What’s new in capacity building?

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Two new multi-layered online reports, one from Grantmakers for Effective Organizations (GEO) and one from GrantCraft (a service of the Foundation Center), offer much-needed guidance for grantmakers about the proven value, plus the ins and outs, of funding capacity building. These reports tackle the mystique surrounding capacity building (“Capacity building can feel murkier for foundations because the work seems less directly tied to missions”), and promote practices that break down the power dynamic too often accompanying funder-driven capacity building. Both reports draw on interviews with grantmakers and grantees to document the positive results foundations see when they invest in their grantees’ effectiveness. Both reports also suggest that there is yet another capacity-building route for grantmakers to consider: multi-year unrestricted funding. (“Grantmakers should consider a long-view approach to building capacity within an organization or across a portfolio because organizational transformations will not happen overnight and the need for attention to capacity never goes away. One-year investments in capacity building projects are rarely enough to cover the full costs of the change taking place inside an organization.” Strengthening Nonprofit Capacity, GEO)

These reports are welcome additions to the body of literature about capacity building because they both urge candid discussions between grantmakers and grantees about an organization’s true needs in connection with capacity building. (“Nonprofits agree that it’s hard to make capacity building successful when a funder is the driving force…When a funder dominates or drives, leadership will often acquiesce rather than debate issues to try to bring consensus or find a compromise. Then, staff is left to carry out a project that does not have the support it needs across organizational leadership or from the community.” Supporting Grantee Capacity, GrantCraft.) This urging to re-balance the power dynamics between grantmaker and grantee is doubly welcome in light of the often heavy-handed demand by grantmakers for “evaluation of outcomes” that too often comes with empty-handed financial support for the very real work required to actually collect and evaluate data, and then analyze and report outcomes.

These reports also illustrate the central role grantmakers play as direct capacity builders. But is this a good thing? Certainly, the research and guidance offered by these two reports is comprehensive and respectful of grantees. Both reports acknowledge the dangers of funder-driven capacity building and encourage grantmakers to work closely with grantees to undertake only what is truly appropriate for the grantee. But at the same time, these reports illustrate just how dependent charitable nonprofits are on private foundations for capacity building – underscoring the perception among nonprofits that investing in one’s own capacity is analogous to a spa vacation, rather than brushing one’s teeth.

This reluctance to self-invest is reminiscent of our reluctance as a society to save. The nonprofit Employee Benefit Research Institute shared data from a 2014 survey that over a third of workers have less than $1,000 tucked away as “retirement” savings! Similarly, we know from the Nonprofit Finance Fund’s 2014 State of the Sector report that 55% of nonprofits surveyed reported less than 3 months cash in reserve, and 12% reported zero. After almost seven long years of federal and state budget cuts and slowed donations both during and post-recession, combined with consistently increasing requests by the public for nonprofit services, it’s no wonder that cash reserves are low and that investing in technology, leadership development, or even just taking time to plan – feels to some nonprofits like pampering that is out-of-touch with the reality of urgent needs.

Yet, the need for nonprofit capacity building is vitally important right now exactly because of the prolonged period of two forces moving in opposite directions: 1) limited resources during the recession and a tepid economic recovery have placed severe constraints on the abilities of nonprofits to serve individuals and communities, and 2) increasing demands from individuals are straining nonprofits’ ability to keep up with the need for services. (See Nonprofit Finance Fund’s 2014 State of the Sector report.) Many nonprofits are stretched so thin that for years they have been unable to invest in their own technology and talent, or allow themselves time to plan for the future. With these two reports now providing a consistent message to grantmakers that capacity building is vitally needed, perhaps nonprofits will be inspired to hit the pause button and take time to identify their own most pressing capacity deficits and then intentionally deploy time, energy, and resources needed to rebuild a strong foundation for their missions.

Just as “hope springs eternal,” we have a proposal for the charitable nonprofit community: Rather than wait until the wheels fall off, why not spend a bit of time with these reports that can give you ideas about how to invest in your nonprofit, and perhaps even set some money aside specifically for a “capacity building fund” - not for pampering, but to invest in the nonprofit’s own effectiveness.

Remember that oxygen mask we are supposed to put on our faces first, before helping others? What could be more needed than making sure there is a smooth flow of oxygen – so we have the capacity to help others? Don’t feel guilty. Hit the pause button, make a commitment to the future, and breathe deeply. Your nonprofit’s capacity depends on it.

Looking for assistance for capacity building projects? Remember that state associations of nonprofits offer a wide variety of capacity building assistance, from leadership development to technology solutions and you can find additional capacity building resources on this website. 


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