Before Making Capacity-Building Grants

Define your capacity-building theory of change. Being able to identify the primary purpose of your capacity building and then translating that into a theory of change is key to assessment.

Most foundations lean in one of two directions: one where organizational effectiveness is the overarching aim, and the other that focuses on the end result of increased field, systems, or movement capacity.

Think about which direction the capacity-building efforts you want to assess lean. For example:

  • If your foundation is aiming to eradicate homelessness, is building capacity — of nonprofits and beyond — a means to that end or the desired end itself?
  • Or does your foundation view its work as driving change through the agency of others, primarily nonprofits, and consider boosting organizational and nonprofit sector-wide capacity the desired end?
  • Or maybe within your foundation you have different theories depending on the different types of capacity that need to be built, from compliance-type capacities, like legal and financial regulatory requirements, to overall organizational development capacities, such as strategic planning and organizational assessment.

It’s optimal to first develop your capacitybuilding theory of change and then design different investment approaches that support it, such as for individual grants, capacity-building workshops, or peer learning networks. Starting with theory of change just makes evaluation that much easier. If you’ve already got capacitybuilding approaches in place, make sure you take time out to map these approaches to your theory of change before you embark on assessment. This will help you determine the appropriate evaluation frame and assessment methods to employ, which ensures your foundation’s resources are spent wisely. As one interviewee put it, “I think that assessment on the organizational level is important for a funder that’s looking to improve the individual organization, but less valuable for funders who are looking at moving a field.” Don’t waste time and money by skipping this important step.

Manage your foundation expectations — don’t expect grantees to demonstrate meta-impact for micro-investments. It’s great to have that overarching capacity-building theory of change so you can make sure you’re testing it. But we heard more than once, “Grantmakers need to be realistic about what their capacitybuilding money can do.” We also heard frustration about how funders sometimes expect grantees to demonstrate outcomes beyond what is realistic based on the scope, type, and funding level of individual grants. Grantmakers may want every investment to connect back to their theory of change, but, as one funder said, “that should be on the funder, not the grantee, to figure out.”

That doesn’t mean funders can’t expect big things to happen. Sometimes small grants do yield big outcomes. We know important changes can result even with smaller capacitybuilding investments. Support grantees in setting reasonable goals and outcomes given the capacity to be built, and given what your foundation will support. For example, if you give a $25,000 one-year grant to fund a consultant that will work with a nonprofit association on a communications plan, recognize the process and potential time involved. It may take a year just to find the right consultant to get started, much less finish a plan. Making sure both you and the grantee are clear on the steps and have outlined a realistic timeline for this capacitybuilding endeavor will help you set better grant goals and outcomes and determine a clearer evaluation approach.

Consider the benefits and risks of using grant application and reporting processes to assess grantee capacity-building investments. When we asked funders, “How do you assess what difference you’ve made on capacity building?” the most common answer was, “Through our grant application and reporting processes.”

It makes a lot of sense for foundations to ask due diligence questions or gather data before giving grants so that they can benchmark the level of capacity grantees have before they receive capacity-building funding. It’s also understandable that funders want grantees to explain in grant reports how their operational and programmatic capacity has evolved as a result of their grants. There are benefits to leveraging existing processes in this way, including that it can yield stories of impact, and help uncover grantee challenges that could be addressed more systematically as a cohort. There are also risks to this approach, including burdening grantees with a lot of unnecessary paperwork, and pulling grantee time to answer questions or provide data that a funder doesn’t have the capacity to act on anyway.

For foundations multi-purposing application and reporting processes to assess grantee capacity building, answering the following questions internally may help you do so in the most constructive way:

  • What’s the right balance of data that our foundation will use to assess capacity built versus paperwork we will never read? What data do we really need?
  • Is our approach consistent with how we believe in engaging grantees on capacity building?
  • How do we make sure we’re funding those most in need of our capacity-building support and not just those that can jump through our application hoops and write good reports?
  • How do we get the information we need in a way that sends the right message to grantees and doesn’t unduly tax grantee capacity at the very moment we are trying to strengthen it?

Takeaways are critical, bite-sized resources either excerpted from our guides or written by Candid Learning for Funders using the guide's research data or themes post-publication. Attribution is given if the takeaway is a quotation.

This takeaway was derived from Supporting Grantee Capacity.