their time to work that creates more value.

Aerial shot of mountains and an ocean. Quote over top: "True lean thinking highly values staff because it is the people doing the work who have the best insights about how to improve it."

Lean Thinking Fundamentals

So, what do “value” and “waste” mean in a lean thinking context? To understand this, lean asks us to take a step back from process details and think more broadly about our purpose:

1. Who is the “consumer” that you exist to serve?

In the case of philanthropy, this is an interesting question. Is the consumer the grantee, who creates the impact you’re trying to achieve? Is it the board, philanthropist, government, or corporation who provides the funding and vision? Or is it the grantees’ beneficiaries, human or not, who benefit from the services provided?

2. How does your “consumer” define value? What is it they really want/need from you?

In lean thinking, value is always defined from the consumer’s perspective. Philanthropy’s unique disconnect around the consumer—people who receive a product/service aren’t the same ones paying for it—only makes it that much more important to be clear on value.

Lean thinking then defines "waste" as every part of the process that does not create value. Some waste cannot be avoided (such as compliance checks required by law), whereas other waste (such as time where something is sitting around not being worked on, any re-work to fix issues, etc) should be minimized or eliminated.

Philanthropy’s unique disconnect around the consumer—people who receive a product/service aren’t the same ones paying for it—only makes it that much more important to be clear on value.

3. How can you realign your process, tools, and organization structure to create more value and cut back on waste?

Lean thinking offers many principles and techniques on how to do this, some of which will apply to philanthropy and some which won’t. It’s a big topic, so I hope to explore some of the more relevant pieces in future posts.

Implications for Grantee Relationships

My hope is that applying lean thinking in philanthropy will not only help foundations streamline their work, but also to make it more grantee-centric. Regardless of who you consider to be your primary “consumer,” it quickly becomes clear that grantees are central to creating value. So, I would argue that every foundation’s processes should put grantee’s needs front and centre—something that we as a sector could improve on.

What creates value for your grantees? Likely the honest answer is the funding you give them—preferably reliable, substantial and unrestricted. It’s possible you also add value to grantees in other ways, for example through capacity building opportunities, connections, visibility, and generative conversations.

Understanding value from the grantee perspective also helps us see waste. To get us thinking in this mindset, here are a few examples:

I don’t expect that applying this to grantmaking processes will be easy, especially as the concept of “waste” may spark a desire to defend how we’re doing things. Ultimately, lean thinking does and should push us to rethink some fundamental assumptions about how we work. In philanthropy I think some of these might be:

  • That everything has to revolve around the 3 yearly board meetings
  • That a certain set of people need to approve every grant
  • That the complex compliance process we have in place is something we need versus something that evolved, and may no longer be serving us.

Getting Started

Fortunately, lean thinking is all about continuous improvement. Start with small experiments: try something new or a bit different, see what the result is, and keep, ditch, or tweak it depending on what you find. Over time, sharing successful results will create interest and build momentum.

What approaches and frameworks have you found helpful in process redesign? If this post has piqued your interest, let’s talk!

Tierney Smith's headshot

Tierney Smith

Implementation Management Service Lead

Change Management

Tierney specializes in helping grantmakers align their grantmaking processes with their values and make effective use of technology. As a Service Lead and Senior Philanthropy Consultant at GrantBook, she helps clients redesign their processes and successfully implement grants management systems. She is especially passionate about creating stronger funder-grantee partnerships by helping funders implement grantee-centric, trust-based practices. 

Previously, Tierney worked at TechSoup Canada to provide nonprofits with access to low-cost technology and educational resources. She has also worked as a software developer and project manager in the corporate sector. She has a degree in Software Engineering from the University of Waterloo.