The business case for capacity building
Capacity building is a term associated with interventions geared towards strengthening the functioning of non-profit organisations. Because it should be an integral part of any business’s development plan, both profit and non-profit organisations need to make it a priority.
In the NPO space, capacity building interventions are generally identified and funded by donors who share one or more of the following concerns regarding a non-profit organisation:
- financial stability
- key donor dependency
- efficiency of systems and processes
- poor governance
- a founder leader syndrome and/or
- the need to plan for senior leadership succession.
That being said, capacity building is so much more than a purely funded intervention however. It rather needs to be valued as an integral part of any business’s development plan, whether the company is for profit or not for profit. This is because capacity building is about strategy and, I would argue, synonymous with the principles of regularly reviewing and executing an organisation’s strategy.
Having studied countless definitions and case studies of capacity building interventions, all generally point to the following common themes, each of which resonates with the principles of strategy formulation and execution:
- evaluating and addressing crucial questions relating to purpose and vision
- understanding internal and external needs and opportunities
- understanding the external operating environment, including threats
- reviewing organisational structure to ensure alignment with purpose and strategy
- implementation options
All too often, non-profits do not have the financial means, time or resources to commit to a holistic strategy and capacity building interventions. By the very nature of their work, non-profits are often steeped in the belly and grit of development, with little time for reflection nor the financial means to continuously assess and enhance the health of their organisations. That being said, funders who have developed meaningful partnerships with non-profits have a vested interest to ensure the continuous growth and success of the non-profit sector – and the organisations they are directly involved with. It stands to reason that any investor/shareholder will back an organisation that it identifies with, understands the growth potential of and with which it shares a common vision of success. As such, capacity building within an NPO is often an issue raised external to the organisation.
Capacity building that is imposed by a funder has very little chance of success, however. Without the buy-in of the board in the first instance, as well as senior management, an external advisor who is funded to support an organisation is likely to gain little traction. While funders may see red flags emerging such as a decline in reserves, a shrinking donor base, key staff dependency and poor operating models and systems, if the leadership of the non-profit is unwilling to address these issues then it is not worth investing time or resources.
In this type of instance it is important for a funder to try and understand why an organisation would resist such an intervention. Is it because of a lack of understanding of the risks the organisation is likely to face? Is it a matter of timing or internal changes? Could it be due to possible mismanagement? Could it be as a result of funder fatigue imposing interventions on the non-profit? Is it because of a lack of trust between the senior executive and the board? Once the reason has been identified, one can then attempt to address – and remedy – this.
In instances where a partnership is established between a funder and non-profit who are jointly committed to enhancing the work of the organisation, parties can then define the intended outcome of the capacity building intervention and plan it accordingly. During the actual implementation thereof, key indicators can be tracked throughout. This will ensure that capacity building is not viewed as a once-off event, but rather seen to take time and add long term systemic value. If the intervention is carefully planned, monitored and evaluated on an ongoing basis, the return on this investment will also far outweigh the time and resources spent.
That the role of donors moving beyond providing funding for core operating or programme costs to include interventions that support and build the foundation of non-profit organisations can only be good for the sector. As NPOs continue to work with donors to address inequality and poverty in South Africa, capacity building interventions will arguably become even more important in the long term – ensuring sustainable impact in communities.