February 21, 2018

Capacity building at nonprofits: A 3-step guide

An organisation’s ability to create sustainable impact depends on how well it builds institutional capacities. Use this three-step process to help you with the task of building internal capabilities.

5 min read

At the centre of a scalable, high-impact nonprofit is the organisational core, which includes a clear mission and vision, a sound logic model, strong leadership, and related institutional infrastructure with streamlined systems and processes.

However, growth that is driven by programme-focused grants alone doesn’t translate into sustainability or operational effectiveness. Organisations and donors must equally focus on institutional capacities, which are the underpinnings of sustainable impact. This process essentially involves looking within the organisation to identify what needs to be fixed, in what priority and with whose help.

We have a three-step process to help nonprofits manoeuvre this process.

1. Understand existing capabilities and identify gap areas

The first step is to do a diagnostic and identify the areas that need to be addressed. Before the diagnostic, however, it is important to have a well-articulated vision and mission—basically the purpose why the nonprofit exists—and the intended pathway you plan to take to reach your desired goals.

Once you know this, you can assess what it would take to achieve this, both programmatically as well as organisationally (non-programmatically). While the programmatic component is far easier to figure, you may need external support to assess non-programmatic gaps, which could be blind spots in the first place. [quote]You may need external support to assess organisational gaps, which could be blind spots in the first place.[/quote] If your donor has enough time to assist you, they can help in identifying these priority areas.  For instance, we at ATE Foundation, along with our nonprofit partners, have identified that sustainable fundraising is the most compelling requirement for several nonprofits.  Alternatively, there are enough players in the sector today that conduct due diligence to help you identify and prioritise the gaps.

Once you’ve identified the first few functions to focus on, bring in experts in these fields to volunteer their time to help you fix issues related to their areas of expertise.  Again, there are several organisations that you can leverage for this. Toolbox, for instance, brings together people from the corporate world who want to volunteer their time for the non-profit space.  Edelgive does this with own employees, as does Orange Foundation.

Related article: Five ways nonprofits can leverage for-profit talent

Capacity building for nonprofits

The three-step process to approach internal capacity building includes identifying gaps, prioritising action areas and managing stakeholder conversations.

2. Prioritise the areas you will invest in

Identifying and investing in these capabilities is a continous process. However, given that nonprofits are always resource constrained, it is important to prioritise mission-critical gaps rather than attempt to address all components simultaneously. [quote]Look for areas in which a small investment can make a substantive difference to your organisation. [/quote] A good way to do this is to look for areas in which a small investment can make a substantive difference to your organisation and the people you serve. In our experience, focusing on some or all of the following six areas (depending on resources available) is key to building robust organisations that deliver effectively on their impact goals.

Related article: How to become an engaged board member

Board and governance: Nonprofits must have the right kind of board members—people who are passionate, involved, and with the relevant skill sets and networks to help you achieve your stated goals.

Leadership: A strong senior leadership, both at a programme and organisational level, is the bedrock of successful organisations. So, try and get your funders to support your leadership capacity. Equally diffficult is trying to source the right senior talent within your cost structure and trusting them to steer the organisation;  most founders and  boards find ths hard to do. Developing this talent demands continuous commitment from the organisation.

At ATE Foundation, we consistently fund leadership talent through direct budgetary support, as well as sector-level support in the form of four programmes: Dasra’s accelerator and leadership programmes, the Strategic Nonprofit Management-India programme at Ashoka University, and the SPNM (Strategic Perspectives in Nonprofit Management) programme at Harvard itself.

Fundraising: We have seen organisations running budget deficits even at a working capital level. Prudently speaking, an organisation must, at any given point, have more than a quarter’s operating cash balance apart from healthy reserves on its books. [quote]Most donors might not have the financial muscle or the willingness to underwrite a nonprofit’s budgets.[/quote] To be able to do this, it is critical to invest in fundraising.  Most donors might not have the financial muscle or the willingness to underwrite a nonprofit’s budgets; what they can do, though, is help you find and fund good talent who can fundraise for them. The payback period for this is very small—a few months, in fact. A good fundraising executive with the right connections can help nonprofits access much more capital than most donors can ever underwrite.

Communications: It’s important to tell your story well, whether it is to your donors, partners, the people you serve or the public at large.  One way to do this without straining internal resources is to outsource this to individuals who are skilled at this.

Related article: M&E – Whose job is it anyway

Monitoring and evaluation: The continuous collection, use and application of data to make informed and evidence-based decisions is important because it helps you evaluate the efficacy of your programme and course correct as needed. It also serves as a key tool to convince various stakeholders on the effectiveness of your nonprofit, which also helps convince incumbent and new donors to support the full cost of impact.

Systems and processes:  This includes robust technology, MIS, analytics apart from clear organograms,  standard operating procedures across ‘operating’ and ‘business’ functions. The goal is to move this out of people’s heads and into institutional memory to enable growth and knowledge transfer.

3. Have stakeholder conversations

Multiple stakeholders need to be convinced about the true costs of impact and the importance of funding all these costs.

Board: We’ve often seen that most nonprofit boards will not think about the support infrastructure that the leader really needs to realise the full potential and vision of the organisation. If you want the board to push for this with your donors, it is important to convince them first. You need to help them step back and think about making these investments, to get them  to understand what you as the CEO are really good at and what support you need to achieve the desired impact.

Funders: Nonprofits need to learn to ask for core support. It is imperative that you build in the core-funding narrative in routine discussions with your donors if you want to address operational and financial challenges. [quote]Nonprofits need to learn to ask for core support. [/quote] For this, you must have complete clarity about what it costs to achieve the desired impact and then advocate for these costs with the funder and ask them to pay their fair share. It is important for them to understand that stellar programme outreach and desired outcomes cannot be achieved without support for all the relevant components.

Donors find it exciting and self-fulfilling to fund innovation and scale without realising that programme growth is not feasible without the capital needed for consolidation and strengthening before leapfrogging to scale.

Volunteers: As a sector, we don’t leverage this stakeholder group enough. If done well, they can help address your capacity needs through their skills, resources and networks.

Jai Vakeel has over 40 volunteers who are experts across functions such as HR, finance, MIS, PR and technology. They are basically leveraging top talent in the country—experts who don’t have the ability to give their time full time to the social sector but are happy to do it on a project basis.

Partner organisations: With nonprofit collaboration becoming increasingly common to achieve scale or replicability targets, we are seeing pooling of budgets and programme cost sharing.  Most collaboration conversations, however, hit a roadblock because the partner nonprofit is not able to replicate the programme due to budgetary constraints; the anchor nonprofit must then step up and cover costs across the value chain.

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Priyaka Dhingra-Image
Priyaka Dhingra

Priyaka is is currently Head Programme and Executive Committee member at ATE Chandra Foundation, which anchors Archana and Amit Chandra’s social sector initiatives. She has 15 years of experience, of which almost seven years have been in the development sector, including at GiveIndia and Dasra. Priyaka is also a drafting committee member for the country’s Social Stock Exchange (Ministry of Finance). She holds an MBA and has attended executive programmes at Harvard Business School and Said Business School.