3 reasons grantmakers are investing in capacity building

Nonprofit organizations have historically relied heavily on grants that targeted specific programs to fund their work. However, these grants may not address the root problem many nonprofits face—sustainable funding. While programmatic grants help target key challenges within a community, they can come with restrictions and requirements that limit the number of organizations that can benefit from them. Additionally, grantmakers can only support so many nonprofits, often the more prominent ones within their community.

This is why progressive grantmakers are investing in capacity-building grants as one of their key community support strategies. According to the International Finance Corporation (IFC), “effective capacity building benefits both the company and local stakeholders by generating inclusive processes that strengthen trust and build commitment and good relationships.”

Investing in capacity building allows you to become more than a grantmaker. You’ll be an advocate focused on improving nonprofit infrastructure, investing in nonprofit leadership, and ultimately supporting the long-term success of organizations in your community. Let’s dig a little deeper into three reasons to invest in capacity building.

1. Investing in capacity building is more equitable.  

Traditional grantmaking is often a one-time, restricted process that can be challenging for nonprofits to participate in. Due to requirements written into grant applications and stipulations to keep funding, many organizations do not have the resources or qualifications to apply for programmatic grants.

For example, many programmatic grants require nonprofits to demonstrate the impact of the grant. This can be a barrier for smaller nonprofits, which may not have the level of data maturity that other, larger nonprofits have established. By centering capacity building in their efforts, grantmakers can promote inclusivity and support smaller nonprofits that are underserved by the traditional programmatic grant system.

2. Investing in capacity-building technology creates long-lasting infrastructure and sustainability.

According to a TechSoup survey of almost 12,000 nonprofit organizations, 68% said cost is a barrier to implementing new technology and 53% said training and staffing to use the tools is their second biggest concern. Despite these concerns, many grantmakers are not investing in technology to support their nonprofit community. According to the Chronicle of Philanthropy, there are two possible reasons for this lack of funding:

• When developing grant programs and choosing grantees, IT leaders, and program officers are not working together to identify the technology needs of their nonprofit community. In turn, they may not develop the most effective program to address grantee needs.  
• There is not enough collaboration within the nonprofit tech space, leading to many different solutions that solve different problems facing nonprofit communities.

Providing nonprofits with the funds to invest in capacity-building technology such as Bonterra’s Guided Fundraising solution (formerly Network for Good) allows nonprofits to manage donor information and relationships, raise more money with easy-to-use fundraising tools, and even host virtual events and auctions. The bottom line is that enabling nonprofits in your community to implement this type of technology is an investment in their longevity, as these systems allow them to work more efficiently and effectively.

3. Investing in nonprofit leadership creates stronger nonprofit organizations.

By investing in nonprofit leaders such as board members and CEOs, grantmakers have the opportunity to learn more about who they are, the purposes of their nonprofits, and the challenges facing their constituents. This is also a great opportunity to evaluate the leaders you are investing in. Ask yourself:

• Are they representative of the communities you wish to serve?
• Are you empowering the next generation by supporting these leaders?
• How could you better support their nonprofit?

Answering these questions will allow you to better understand your nonprofit partners and brainstorm new ways to help them with their capacity-building efforts. Furthermore, you’ll have a greater understanding of the nonprofit’s constituents, allowing you to make choices that create a more widespread impact on the nonprofit’s community.

Building capacity and trust

It’s important to listen to your community, learn more about the challenges they are facing, and take action to help alleviate their struggles. Through the capacity-building process, grantmakers can establish relationships with organizations in their community and learn more about the hearts and minds behind these causes. This helps them build trust, which is key to impactful capacity-building programs and measurable impact.