In recent years, terms such as systems, leadership, theory of change, and organisational development have become common in the development sector. As grassroots organisations grapple with these concepts and their importance, many still struggle to find funding for their work. Bidyut Mohanty of SPREAD, Odisha, explains it this way. “Funding today is more competitive, results oriented, project driven, and compliance heavy than ever before. Small organisations spend most of their time chasing the next grant. Over time, they have little time and resources to invest in critical organisational needs, including team development, leadership, systems, finance, technology, and governance.”
The absence of investment in these areas eventually weakens an organisation’s capacity and long-term impact. There is a need to invest in institutional development as much as in community development.
Can grassroots organisations discuss organisational development with funders?
Conversations with several grassroots organisations suggest that such discussions with funders often do not lead to immediate outcomes. Even so, raising these issues remains important.
Abhay, Director of GSVS in Ajmer, Rajasthan, says that funding patterns have changed over the years. “Both funders and organisations have become more professional. Typically, organisations can use only 10 to 20 percent of a project budget for institutional costs, such as human resources. At the same time, funders have become more deeply involved in projects. This leaves less room for organisations to discuss their own realities and experiences. To make your case today, you need strong evidence.”
Kailash, Founder of Jatan, Udaipur, makes a similar point. He adds that most project proposals now follow fixed funding formats, leaving very little room for organisational development or capacity-building costs. “But conversations are where change begins,” he says.
How can organisations start this conversation with funders?
1. Be clear about what you need
Kavita and Taruna from Atma, an organisation working on capacity building for grassroots organisations, explain that many organisations struggle to clearly articulate what they need. Saying “we need training” is not enough. Funders want to know what organisational gap the training will address, and how it will improve programme outcomes.
Funders want to see that an organisation is willing to invest time and effort in learning.
Linking capacity-building needs to long-term goals can strengthen the case. For example, if an organisation plans to diversify its funding over the next two years, it helps to explain why strengthening fundraising, communications, or resource mobilisation matters for that goal.
Organisations should also separate perceived needs from actual needs. An organisation may believe it needs new technology, when the real problem lies in data management, financial systems, or project management. Identifying core underlying needs builds credibility.
Finally, demonstrating commitment also helps make the case. Funders want to see that an organisation is willing to invest time and effort in learning, adopting new processes, and implementing change. This matters as much as seeking financial support.
2. Understand your funder
Not every funder is open to supporting organisational development, so identifying the right opportunities matters. Abhay explains that institutional development funding is never easy to secure. He suggests organisations first understand their funder. CSR funding usually offers less flexibility because its formats are fixed. In his experience, international funders often allow more room for conversations about organisational development. He is also seeing local funders become more receptive.
Kailash adds that organisations often include certain organisational development costs within the capacity-building budget already available in a project, while keeping the funder informed. In one instance, a funder even agreed to have Jatan’s board members participate in an institutional training programme. Once there is mutual understanding, he says, solutions become possible.
Kavita and Taruna further note that funders who have worked with an organisation over time are generally more willing to invest in capacity building than new funders. Trust is the greatest asset in these conversations.
3. Show that organisational development is integral to programme success
Organisations often present organisational development as an ‘extra’ requirement, while they tend to treat programme funding as the ‘real’ work. This framing weakens the conversation on organisational development from the outset. Funders are unlikely to treat capacity building as a core priority unless organisations do so themselves.
Where possible, organisations can build institutional development into their programme budgets. Even if a funder is not ready to support a comprehensive organisational development initiative, organisations can begin with a single area, such as monitoring and evaluation, financial management, or leadership development. Documenting these results helps show how the investments strengthen programme quality, effectiveness, and long-term impact.
4. Use the Theory of Change to make your case
Most funders now ask organisations to include a Theory of Change in their project proposals. Kailash believes this is one of the strongest opportunities to justify investment in organisational development. He explains that funders increasingly ask for a Theory of Change. While the terminology may have changed over the years, he says, the purpose remains the same. Organisations can use this section to explain that achieving social change also depends on their own capacity. Without trained staff, strong leadership, and effective institutional processes, they are unlikely to deliver the outcomes they propose.
He adds that organisations often limit their Theory of Change to describing problems and solutions. In doing so, they overlook an equally important question. Does the organisation itself have the capacity to deliver that change?
5. Strengthen organisational systems before approaching funders
Many funders prefer to work with organisations that already have strong systems and internal processes. Newer and smaller organisations often struggle to access the support they need to reach that stage.
Funders are more likely to invest in organisations that have already shown programme outcomes.
Abhay shares that his organisation’s policy documents clearly state that it provides social security benefits, such as provident fund, to staff. When these issues come up during project discussions, these existing policies strengthen the organisation’s credibility with funders.
Funders are also more likely to invest in organisations that have already shown programme outcomes. Capacity-building investments then appear less risky, and more like opportunities to accelerate an organisation’s growth. Field visits can give funders a firsthand understanding of an organisation’s work. When organisations have documented the outcomes of previous capacity-building investments, even on a small scale, they are better placed to make the case for further support.
When should you talk to funders?
There is no perfect time to start this conversation, either before or after receiving funding. The right time is whenever an opportunity arises. Someone has to initiate the conversation, and that responsibility often falls on the organisation.
Both Kailash and Bidyut note that many organisations never discuss these issues with funders. The first step is simply to start the conversation.
Before receiving a grant, conversations should be exploratory. This is the time to understand how the funder views capacity building and organisational development, and what kind of support they may be willing to provide. Organisations can introduce their broader needs and long-term goals without going into excessive detail.
After receiving a grant, once a partnership is established and the funder understands the organisation better, discussions around capacity building can become more open and honest. This is the ideal stage to jointly assess organisational needs and readiness, and to develop a concrete capacity-building plan.
Bidyut sums it up this way. “We often talk about strengthening projects, but projects don’t become stronger on their own. It’s strong organisations that make good programmes possible. If we don’t invest in making organisations resilient, programme quality will eventually suffer.”
There is no universal formula for convincing funders to invest in organisational development. Every organisation, every funder, and every partnership is different. When organisations can clearly articulate their needs, and funders recognise those needs as essential to programme quality, accountability, and long-term impact, the conversation changes. It moves beyond requesting additional budgets, and becomes a conversation about investing in stronger organisations and more meaningful social change.There is no universal formula for convincing funders to invest in organisational development. Every organisation, every funder, and every partnership is different. When organisations can clearly articulate their needs, and funders recognise those needs as essential to programme quality, accountability, and long-term impact, the conversation changes. It moves beyond requesting additional budgets, and becomes a conversation about investing in stronger organisations and more meaningful social change.
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Know more
- Read more about the funding gap between funders and nonprofits on organisational development costs in India.
- Learn how one nonprofit reframed its language and systems to get funders to cover its core costs.
