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Giving Compass' Take:
• Capacity building is necessary for nonprofit programs to thrive, yet some grants only allow for a small percentage of funding to go toward operational support.
• The authors call for a collaborative of funders to honor the role of capacity building and provide a standard of capital for nonprofits to be able to do their work. What are the next steps if that were to happen? Are donors ready to shift mindsets toward prioritizing capacity?
• Read about capacity building for social change.
Capacity building is one of those topics that many nonprofit leaders avoid bringing up with funders. They prefer instead to talk about their programmes and beneficiaries. That’s where their passion lies, and, not surprisingly, it’s where funders want to invest. However, not having the conversation around capacity building often means that nonprofits and funders risk neglecting to invest in it.
Our own experience, along with a growing body of research, makes the case that nonprofits simply can’t achieve their full potential unless they invest and build the core capacity needed to deliver their programmes over the long term.
In contrast, capacity building in the business world is a foundational concept. Corporate investors expect companies to build strong central organisations, because they understand that their success depends on it. Nonprofits also need to build strong core capacity if they are to succeed. More so, if we aspire to solve big, vexatious social problems, we need to adequately equip nonprofits with good talent and tools, as well as capital to cover their true costs.
What personal experience has shown us about the importance of capacity, Bridgespan’s research has illuminated. In the United States, major funders highly favour programme grants at the expense of capacity building. In fact, three-quarters of US foundation giving goes to specific programmes or projects. At the same time, most major US foundations limit spending on indirect costs (which includes capacity building) to 15 percent of a total grant, which is less than half of what nonprofits spend on average.
To that end, Bridgespan worked with the Ford Foundation in the United States to re-frame how funders and grantees think about building strong, resilient organisations.
The same is true in India.
Read the full article about capacity building by Amit Chandra and Prithi Venkatachalam at India Development Review (IDR).