Sustaining Nonprofit Performance: The Case for Capacity Building and the Evidence to Support It

Chapter 5. Improving the Odds of Success

Despite its potential impact on organizational effectiveness , capacity building is far from automatic or easy. Roughly a quarter of the 318 efforts chronicled in this book were either somewhat successful or less, two-fifths of the survey respondents said their organization’s effort taught them that change is very stressful for their staff, and more than half said they learned that change is more difficult to achieve than expected. Some of these complaints are embedded in the basic rules of the sector, rules that Clara Miller of the Nonprofit Finance Fund says create a shadow universe of unintended consequences in which surpluses are not surpluses at all, but liabilities against future funding, and in which infrastructure is a sign of weakness, not strength. Consider the rules governing investment in infrastructure. As Miller argues, “The nonprofit rules of business largely prohibit investment needed to increase efficiency as growth occurs; third parties paying for a service prohibit or put limits on spending for anything but ‘direct program,’ not realizing that there are costs of growing in this highly regulated business.”1 Some donors simply pretend that administrative costs do not exist, while others imagine that capacity is somehow created by magic: I grow, therefore I think. Improving the Odds of Success 123 5 These kinds of restrictions will not melt away with hope, of course. They require collective action and advocacy across the sector. Just as businesses must spend money to make money, nonprofits must build capacity to have capacity. “If you look around, you can see how we’ve changed,” said the head of a Baltimore arts organization when asked how capacity building affected her organization. “Our budget has doubled. Our staff has doubled. Our square feet have doubled. Our programs in the community have, God knows, quadrupled. Now I don’t know if it is going to stay that way. We are getting ready to put up another building, and it has been hard to raise the money to do that. You can see that we don’t have a big organizational surplus. Plus I have this gifted, wonderful, marvelous board chair who tells me he is done in 2005.” As this short chapter suggests, there are ways to improve the odds that organizations like this will not only survive but thrive. Doing so requires action at several levels: inside individual nonprofits, across the sector’s capacity-building infrastructure, and among the collected parties who care about the sector as a whole. Strategies for Success Every research project has its limitations, not the least of which is the initial choice of methodology. This assessment is no different. In an ideal world, once again, the survey sample would have been much bigger, the research would have begun well before each organization started its improvement effort, and the analysis would have included objective and subjective measures of impact, not to mention site visits to validate the findings. The question is not whether the research underpinning this report could have been more robust, but whether the evidence is sufficient to make the case for capacity building. I believe the answer is yes. The evidence clearly suggests that capacity building increases organizational capacity, which in turn influences organizational effectiveness, which in turn influences program performance, which in turn may have some impact on public confidence. Even if confidence does not rise with success , it most certainly declines with failure. Much of this evidence is based on perceptions, which can and do reflect self-interest. But even given the appropriate caveats about selfreporting , the evidence is too strong to discount. Except for the allure of leadership as the great cure-all for what ails nonprofits, the relationships 124 IMPROVING THE ODDS OF SUCCESS between capacity building and organizational capacity are almost exactly where one would expect them to be, given the prevailing wisdom about how strategic planning, media relations, reorganization, new programs , and so forth affect organizational outputs. In turn, the relationships between these organizational outputs and the two broad measures of organizational effectiveness (organizational management and program impacts) are almost exactly where one would expect. And the relationships between these organizational outcomes and overall performance are strong. Assuming that the chain holds, the question is what might be done to increase the odds that organizations will succeed. This book suggests three broad answers, the first dealing with improving the odds of success for particularly vulnerable organizations, the second with strengthening the nonprofit...