The Insider's Guide to Grantmaking: How Foundations Find, Fund, and Manage Effective Programs

Choosing a Mode of Operation

In addition to embracing a theory of change and a grantmaking style, the foundation must choose a mode of operation. There are essentially two ways that a foundation may conduct its business: as a grantmaking or an operating organization. The vast majority of U.S. foundations are grantmaking; that is, they make awards to mainly nonprofit organizations for charitable purposes. In order to do this, the foundation (if it is of a significant size) usually needs employees of its own, but because the foundation does not itself manage the projects that it supports financially, it need not employ a large staff. An operating foundation, in contrast, makes few or no awards to other organizations. Instead, it manages institutions, ...