A grantmaking strategy is a funder's theory of change — its answer to the question: what are we trying to accomplish, and how will distributing grants achieve it? Without a clear strategy, grant programmes drift toward funding whatever applicants propose, rather than directing resources toward specific outcomes. With one, grant programmes can be designed, assessed, and evaluated against clear intent.
This guide covers how foundations and charitable trusts develop effective grantmaking strategies — and how strategy connects to programme design and grants management practice.
A grantmaking strategy typically addresses:
Mission and purpose. The overarching reason the organisation exists — usually defined in the trust deed, foundation charter, or governing document. This constrains the range of possible strategies but doesn't determine the strategy itself.
Strategic priorities. The specific areas or populations the funder will focus on within its mission. A community foundation with a broad community development mission might focus strategically on youth employment, housing security, and community wellbeing — not necessarily every community development need.
Theory of change. How does the funder believe change happens in its priority areas? What are the leverage points? What types of activities are most likely to lead to the outcomes the funder wants? The theory of change connects strategy to programme design.
Position in the funding ecosystem. Where does this funder fit relative to government funding, other philanthropic funders, and self-funded activity in the sector? What is the distinctive contribution this funder can make that isn't already being made?
Grant type mix. What types of grants will the funder make — project grants, operating grants, capacity-building grants, research grants? The grant type mix follows from the theory of change.
Scale and duration. What is the typical size and duration of grants? Multi-year unrestricted grants imply a different theory of change than small competitive project grants.
Risk appetite. What level of risk is the funder willing to accept? Some funders prioritise established organisations with proven track records; others specifically seek to fund emerging organisations, test new models, or work in areas where conventional funders don't go.
Good grantmaking strategies are developed through a process that combines:
Evidence about need. What does research and data tell us about the problems in our priority areas? Where are the gaps? What are the scale and distribution of need?
Evidence about what works. What does the research say about effective approaches in these areas? What have other funders learned? What is the emerging practice evidence?
Stakeholder input. What do the communities the funder serves think about where the most significant gaps and opportunities are? What do funded organisations say about what they need? What do sector leaders say about where strategic investment would have the most impact?
Assessment of funder assets. What resources does the funder have — financial assets, networks, staff capability, relationships, convening power — that could be deployed for more impact? The strategy should be realistic about what the funder can actually do.
Governance and values alignment. The strategy must be consistent with the funder's legal purposes (trust deed, founding document) and reflect the values of the board or trustees. Strategies that boards don't believe in aren't implemented well.
Funders approach strategy differently. Common models:
Responsive grantmaking. The funder defines a broad funding purpose and responds to what applicants propose within it. Advantages: community-led, flexible, accessible. Disadvantages: diffuse impact, no clear theory of change.
Strategic or directed grantmaking. The funder identifies specific outcomes it wants to achieve and designs programmes specifically to achieve them. Advantages: clear impact focus, able to evaluate against specific goals. Disadvantages: may miss community-defined needs, can be top-down.
Catalytic grantmaking. The funder uses grants to catalyse change that goes beyond the immediate funded activity — systems change, policy change, building the capacity of the sector to address a problem at scale. Disadvantages: difficult to measure, long time horizons.
Place-based grantmaking. The funder focuses on a specific geographic community rather than a thematic area — aiming to strengthen all aspects of that community's wellbeing. Advantages: holistic, relational. Disadvantages: may not align with thematic funder priorities.
Collaborative grantmaking. The funder works with other funders to co-fund shared priorities, coordinating strategy and avoiding duplication. Advantages: greater collective impact, efficiency. Disadvantages: requires alignment between funders, slower decision-making.
A grantmaking strategy only delivers value when it's translated into programme design. Key connections:
Eligibility follows strategy. The eligibility criteria for a grant programme should directly reflect the strategic priorities — funding the types of organisations, in the places, doing the work, that the strategy identifies as most likely to achieve the funder's goals.
Assessment criteria reflect theory of change. If the strategy is built on a specific theory of change — that, say, community-led approaches are more effective than expert-led ones — the assessment criteria should evaluate applications against that theory.
Grant type and duration reflect strategic intent. If the strategy aims to build long-term organisational capacity, multi-year unrestricted grants are more consistent with that intent than short-term project grants.
Reporting connects to strategic outcomes. Outcome reporting should track what the strategy says matters — not just generic outputs. If the strategy prioritises systemic change, programme reports should collect data about systemic change indicators.
Grantmaking strategies don't last forever. Triggers for strategic review include:
A strategy review process should include the same stakeholder input and evidence review as the original strategy development — not just an internal board conversation.
Strategy connects to grants management in practical ways:
Programme configuration reflects strategy. The application forms, assessment criteria, and reporting requirements configured in the grants management system should be direct expressions of the programme strategy.
Portfolio analysis tests strategy. Aggregated data from the grants management system — who is funded, for what, where, with what outcomes — can be analysed to test whether the portfolio is aligned with the strategy and whether the outcomes are consistent with the theory of change.
Reporting supports strategic accountability. Programme reports to boards should report against strategic outcomes — not just grant outputs. A grants management system that supports outcome data collection at the grant level enables programme-level reporting against strategic goals.
Tahua helps funders configure grant programmes that reflect their grantmaking strategy — with outcome frameworks, assessment criteria, and reporting requirements designed to deliver on strategic intent.