Grantmakers’ Capacity Building FAQs

[Editor's note: GrantCraft's recently published guide Supporting Grantee Capacity: Strengthening Effectiveness Together has generated significant conversation in the field about capacity building, and also added to an increasing body of literature  about the topic. Grantmakers for Effective Organizations is among those with excellent perspective on capacity building with grantees. Together with organizations like GEO, we hope to influence more strategic capacity building from funders.]

At GEO’s earliest conferences, members shared their experiences with capacity building and joked that they were the aliens in philanthropy because these practices were not mainstream. Today one would hardly consider capacity building an alien concept. A 2014 GEO survey found that 77 percent of staffed foundations in the United States provide some type of capacity-building support to grantees, and 27 percent of respondents that support capacity building said they have increased this support in the past three years.

Yet, at the same time, we still hear many questions about capacity building. Earlier this year, we released a new publication that was informed by listening sessions and interviews with grantmakers and nonprofit leaders across the country. In those sessions, we heard many grantmakers say they could use more support in making the case for capacity building within their organizations or to other grantmakers. We also heard some grantmakers say that, even after years of making capacity-building grants, they felt uncertain about how to know whether they are providing the right type of support.

From these conversations, two common questions come up again and again: a) how do I do this work? and b) how do I evaluate it? Here’s our take:

Q: What is the best approach for providing capacity-building support?

In short, there is no such thing as “best practice” when it comes to capacity building. As new publications from GrantCraft and GEO show, capacity building is complex and nuanced, and grantmakers will likely need to approach each engagement differently depending on what they seek to accomplish.

We’ve seen three basic principles that are relevant no matter what your capacity-building support looks like:

1. Make it contextual. A contextual approach to capacity building means designing support that is tailored to meet the specific needs of a grantee and can help the organization address real-time challenges and opportunities.
2. Make it continuous. Grantmakers should consider a long-view approach to building capacity within an organization or across a portfolio because organizational transformations will not happen overnight and the need for attention to capacity never goes away. One-year investments in capacity-building projects are rarely enough to cover the full costs of the change taking place inside an organization.
3. Make it collective. Collective approaches to capacity building can take one of three possible directions:
   1. Focusing on leadership at multiple levels — reaching beyond the executive director to engage a team that is drawn from multiple levels of the organization or across organizations.
   2. Working with other grantmakers — coordinating capacity-building support, thereby streamlining the process and maximizing resources.
   3. Paying attention to the capacity of a set of actors that are vital to the issues — whether that set is bound by a geographic area or an issue area.

Q: How will we know if our capacity-building support is working?

One of the biggest barriers that funders perceive to supporting capacity building is knowing whether the investments are having the desired impact. The following four steps can help grantmakers assess the impact of capacity-building support:

1. Start with baseline information. Organizational assessment tools can provide a useful starting point in identifying and discussing grantee capacity needs and readiness for a capacity-building initiative. Organizational assessments typically require the entire nonprofit leadership team to complete the assessment in order to provide a comprehensive view of how leadership perceives the organization’s strengths and challenges. These tools can be custom-made or off the shelf. A couple of the most widely used products are TCC Group’s Core Capacity Assessment Tool and McKinsey & Company’s Organizational Capacity Assessment Tool.
2. Set goals and clarify expectations. With a baseline understanding of a nonprofit’s capacity strengths and challenges, grantmakers and the nonprofit can work together to set goals for capacity-building support. Grantees must have ownership of the goals or else change is unlikely to happen. At the same time, grantmakers experienced in providing capacity-building support will have helpful knowledge and insights to share.
3. Have honest conversations for maximum learning and sharing. Talking about capacity challenges with funders can feel intimidating to nonprofit leaders. Yet, in order for grantmakers and nonprofits to build effective partnerships for capacity building, the grantmaker has to have a clear understanding of the organization — warts and all. Grantees should never feel like sharing organizational challenges might put them at risk of losing funding.  It is important for the grantmaker to be proactive and intentional about building a strong foundation of trust between grantmaker and grantee.
4. Make evaluation a two-way street. Assessing the impact of capacity-building support is not an exercise of putting grantees under a microscope. Grantmakers should ask for feedback on how well they are supporting the grantee (which requires honest conversation) and take time to reflect on the overall strategy for capacity building. Additionally, grantmakers should periodically assess the overall impact of capacity-building portfolios to assess whether the work is having the desired effect and to identify possible improvements.

Supporting nonprofit capacity well can be a complex and nuanced endeavor, but fortunately there is a growing body of knowledge and experience to guide grantmakers. In addition to resources from GEO and GrantCraft, many grantmakers and technical assistance providers have codified their own learning and experience to help advance the field. For answers to more capacity-building questions, check out the resources from GEO, GrantCraft and others.