One of the tools I have used with troubled arts organizations should also be effective for most organizations during this economic downturn: the challenge grant.

Challenge grants are gifts from one or several donors that must be matched by other gifts. At its simplest, the challenge grant must be matched by an equal amount from other donors to become effective. Some matches require two or three times the initial grant.

Challenge grants are effective because they encourage new donors to give for the first time and existing donors to increase their gifts.

In a period of time when we are all competing more directly for a smaller pool of money, challenge grants can give an organization a competitive edge. If donors believe that their gifts go farther because of a matching grant, they may be more likely to give to that organization.

When I was at American Ballet Theatre, we used a matching gift from our chairman, Peter T. Joseph, to great effect. He already gave us an amazing $1 million each year. I asked him to bundle the next five year’s worth of gifts into one matching grant. We announced the $5 million challenge grant to great fanfare; the $5 million pledge seemed like a huge amount for a sick organization.

And donors were very happy to give us their gifts to match this remarkable pledge. The $5 million from Peter was built into our annual budget. The matching $5 million paid off virtually our entire accumulated deficit and changed the history of the organization.

I suggest that organizations today should get their largest donors to bundle several year’s worth of their giving into one large challenge grant and do what we did at ABT.

I think it could make the difference in this environment.