Pros and Cons of Grant Funded Positions

Are you intrigued by the idea of grant-funded positions but concerned about potential drawbacks? 

Weighing the opportunity cost associated with acquiring a grant to hire an employee can feel overwhelming. Is the value of expanding capacity worth the challenge of longer-term sustainability? 

Let’s dive into the pros and cons of grant-funded positions to help you navigate these types of funding opportunities wisely.

The most common types of grant-funded positions are one to two year full-salary coverages for specific projects or pilot initiatives. 

Grant-funded positions are often financed through government grants (federal, state, and sometimes city-level) or private foundations looking to support initiatives like expanded program delivery, specialized projects, research, advocacy, teaching, and training.

This time-limited funding enables nonprofits to achieve specific goals or complete targeted projects. Extended multi-year grants, like those providing three to five years of funding, are also available—though they’re less common and highly competitive.

Some foundations might also support multi-year, partially funded roles by offering: 

• Full funding for a position in the first year

• Partial funding in the second year (covering 50%-75% of the salary)

• Further reduced funding in the third year (covering 25%-50% of the salary)

By gradually decreasing their financial support, the foundation encourages sustainable growth—the idea being that as the new position demonstrates results, the development team can engage new stakeholders to fund the ongoing work.

Full disclosure friends: having spent four of my 15 years in nonprofit work in roles fully supported by grants (representing over 26% of my nonprofit career), I have a strong affinity for grant-funded positions. 

Here are some of the ways grant-funded positions can provide immense value to nonprofits like yours: 

Capacity Expansion

What is the one goal your organization wishes it had the capacity to achieve right now? Imagine for a moment what it would be like as a nonprofit leader to have a fully-funded position dedicated to accomplishing that very goal. 

The power of grant-funded positions to accelerate your mission cannot be overstated. 

Think of grant-funded positions as the jet fuel for your organization: they provide the initial thrust needed to propel your mission forward. 

Although the front-end effort is substantial, once established, your organization can achieve sustained impact and growth with the foundational boost provided by funding for these positions.

Specialized Skills and Expertise 

For many nonprofits, the cost of hiring highly skilled new team members can be prohibitively high. However, investing in specialized knowledge and expertise often unlocks greater mission-driven impact.

Just as NASA now launches rockets with GPS technology—despite it not being available in the late 60s—nonprofits should embrace the specialized skills and advanced knowledge that grant-funded positions often offer. 

An investment in specialized skills and expertise will increase your organization’s capacity, and ultimately, the impact of your mission. 

By securing grant-funded positions, your organization can not only enhance its current programs but also explore new opportunities and innovations to drive long-term growth and success, which likely wouldn’t otherwise be affordable. 

Case Study: Jan Spackman at Sleep in Heavenly Peace

Jan Spackman is a shining example of the transformative power of grant funding. Her initially grant-funded position enabled her to significantly scale Sleep in Heavenly Peace from 7 chapters to over 300 nationwide. 

Jan's story highlights how the strategic use of grants can expand an organization’s reach and impact, demonstrating that effective grant management can be a cornerstone for innovative growth.

Thanks to a grant-funded position that invested in both Jan and the mission of Sleep in Heavenly Peace, thousands of children across the United States have transitioned from the discomfort, distress, and hardship of sleeping on the floor to the safety of sleeping in a warm bed with fresh new sheets. 

Now imagine the impact a grant-funded position could have on your organization, driving similar growth and making a profound difference in the lives of those you serve.

Even with the overwhelmingly obvious benefits of a grant funded position, there are cons to be aware of. Great leaders have to consider the drawbacks as well. 

Funding Instability

One of the major drawbacks of grant-funded positions is the inherent instability of funding. 

Grant funding is typically time-bound and contingent upon the availability of funds, the priorities of the grantor, and the success of renewal applications. This can create a sense of uncertainty and instability for your organization and team members in these positions. 

Further, you may find it challenging to plan long-term projects or strategies when the continuation of essential staff roles is uncertain. This instability can disrupt program continuity and impede your team’s ability to deliver consistent services.

Difficult for Newer Organizations To Secure 

Fundraising for a nonprofit project or mission expansion can be particularly challenging, especially for new or young organizations that have not yet had the time to demonstrate their impact and reliability. 

Foundations seek to make wise investments, and when it comes to grant-funded positions, established organizations with a proven track record often have a competitive advantage, whether fair or not. 

As great as they can be, grant-funded positions are often out of reach for small and newer nonprofits—even if they’re deserving. 

Psychological Impact on Employees 

Employees in grant-funded positions often experience anxiety and stress about their job security, knowing that their roles are tied to external funding sources that may not be renewed. This can affect their morale, productivity, and overall job satisfaction. 

But there is a path through these obstacles. 

Nonprofit leaders should establish and communicate clear guidelines for the duration of grant-funded positions to their teams. For example:

• Committing to a minimum of one year for paid internships and fellowships.
• Committing two years for fully-funded positions.
• Committing three years for partially funded positions (covering at least 50% of the salary).

This approach provides clarity and stability for both the organization and its staff.

As a leader, you can also mitigate the potentially negative psychological impact of grant-funded positions by aligning the outcomes of these positions with your organization’s long-term vision. 

For instance, if your nonprofit serves inner-city youth and you have a two-year grant for a sports coordinator position, communicate to the funders how this role is helping teach life lessons through the avenue of athletics and enhancing social capital among 15% more youth than your programming was previously reaching. 

Similarly, share these outcomes with other stakeholders and local business leaders who have a vested interest in the community’s well-being. This approach not only highlights the immediate impact but also underscores the role's significance in achieving your organization's broader goals.

Developing a Contingency Plan

Having a backup plan to retain staff when grant funding ends is crucial. 

Notice I didn’t say 'if' grant funding ends—because great leaders always have a contingency plan. Your people are invaluable, and you owe it to them to be prepared for any eventuality.

Imagine NASA declaring a successful rocket launch after using 100% of the fuel just to reach orbit. Just as NASA ensures enough fuel for the entire mission, nonprofits must ensure they have a sustainable plan for staff retention beyond the initial grant period.

Prepare to retain the position through an expanded funding strategy and consider upgrading your grant management systems to optimize success, as Jan Spackman did. This will help sustain the progress your new employee is making in fulfilling your organization’s mission. 

By diversifying your funding sources and enhancing your grant management capabilities, you can ensure continued support for critical roles and maintain momentum toward your goals. And the best part is this gives your employees peace of mind and creates a feeling of safety in the workplace, which everyone deserves. 

Communicating With Grantors

When a foundation supports a position within your organization, it’s important to go beyond merely reporting raw data. 

Engaging grantors with compelling stories of impact and consistent communication can be the difference between securing recurring funds or being left looking for new funding alternatives. 

Here are some strategies: 

Include Grantors in Your Communications

• Add the foundation’s employees to your newsletter distribution list to keep them informed about ongoing activities and successes.
• Ensure that grantors are exposed to your organization's social media content, showcasing stories of impact (not just data).
• Use storytelling to highlight the real-world effects of their support on your programs and beneficiaries. After all, the work quite literally wouldn’t be possible without them.

Provide Routine Engagement

• While some grant-funded positions only require annual reporting, don’t limit your communication to just once a year. Regular updates can keep grantors engaged and invested in your mission.
• Schedule regular updates or informal meetings to discuss progress, challenges, and upcoming plans. This proactive approach expresses the value and gratitude you have for your grantor, and no one wants to see you succeed more than they do.

Prioritize Proactive Communication

• Even if not required frequently, provide detailed and transparent reports that include both quantitative data and qualitative narratives.
• Engage grantors in a feedback loop, showing that their investment is continually valued by asking for their input. 

By integrating grantors into your regular communication and engaging them with compelling stories, you help them see the value of their investment beyond just data. 

This approach shouldn't be viewed merely as a tactic for securing future funding. As a nonprofit leader, it's important to genuinely value those who invest in your organization's frontline work just as much as you value your team members who are delivering it. 

This holistic approach to stakeholder engagement fosters a deeper, more meaningful connection and demonstrates your commitment to transparency and shared mission success.

Check out this list of post-award grant management best practices for more tips on communicating with grantors.

Leveraging Local Opportunities

If you think you and your team love helping others and creating positive social change, wait until you hear about universities and their passion for community research. Consider partnering with them.

Universities are eager to apply their research in real-world settings and can offer valuable resources, knowledge, and enthusiastic students. Collaborating with them can lead to innovative solutions for your programs and provide research-based evidence to support your initiatives, enhancing your ability to attract additional funding.

Similarly, local businesses are often keen to support community initiatives as part of their corporate social responsibility efforts. By engaging local businesses, your organization may secure financial support, in-kind donations, and volunteer assistance. These partnerships can boost your program's capacity while helping businesses fulfill their community engagement goals. Leveraging these local opportunities effectively can significantly enhance your nonprofit's resources and impact.

Grant-funded positions can serve as the jet fuel that propels your organization’s mission, resulting in the hiring of specialized staff to tackle ambitious projects without immediate financial strain. 

However, the reliance on time-bound funding introduces significant challenges, including funding instability and psychological impacts on employees. However, the challenges of sustaining grant-funded positions are minimal compared to the high rewards of expanding your organization’s capacity. Investing in these roles can lead to transformative growth and innovation. 

As the old anecdote goes, the best time to plant a tree was twenty years ago, and the second best time is today. Check out Instrumentl’s free grant search tool today to start your search for funding.