Redefining Capacity Building
| Posted in Management on Mar 25, 2011 by |
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Capacity building has for a long time meant different things to different practitioners. For the community organizer, it means teaching low-income leaders the skills they need to successfully build a sustainable organization around their mission: budgeting, governance, accounting, volunteer and staff development and training. For established nonprofits and their professional staffs it often refers to discrete projects like strategic planning, strategic communications, management systems (HR), program evaluation or development plans. For advocates of social entrepreneurship, it means helping new and existing agencies develop innovative funding streams through earned income and social enterprise: marketing, sales, supply chain management and accounting.
Common to them all, however, is the pursuit of sustainability.
Recently, academics and nonprofit practitioners have looked at organizations that are achieving the promise of large-scale change and at outcomes for those agencies utilizing the traditional capacity building paradigm. As a result, capacity building is being redefined. Rather than teaching the grassroots leader, social worker or executive director how to be better at accounting, payroll, benefits administration, etc., this new paradigm espouses the belief that organizations, philanthropists and society are better served when we seek to take off the shoulders of the nonprofit professional all of those things not directly related to their core social programs and mission – and instead, provide them with best-in-class partners to achieve better results. In turn, we also need to promote ways for professionals to develop and share best practices across mission spaces. And we have to engage community leaders in conversations to redefine the metrics of nonprofit effectiveness and the framework for funding our missions.
For organizations engaged in capital campaigns, the question to be asked is not, “how will this campaign help us keep doing more of what we have always done” but rather, “how do we use this opportunity to adopt better, more efficient and effective business models to achieve the same and better results.” How does this facility (capital investment) improve our ability to achieve our mission? How can we leverage this investment to sustain our programs? What administrative and infrastructure changes can we build into (or out of) the facility to make us more capable of achieving our goals? What will it take to stay ahead of the curve so the processes, systems and structure upon which our programs are built do not become obsolete?
Let’s consider how redefining capacity building can help us answer those questions.
Capital campaigns take a tremendous amount of philanthropic dollars out of circulation –tying them up in buildings and endowments. What if those investments could generate additional cash flow within the sector?
Buildings are tangible assets. This asset can be sold, freeing the organization from the responsibilities of owner and landlord. That sale can also pay down debt or even create an operating reserve. Buildings can be used as collateral to leverage loans and improve cash flow. They can be sublet or even designed from the outset to house other organizations with complementary missions.
Endowments grow because they are invested. Nonprofits tend to be conservative in their investments seeking steady returns, especially in this economic climate. Likewise, organizations seek to diversify their portfolio, mitigating risk. What if 5% of an organization’s reserves where used to provide loans – ideally patient capital – to socially responsible opportunities in our community?
That might be an investment in the agency’s own social enterprise or in an enterprise being developed by another nonprofit. They could fund start-ups generated from their own research, innovation and evidence-based practices. Or they might invest in their own constituents through micro-loans to individuals. In all cases, the expectation would be that the loans would be repaid with the principal and interest reinvested in the lending organization. Philanthropic capital is stewarded for its intended purpose and further leveraged to create dynamic change in our community.
The other investments we need to look at are those we make in our administrative services. Traditionally, a nonprofit’s effectiveness has been judged largely on its ability to minimize overhead (administrative and fundraising expenses) and maximize program investment. Consequently, many organizations strive to provide services to their constituents – achieve their mission and purpose for existing – with little to no investment in professional administrative services such as human resource management, accounting and information technology services.
This paradigm results in a less efficient and effective use of philanthropic resources – both money and personnel. In turn, this diminishes their capacity to serve their clients and jeopardizes their stewardship of contributed revenue. For many nonprofits, outsourcing core administrative functions provides the opportunity to access the highest quality services at the lowest possible cost. Outsourcing creates economies of competency and scale that save organizations time and, more often than not money. It also reduces redundancies thereby improving effectiveness and efficiency all of which has the potential to improve program outcomes.
Why does each organization need to have its own servers? What might cloud computing offer us in terms of flexibility and cost savings? What investments in program evaluation (staff and technology) might we be able to share with organizations with similar missions? Do pro bono accounting (legal, IT, etc.) services help or hurt organizations that eventually have to absorb the market-rate cost of those services when free is no longer a pricing option? What are the real costs of maintaining a facility? What risks does the organization face related to its hiring practices or the manner in which it delivers services?
By properly resourcing administrative decisions we strengthen our capacity to achieve our missions. The status-quo perpetuates the myth that mission success is independent from sound business practices and that nonprofits are not in fact businesses with fiscal stewardship and service delivery obligations. Capital campaigns – even more so than regular budgeting and strategic planning exercises – offer organizations the latitude to redefine success for the entire organization, not just programs, and to rethink their role and obligation to the larger nonprofit community. Informed decisions based on enlightened self-interest have the power to transform our world; in fact, it’s what always has.
Chris Miller is Chief Executive Officer and Christy Maxfield, CFRE is Vice President at the St. Louis based Mission Center™, L3C, a hybrid, for-profit social enterprise. Contact Chris or Christy at missioncenterl3c.com .
Tags:
Capacity Building Sustainability Strategic Planning Capital Campaign Nonprofit The Mission Center L3C
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