Capacity building in the nonprofit sector continues to be a struggle. In 2001 Venture Philanthropy Partners (VPP), a Washington DC based organization released Effective Capacity Building in Nonprofit Organizations, a thorough report detailing the need, measuring impact, and outlining strategies for capacity building in their region. I would like to think that over time conditions and strategies improve or change however now 15 years later the theories of the VPP report still hold true and conditions unfortunately still exists.
Over the next few blogs and in the Spring issue of the Philantrepreneur Journal building capacity will be examined, defining the term within the sector, providing conceptual theories, and hopefully providing rationale to place more emphasis on supporting capacity building efforts.
The following are excerpts from VPP’s report which is still quite relevant in 2016.
WHY CAPACITY BUILDING MATTERS – AND WHY NONPROFITS IGNORE IT
Nonprofits, just like businesses, need to focus on building the capacity of their entire organization if they want to maximize their social impact. Both board and staff need to dedicate themselves to raising capacity building to the same level of importance and attention as program development and management – to think early and often about strengthening the organization in lockstep with implementing programs. What propelled leading nonprofits to new levels of effectiveness was not any single initiative, but rather a deliberate program to enhance its capabilities at all levels, from its strategy to its systems and structure. These efforts in turn improved its ability to deliver against its aspirations.
Many organizations in the independent sector, especially smaller groups or recently founded institutions, continue to neglect building organizational capacity in favor of developing and deploying programs. Why? What barriers prevent nonprofits from embracing a more holistic view of their enterprises?
At one level, the tendency among nonprofits to favor program makes perfect sense. Most nonprofits are founded by intensely motivated individuals who are promoting a new idea: a different approach, method, or system to address some pressing social need. In the case of Samaritan Inns, for example, the programmatic innovation was the focus on providing post-rehabilitation housing and counseling for addicts. Of necessity, the start-up phase for many nonprofits revolves around testing, refining, and implementing its new idea, with the majority of the organization’s resources dedicated to that task. In addition, many nonprofits aspire to achieve their missions in the not-too-distant future, so why should they invest in capacity? Finally, building capacity can be difficult, time-consuming, and expensive in the short run, and most nonprofit managers would prefer to spend their dollars on programs.
But other obstacles also face nonprofit boards or managers seeking to build capacity. For example, nonprofit culture tends to glorify program work over “back-office” functions or even higher-level institutional functions such as strategic planning. (In fact, in many for-profit and nonprofit organizations, “planning” is something of a dirty word, as it distracts from important day-to-day activities.) In addition, many nonprofit managers are generally skeptical about the relevance of business practices to nonprofit organizations.
Another important barrier impeding the ability of nonprofits to engage in capacity building is a dysfunctional funding environment. Every nonprofit manager knows that a majority of donors, both individuals and foundations, like to earmark their contributions to support particular projects or programs. The easiest dollars to raise have always been for “bricks and mortar” capital campaigns, with very tangible products, while the hardest have been for general administrative costs – including efforts to build organizational capacity. Donors fear that such contributions will serve only to hire more staff or perpetuate the institution rather than make an impact on the mission. The rise of new forms of funding, particularly venture philanthropy, has begun to lower this barrier, but given the idiosyncrasies of many major donors, it seems unlikely that this perspective will change dramatically any time soon.
Nonprofits have also been hampered in their capacity building efforts by a simple lack of knowledge. For inspiration and new ideas in an area such as fundraising, for example, nonprofits can look for guidance to a whole body of literature, the experiences of other organizations, and a robust specialty consulting market. But when it comes to nonprofit capacity building, there is no shared conceptual framework or approach that can be applied widely across the sector.
Finally – and maybe most important – establishing a direct linkage between building capacity and increased social impact has proved elusive. In a few cases, certainly, the connection is readily apparent. A food bank that improves its inventory management, for example, will deliver more food to more people more quickly. But far more often, it is difficult if not impossible to attribute increased impact to a particular capacity building effort. Take the case of Samaritan Inns, which hired an expert in 28-day rehabilitation programs as part of its overall initiative to build capacity. This individual clearly played a big role in revitalizing the institution, but how can we measure his specific contribution relative to all the other external factors – legal, economic, social – which influenced Samaritan Inns during this period?
These barriers are formidable but not insurmountable. The professionalization of nonprofit management as well as changes in the funding climate will continue to nudge nonprofit culture toward a more enlightened view of capacity building. As more organizations begin to address capacity building systematically, better information and improved measures will surface to make a more convincing connection between capacity building initiatives and social impact. Make no mistake, although the link between increased capacity and increased impact may be hard to quantify, one does lead to the other. The executive directors of the organizations profiled in this report testify that their capacity building efforts were critical ingredients in their increased social impact, though in every case there were other contributing factors as well. For the nonprofit sector as a whole to achieve a greater social impact, more organizations must address their gaps in organizational capacity. Having honed their model or their program, they need to invest the necessary time and effort in building their organizational capacity to deliver that program more effectively and efficiently or to replicate their success in other locations. Unless they do, they will never be capable of fulfilling their promise.
F or the nonprofit manager, building organizational capacity can seem daunting indeed. It can be hard to fund, hard to launch, and hard to implement. It takes a long time and the need is not always apparent to staff, volunteers, board members, or donors. But nonprofit leaders cannot allow themselves to be dismayed by these obstacles, because nonprofits enjoy an inherent advantage. At its core, the nonprofit sector is driven by people committed to a mission and to increased social impact. Consequently, employees, board members, and donors will almost invariably respond positively to a proposal that will clearly advance the mission, no matter how radical the proposal is.
That is why visionary nonprofit managers have placed emphasis on developing ways of quantifying the social impact of their organizations through evaluation and research programs. Demonstrate the increased social impact from capacity building and opposition will soon fade. Prudent leaders, of course, will avoid opposition in the first place. Instead, they will recognize the importance of building organizational capacity from the very start and make it the hallmark of their tenure. They do not wait for a crisis before addressing capacity gaps; rather, they will aggressively seek out those gaps and take measures to fill them. Capacity building does matter, and it does make a difference in a nonprofit’s ability to fulfill its aspirations. The sooner nonprofits realize this and start assessing their capacity needs, and the sooner funders increase their support for capacity building efforts, the better off nonprofits – and society as a whole – will be.