To fund systems change effectively, grantmakers need to define a clear vision, work in true partnership with grantees, coordinate with other funders, and maintain a long-term perspective, a report from McKinsey & Company and Ashoka finds.
Developed in collaboration with Catalyst 2030, Co-Impact, Echoing Green, the Schwab Foundation for Social Entrepreneurship, the Skoll Foundation, and SystemIQ, the report, Embracing Complexity — Towards a Shared Understanding of Funding Systems Change (101 pages, PDF), argues that solving today's most complex challenges requires both a systems change approach and collaborative action on the part of stakeholders, whereas current funding practices are designed to support short-term projects with measurable results rather than the evolving approaches needed to create lasting change. Indeed, a survey of more than a hundred social entrepreneurs working to effect systems change around the globe found that 55 percent said their funders did not provide sufficient support for their systems change efforts.
According to the survey, short-term horizons, restricted funding, and funder interference pose major challenges for systems change leaders, with 72 percent of respondents saying that unrestricted funding accounts for less than 25 percent of the grant dollars they receive, while 87 percent reported having to adapt their initiatives to comply with funders' requirements, including 43 percent who said they had to make major changes.
Based on the survey findings, a literature review, and interviews with funders, intermediaries, and systems change leaders, the report outlines five principles for funding systems change work: embrace a systems mindset by clarifying the systems that funders want to change and actively look for funding opportunities; support evolving paths to systems change by investing in systems change leaders rather than short-term projects; work in true partnership with grantees by acknowledging and addressing unequal power dynamics; prepare for long-term engagement; and collaborate with other funders to build networks. For each of the five principles, the report offers detailed recommendations and examples of how funders implemented the principle.
"As we have outlined in this report, systems change is a long-term process that requires patience, learning, and collaboration," the authors conclude. "As the funding community moves toward greater support for these systems-level efforts, we can better drive the deep and lasting social change that will create a world of prosperity, equity, and sustainability for all."