Welcome to this series of mini courses. We hope to give individual donors a quick lay-of-the-land on topics related to providing capacity-building support to nonprofits. Each course can be completed within 5-7 minutes. The entire series can be completed in under an hour. More experienced funders can gain useful information from these mini courses: Considerations for Mitigating Risk, Strategies for Fueling Nonprofits, and the article: “Why Nonprofits Need Capacity Support.” Let’s get started!
This series encourages reflection on one common belief many donors share: The more money that goes to programs, the better. While Charity Navigator and other similar sites rate nonprofits partly on their program/cost ratio, this is by no means an agreed-upon standard. Many philanthropy support organizations, academia, and thought leaders advocate for providing nonprofits with increased capacity support. For some institutional funders, helping nonprofits grow and achieve significantly greater impact over time is thought of as practicing smart philanthropy. Other funders believe in providing capacity support but do not know how to do so efficiently and effectively. Then some do not believe in providing support to help such organizations grow at all. They may think that there are too many nonprofits, that needing capacity support is a sign of poor management, or nonprofits should do more to earn an income. (We will address some of these perspectives later).
Many institutional and government granting agencies are familiar with research and articles on what is called “the nonprofit starvation cycle.” They understand that indirect costs need to be accounted for when funding nonprofits to run programs. However surveyed nonprofit employees reported indirect costs being between 21-84%, which is far above the typical 15% given.
It is understandable that you may simply want to see your funding go to accomplishing the greatest good. To achieve that end, you may want to know how many students will receive afterschool tutoring, how many malaria nets will be provided, or how many children will receive medical care. The upside to this kind of approach is that it is measurable, can give immediate satisfaction, and be improved on as nonprofits learn better ways to deliver services. However, simply providing program support rarely enables nonprofits to grow so they can provide many more afterschool tutors, malaria nets, or medical treatments over time.
A growing percentage of foundations focus on capacity building, and a small percentage do as a key strategy for achieving impact. In successful circumstances, these growth-focused grants dramatically improve the entire trajectory of a nonprofit organization. However, there are no silver bullets – risks can be mitigated but not eliminated – outcomes may be apparent but not demonstratable through rigorous research. (The topic of risk mitigation is covered later).
There is also the question about donated money being misused. You have legitimate reasons to be concerned about scams and inefficient uses of funding. At the same time, some nonprofits use their resources quite efficiently through its hardworking and often underpaid staff. Therefore, the challenge for people like yourself will hopefully be less about whether to help fuel nonprofits and more about how to do so effectively. We believe this series of mini courses will be helpful. Fortunately, there are a plethora of online resources available. There are also a plethora of philanthropic advisors who can help guide your decision-making process.
Almost every law, accounting, and medical firm invest in growing their businesses. For one thing, they don’t hesitate with providing assistants for their high-performing professionals. However, many grantors and private donors do not apply this business logic. While it is beyond the scope of these mini tutorials to analyze and compare opposing trends between for-profits and nonprofits, we encourage you to explore the potential benefits of applying successful for-profit business strategies in your efforts to make good decisions as a funder.
Welcome to this series of mini courses. We hope to give individual donors a quick lay-of-the-land
1. Program Funding: This type of funding is given to cover the costs of running programs, which
Many leaders in philanthropy support organizations (PSOs) believe that nonprofits could achieve a considerably greater impact