Capacity Is the Key to Effectiveness

Opinion: There is an expectation that institutions and companies have adequate resources to deliver the goods and services society relies on. So why should the Not for Profit sector be different, asks Mae Hong, chair of US-based Grantmakers for Organizational Effectiveness.

Imagine, for a moment, that you need to go to a hospital emergency room for a serious injury. Would you feel confident about the kind of care you were receiving if you knew that the hospital was using an outdated computer system that it received second hand from a local company?

Or that, in an effort to save money, the pharmacy was only permitted to distribute half the recommended medication you need to relieve your pain? Or that the hospital was known to have the lowest salaries in the region for medical assistants and nurses?  

Similarly, would you get on an airplane if you knew the airline company had cut costs on the maintenance of its equipment? Or if the plane barely had enough fuel to reach your destination, but the crew assured you there would be strong tailwinds so you need not worry?

Of course not. We have expectations that the institutions and companies that we trust with our very lives every day must, without question, have the resources and infrastructure to deliver the services and goods we count on. So why is that we expect Not for Profits – organisations that often are serving the most vulnerable people and communities and literally saving lives on a daily basis – to do the hardest work with the fewest resources and the weakest underpinnings?

According to Grantmakers for Effective Organizations (GEO), a national association of foundations dedicated to strengthening the Not for Profit sector (where I have the privilege of serving as board chair), in order to be effective, Not for Profits need sound management, strong governance and a persistent rededication to achieving results.

Capacity refers to the wide range of capabilities, knowledge and resources that Not for Profits need in order to be effective. It is multi-faceted and continually evolving, but most of the literature about the Not for Profit sector identify these core, interrelated elements as the key drivers of Not for Profit health and performance:

• governance and leadership
• mission, vision, and strategy
• program delivery and impact
• strategic relationships
• resource development
• internal operations and management.

A Not for Profit cannot be expected to deliver meaningful results (which every donor wants) unless it has the wherewithal to do so. Capacity building, therefore, is the direct and intentional effort by funders (and anyone else who cares about results) to strengthen Not for Profits’ ability to deliver on their missions. “Capacity building” emerged into widespread use for the Not for Profit sector in the late 1990s / early 2000s. This closely paralleled a major seismic shift in how US foundations operated at the time, moving away from broad, general support for the sector toward more proactive, funder-driven efforts branded under “strategic philanthropy”, “venture philanthropy” or “catalytic philanthropy” etc. – all of which de-emphasised the role of Not for Profits and put foundations at the center of social change efforts. This changed the nature of the relationship between foundations and Not for Profits in ways that are today widely debated. One of the largest consequences of this shift is that Not for Profits no longer have stable, reliable general-operating support.

As funders of all types undergo this evolution, Not for Profits are left to piece together restricted, project-based support for short-term activities, leaving core operating functions underfunded and fragile. As a result, Not for Profits are left vulnerable in critical areas, thus exposing a need for specialised kinds of supports to address specific capacity needs.  

As a result, a growing number of foundations are recognising the need to invest in ways that strengthen their grantees’ capacity in addition to providing support for programs and services. This can take a variety of forms, ranging from targeted grants to build specific organisational skills, such as fundraising, financial management, communications or evaluation, to paying for professional technical assistance for grantees, such as information technology, human resources or facilities planning.

Regardless of the activity or form that capacity building may take, GEO has identified three principles that are key to ensuring that capacity building efforts achieve their intended results for Not for Profits:

• Make it contextual: Every Not for Profit is different and has distinct needs specific to their context. This includes factors such as age and lifecycle of the organisation, budget size, field of service, cultural / ethnic identity and others.
• Make it continuous: Funders need to take a long-view to capacity building. Organisational health and vitality requires constant and ongoing attention. It cannot be episodic or sporadic.
• Make it collective: Capacity building needs to be a shared effort across a wide spectrum of invested parties. This may include multiple levels of leadership within an organisation; working with other funders to coordinate efforts and involving other external actors that have a direct impact on the work of a Not for Profit.

As a sector, philanthropy still has a long way to go in terms of learning how to best support Not for Profits in ways that promote excellence and effectiveness. But we can’t afford not to make this an essential part of every foundation’s grantmaking strategy. Think about this the next time you visit a hospital or ride an airplane.

About the author: Mae Hong is chair of Grantmakers for Organizational Effectiveness, vice president at Rockefeller Philanthropy Advisors and Keynote speaker at Philanthropy Australia’s 2016 Conference.