It’s a nebulous term. It pops up now and again, at conferences, meetings and in various interesting articles about the necessity and often scarcity of resources to fund expansion / growth within impact organizations. Capacity building is not new. It is described by the Foundation Center and generally, as “a broad term that encompasses actions that improve nonprofit effectiveness in terms of organizational and financial stability, program quality, and growth.” These are not small feats. And yet, for all of their importance, not many of my impact partners and clients seem to be asking for this type of support.
I must admit I haven’t given much thought to this topic until now. I’ve spent the last 20 odd years in the private sector, providing financial advisory services to distressed companies. I’ve recently spent considerable time thinking about the role of capacity building as it relates to my work with impact organizations. In the private sector, the term ”capacity building” means funding R&D, IT, talent, continuous improvement, and often, the hiring of outside expertise to develop and implement such strategies. And yet, when applied to a nonprofit organization, capacity building seems to be a well-meaning abstraction, a catch-all, and often, a luxury. Why is funding these critical activities optional for any organization that wants to be successful?
Donors and the nonprofits they fund seek to tackle increasingly complex problems from education and health, to community and workforce development, to global climate change. Collective impact on this scale requires, among other things, high-functioning organizations. However, these vital organizations generally lack the equivalent of a for-profit R&D team to propel this systemic change. Not only are most nonprofits starved of financial capital, they often lack the human capital to be innovative and create widespread change.
Notwithstanding the incredible leadership and knowledge housed within nonprofits, these operating constraints (limited cash, tight staffing issues, and inadequate capacity) often hinder their ability to realize growth. As a result, many brilliant nonprofit leaders are forced to be a jack of all trades, leaving little time or energy to scale their work and create increased impact.
I recently completed an engagement where within six months, my team successfully helped our client create a business plan and revenue model for a scalable social enterprise. The client received board approval to self-fund this important project. Our team provided focus and expertise that would have otherwise been difficult to achieve.
There are, of course, no easy answers to addressing sustainability issues within impact-driven organizations but I offer a few thoughts:
For grant makers:
- Be innovative. Think differently about what your capacity grants can fund – you’re investing in R&D and ultimately growth.
- Do your grantees have sufficient core support to execute their strategies? Capacity grants could provide for this external expertise.
- Capacity building is an investment in an organization’s future. These grants can be used to develop opportunities for scale and earned revenue, ultimately lessening the potential need for grants
- Be bold…ask for a capacity grant. Funders are often overwhelmed with program support requests and may likely welcome innovative requests. Step up and ask for an investment in the sustainability of your organization.
- Remember, you’re not seeking to operate as usual – you’re striving to be extraordinary.
- Provide a clear path to results. Identify and articulate the purpose of your capacity building, including the desired impact.
While these ideas may appear somewhat unorthodox, I firmly believe that unconventional thinking is necessary in order to address large-scale social issues. Don’t be afraid to rise above challenging conditions if you have an innovative strategy you think will help your organization, now and in the future.
“What is now proved was once only imagined.” – William Blake