Lessons and trends in nonprofit capacity strengthening

What does nonprofit capacity strengthening mean and why is it important? How has it evolved and what are emerging trends in the field?

As part of its Organizational Effectiveness (OE) strategy refresh, the Hewlett Foundation’s Effective Philanthropy Group set out to answer these questions and better understand the current field of nonprofit capacity strengthening. Since 2004, the OE program has offered supplemental funding for current grantees of the foundation to prioritize organizational capacity needs. OE grants can be used to support a range of efforts, such as communications planning, executive transition, and financial capacity, as well as diversity, equity, and inclusion.

The primary purpose of the field scan was to inform our OE strategy refresh; hence this report is not meant to be a comprehensive review of the field of nonprofit capacity strengthening. The authors focused on reviewing recent literature and speaking with a group of 15 interviewees, comprising mostly peer foundations who already invest in grantee capacity strengthening and a select few capacity-building providers. We know that flexible funding and partnerships built on trust are the best ways funders can help nonprofits strengthen capacity, but what are other creative ways to provide support? We sought to learn about funders’ different grantmaking approaches, including what is working well and lessons learned. We also wanted to hear about emerging areas of focus and promising practices for funders.

The study found noteworthy trends and shifts in the field, including the following:

  • A distinction emerged between short-term capacity-building efforts and a longer-term organizational development approach that’s focused on more holistic investments in organizational effectiveness, sustainability, learning, adaptability, well-being, and resilience. Both types of capacity strengthening are important and require different approaches and levels of commitment.
  • There is a recognition of historic biases that have excluded many BIPOC-led nonprofits from capacity-strengthening resources — which is pushing funders to rethink resource allocation and grantmaking practices.
  • We saw an emphasis on shifting toward nonprofit ownership of, and asset-framing models for, organizational assessment.
  • A shift is happening from centering individual organizations to broadening support for networks, coalitions, and movements.

Even the term “capacity-building” has evolved, and a new definition has been adopted by the Grantmakers for Effective Organizations that explicitly names power and communities in the process: “Capacity building is the process of building and strengthening the systems, structures, cultures, skills, resources, and power that organizations need to serve their communities.” This definition reflects the general sentiment we heard from interviewees — that funders need to be more intentional in addressing power sharing and power building in funder-grantee relationships.

While there are a number of promising practices highlighted throughout the report, there are several worth noting:

  • Rethink which nonprofits are benefitting (or not benefitting) from capacity-strengthening supports, and how implicit biases are baked into selection criteria.
  • Provide resources to support nonprofit staff wellness and healing from trauma and burnout, especially in the context of a pandemic and racial uprising.
  • Support place-based and/or affiliation-based peer learning cohorts that are culturally informed and BIPOC-focused or led when relevant

Overall, funding of nonprofit capacity strengthening is vibrant but still relatively small. We need many more funders to increase their support, whether as flexible funds and/or supplemental support for capacity strengthening, so that the sector has access to the resources needed to build and sustain strong, healthy organizations and networks. We also need more investment in the evaluation of capacity strengthening strategies to better understand how funders can continue to adapt and refine their approaches to support nonprofit health, resilience, and sustainability.

We hope this field scan offers some ideas and entryways for funders to prioritize their support of nonprofits’ organizational needs, while also considering ways to counteract the negative impact of implicit biases, power imbalances, and burnout that have afflicted the nonprofit sector for too long.

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