Hi everyone, before we tackle today’s fun and exciting topic, a couple of announcements.
First, our administration is stepping up its concerted attacks on immigrants and refugees, preparing for further ICE raids to terrorize families and children. Here are few things you can do in response. Please take some time to do them.
Second, my organization continues to grow, so now we’re hiring an Organizational Learning Coordinator. This is an early-career position for those who love data and evaluation and learning and writing about all the cool stuff RVC and our partners are doing and the impact its having. Please check it out, and pass it along to your networks. Must love Oxford Commas.
Third, I will be going to Vietnam for the next three weeks. I wrote several blog posts in advance, so the blog schedule remains the same. However, since I had to write them quickly, the quality may have been affected. Apologies in advance.
I had written earlier about the Capacity Paradox, where foundations will not invest in an organization unless that organization has strong capacity, which it can’t build strong capacity unless foundations invest in it. It is a terrible Catch-22 that has screwed over many organizations, especially organizations led by marginalized communities. But now, there is another Capacity Paradox, where funders’ hyper focus on capacity building is precisely the thing that prevents capacity from being built.
An example. A while ago, my friend, a new executive director, called me up asking for advice on a $7500 capacity building grant he had just received. “Can I hire you to do some strategic planning work?” he asked. I told him I would help him for free so he could use the funds on paying himself, as I knew he had been working full-time but getting paid a fraction of that and was also struggling to find funds for his programs. “That would be a lifesaver,” he said, “But the grant requires that we pay a consultant.” An unrestricted grant would have accomplished the same capacity building goal—the formation of a strategic plan—but also help to strengthen the organization and increased his team’s morale. Instead, because it was restricted, he was scrambling trying to spend it the way a foundation thought he should.
This example above illustrates a fundamental problem with the way funders tend to approach capacity building. I’m going to call it “Philanthropic Benevolent Patriarchy,” the belief many funders and donors have that they know what’s best for an organization, though they see less than 1% of its work and operations. This belief has actually been really destructive to organizations, especially when so many board trustees come from outside the sector and have no understanding of how nonprofits run, yet they get to make decisions on how nonprofits should spend their money to strengthen their infrastructure.
How has this been working out? Not so well. Restricted funds, even if they are for the purpose of capacity building, are one of the biggest barriers toward capacity being built. If funders actually want to help organizations strengthen their infrastructure, it’s simple: stop providing restricted capacity building grants and just give Multi-Year General Operating Dollars—MYGOD!—and get out of the way.
Here’s why giving MYGOD is the most effective way to build organizational capacity:
It pays for people, the most essential element for organizational success: As we mention over and over again, it is people who do the work. Yet funders and donors continue to harbor disdain for paying for staff salaries and wages, so they fund the stuff around it. It’s like wanting to build a house and paying for everything except construction workers. The insistence on funding strategic plans, workshops, software, equipment and other things associated with capacity building continues to miss the point: NONE of these things work without humans to implement them. Yes, there are many important and effective volunteer-led organizations (and they need MYGOD too), but most of us still rely on paid staff to carry out our work. Multi-year unrestricted dollars pay for wages, benefits, professional development, etc., and allows for stable staffing year over year, and stable staffing leads to strong organizations.
It provides stability, a necessary component of growth: Having stable funding allows organizations to plan for the long-term, including how to strengthen their capacity deliberately and strategically. Organizations cannot build capacity if they are constantly freaking out about where their funds are coming from, whether they can continue their programs and services. One-year grants create a piecemeal approach to both programmatic and infrastructure growth, kind of like adding random new rooms to a house at unpredictable intervals, without any sort of blueprint.
It lets organizations focus on what they’re good at: Having stable funds that can be used for whatever is needed means organizations can focus on what they’re good at, their key programs and services, and outsource things that may not make sense for them, including many tasks that some funders—because of Benevolent Patriarchy—believe are relevant when they’re just distracting. When organizations are allowed to focus on what they’re good at, they tend to excel, and this naturally enables them to attract funding and grow.
It allows for flexibility to adapt to changing circumstances and opportunities: Capacity building is often not linear. There are always things that come up that force organizations to change directions or strategies in order to grow. Unfortunately, many funders treat capacity building as a linear, predictable thing. “In six months, we will have a strategic plan. In 12 months, we will hire our first Development Director,” etc. Combine that with the excessively long time that it takes for most funders to make decisions means that organizations’ predicted capacity building strategies may no longer make sense when the grant is finally disbursed. Having flexibility allows orgs to adapt as situations change, which is critical for growth.
It encourages strategic risk-taking: One of the biggest failures of our sector, and one of the differences between nonprofits and for-profits, is that we are rewarded for being risk-averse. Multi-year unrestricted grants, combined with trust from funders, encourage organizations to try things out. This ability to experiment leads to better programs, and better programs again leads to more funding, and more funding correlates with stronger infrastructure.
It is more culturally responsive: Many capacity building strategies that are taken to be best practices by funders who give restricted grants do not work for organizations led by and serving marginalized communities. MYGOD and the flexibility it provides lets these organizations implement capacity building strategies that make sense for them, not what funders think would make sense based on their limited understanding of what organizations and communities need.
As the problems facing our communities worsen, with people being terrorized by ICE raids, among other atrocities and human rights violations, we need our nonprofits to be strong and effective so they can do their work. Funders who care about capacity building, I am thankful that you exist, because working for a capacity building organization, I know how hard it is to get people to prioritize this esoteric, difficult-to-explain work that we do. Capacity building is not as compelling as more heart-tugging missions, but you understand that it is important, and you invest in it. So I am very thankful.
But we need acknowledge what’s working and what’s not. It may seem counter-intuitive, but the best way to build an organization’s capacity is to stop giving grants for capacity building and instead provide unrestricted funds over several years, especially to organizations led by and serving marginalized communities, and trust that organization to know what’s best for its operations and programs. And convince other funders to do the same.
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