Capacity building is something that many experts believe will significantly improve the presently poor outcomes of the nonprofit sector, but everything has its challenges. Below are a few of the challenges associated with Capacity Building implementation.
There is also both historical and current resistance to the use of philanthropic funds for capacity building. Christine Letts, Allen Grossman & William Ryan, in their book High Performance Nonprofit Organizations, assert that in too many cases funders see “investment in the infrastructure of nonprofit organizations as overhead – the connotation is that these are deadweight costs that take money away from program beneficiaries.”
In the capacity-building paper, Finishing the Job, the Edna McConnell Clark Foundation amplifies this statement: “The role of organization builder is not a familiar or comfortable one for many foundations…. Wary of becoming life-support systems for undercapitalized institutions, foundations have tended to concentrate on refining methods and generating ideas more than on funding and building the productivity, versatility and staying-power of the institutions that implement ideas and distribute services.”
In particular, it is noted, funders (including both foundations and government) have been reluctant to pay for core administrative costs – such as for staff training, information technology and strategic planning. This has led to the inefficiency and low effectiveness of the nonprofit sector, often due to the fact that nonprofits are beyond lean and are trying to function with little to no overhead. (A business run this way would be closed in a matter of months, so why would we want to operate our nonprofit sector in a way that doesn’t work?) What donors must understand is that capacity building is about a nonprofit reaping an increased result, NOT about management for its own sake.
Role conflicts in capacity building refers to the unique “three-way relationship” that exists between foundations as funders of capacity building, nonprofits and their communities, and providers or intermediary organizations. There are bound to be some tensions, especially as capacity building programs grow in scope. These can best be handled if roles are defined clearly from the outset (plus providing simple structures by which role conflicts can be discussed and resolved). Important questions that should be asked at the onset of capacity building include:
- Should a capacity audit be required before nonprofits can apply for a grant?
- How much information from a capacity audit should be provided to the foundation? To the donor?
- Will the foundation provide specific capacity building grants, or will it only fund capacity building as a part of a program grant?
- Should capacity building initiatives offered to grantees be mandatory or voluntary? What about capacity building initiatives that directly impact the foundation’s grant or program?
- Should donors be required to pay for the capacity building related to their donations?
- Should a partner Intermediary be funded by an annual grant or by project/hour?
Should nonprofits receiving foundation support be required to be a member of the partner intermediary (if they are a membership organization).
These, and several other issues (direct or indirect), are among the complex matters funders, nonprofits and providers will need to consider and decide upon together.