Capacity building is the term used frequently by foundations and nonprofit leadership to ascertain the ability of an organization to effectively achieve it s mission. This article describes capacity building, and why it is important in addition to offering a starting point for engaging in capacity building.

Definition of Capacity Building

Capacity building is defined as the ability of an organization to achieve their mission in an effective manner. It can also be described as the strategies or actions that an organization takes to ensure that it has the resources needed to succeed. These actions can include: resource development, financial management (diversification of funding sources), organizational learning, leadership development and other activities. In other words, capacity building is any set of actions that an organization takes to improve its ability to perform successful in its chosen area.

The term or concept also relates to the commitment of foundations and other entities to help nonprofit organizations to become high performing entities by supplying information, instruction and guidance.

Importance of Capacity Building to Future Success

Nonprofit organizations occupy an invaluable niche in a community. These entities provide needed social services, education, health care and the arts that improve the well being of the community and on which many people depend. The environment in which nonprofits operate has become increasingly complex and challenging as demand for their services increases while their conventional funding streams become more limited, and new technologies emerge that offer new venues for fundraising or interacting with potential and existing supporters.

Capacity building is important because it encourages the leadership of a nonprofit to evaluate their abilities to perform in a complex environment. For example, is the organization missing potential fundraising opportunities by not having a website with the capacity to solicit and receive donations? Should the organization develop its staff so that they can provide a new service that is complementary to their existing array of services?

In addition, capacity building is important because the evaluation process coupled with the implementation component help ensure organizational success and sustainability.

How to Get Started

Deciding change is needed is the first step. Once the need for change has been agreed upon, board members and management should undertake the following (most commonly done as part of their strategic planning process):

1. Evaluate the environment (external) and organization (internal)

  • The external assessment should include: an evaluation of the competition (what are their strengths, weaknesses), the political environment, funding outlook, trends, and demand for the organization’s services.
  • The internal assessment should include an evaluation of staff (number of and skill sets), the services offered by the agency, financial performance, internal trends (e.g. continuing staff turnover, quality issues, etc),

2. Identify and discuss the strengths, weakness, opportunities and threats facing the organization

  • From there, the leadership should identify and prioritize the actions they need to take in order to address their weakness, shore up their strengths and take advantage of their opportunities.

Capacity building is a long term, ongoing process. According to the report, Effective Capacity Building in NonProfit Organizations prepared by McKinsey and Company, August 2001, as improvements are made in one area of the company, deficits appear in other sectors that require attention. Consequently, capacity building requires commitment and perseverance.