Why Capacity Building is Needed

Building high-performing organizations is a vitally important endeavor:

"As nonprofit organizations play increasingly important roles in our society, it becomes more critical for them to perform effectively. In response, nonprofit managers have demonstrated a growing interest in management practices and principles that will help them build high-performing organizations, rather than just strong programs. Traditional foundations and venture philanthropists have also professed a new commitment to investing in the organizational capacity of the nonprofits they fund."

Effective Capacity Building in Nonprofit Organizations
Report for Venture Philanthropy Partners by McKinsey & Company (2001)

Somewhat surprisingly, there is no clear definition of what it means to be "investing in the organizational capacity" of nonprofits, because capacity building can encompass anything from nonprofit board training, to installing a computer network. Capacity building is whatever is needed to bring a nonprofit to the next level of operational, programmatic, financial, or organizational maturity, in order to more effectively and efficiently fulfill its mission.

Today nonprofit leaders and funders agree that effectiveness and impact are what matter, not the quantity of outputs, or how replicable a program might be. Nonprofits and funders recognize that there are many ways a nonprofit can build its capacity to achieve greater impact. Capacity building can be — but is not necessarily — exciting and "innovative." And certainly it is not always about "scaling up." Even small organizations with modest budgets and very focused missions can emerge into high-performing, impactful organizations, given the will and the resources to do so.

Building the capacity of your nonprofit to move on to the next phase of its organizational development is a challenge. It can help to know what the most pressing need is for your organization.

What will give your nonprofit increased strength and effectiveness, enabling your nonprofit to survive the challenges of the current economy and sustain itself well into the future?

• Leadership, adaptability, and program capacity are the leading factors, according to a report, The Sustainability Formula – How Nonprofit Organizations Can Survive in the Emerging Economy, by Peter York, TCC Group (2009).
• Even if your organization has "been around for a while" there is still room for building capacity to achieve greater impact and ensure sustainability. Read Getting Back in Shape: Guidelines for Improving the Fitness of Established Nonprofit Organizations, a briefing paper from the Conservation Company (now the TCC Group) that, while published in 1999, rings true today in its observations about the life-cycle challenges of nonprofits and the vulnerabilities that can take a mature organization by surprise.

What are your nonprofit’s greatest needs for capacity building?

• Nonprofits often lack the capacity to evaluate their own effectiveness or outcomes. Grantmakers for Effective Organizations offers a white paper exploring ways to build the capacity of nonprofits to evaluate, learn, and improve.
• Conducting a self-assessment such as using the organizational capacity assessment tool developed by the Marguerite Casey Foundation to help nonprofits identify capacity strengths and challenges, and establish capacity building goals.
• The Innovation Network, Inc. also offers a self-assessment survey and reporting tool that provides nonprofit leaders with a snapshot of the organizational strengths and areas for improvement, among other tools offered through its "Point K" website resources. (Free registration required.)
• The TCC Group's Core Capacity Assessment Tool can suggest "where to start" by targeting where specific capacity building efforts could be most beneficial for your nonprofit.
• The Urban Institute's monograph on Capacity Building in Nonprofit Organizations (2001) offers a framework and an excellent overview of various ways grantmakers and policy makers might go about assessing the capacity building needs of the nonprofit sector, as well as the needs of nonprofits in a particular community or even a specific individual nonprofit.

Studies that identify and assess the capacity building needs of nonprofits in various regions include:

• California: Fortifying LA's Nonprofit Organizations, capacity building needs and services in Los Angeles County (TCC Group 2010).
• Indiana: Multi-year Nonprofit Capacity Assessment Survey (the Center on Philanthropy and the School of Public and Environmental Affairs at Indiana University) and Nonprofit Capacity Assessment: Indiana's Arts and Culture Organizations 2010.
• Ohio: An Analysis of Nonprofit Capacity Building in the Mid-Ohio Valley
• Washington: An Assessment of Capacity Building in Washington State (2009) prepared by The Giving Practice, a consultancy of Philanthropy Northwest. This study offers a helpful framework for examining the capacity building needs for nonprofits in an entire state (by considering eight components of a healthy nonprofit ecosystem) and includes in-depth analysis of the capacity building resources of Washington State, county by county.

Where Can a Nonprofit Find Capacity Building Assistance?