Chairman’s Corner: November 2002

Capacity is Not a Luxury

by Mario Morino, Co-founder of VPP

In the midst of a continuing economic downturn and severe budget pressures at all levels of government, we at VPP continue to be concerned about the constrained supply of funding for nonprofit organizations at a time of rising demand for core safety-net services. We are concerned not only about the diminished flow of dollars into the sector; we are also concerned that the available funding is not being invested as wisely as it could be.

Of course, there are many organizations that desperately need quick infusions of cash to keep the doors open and to enable them to continue providing food, shelter, health care, or other services to the most vulnerable members of our communities. And yet we at VPP believe that there has never been a more important time for funders to get serious about stepping forward to direct a much greater share of their funding, as well as their leverage in the community, to help build the organizational capacity of their grantees. It is our belief that the only way we can help organizations to absorb today’s tough economic blows is by investing substantially in capacity, providing passionate, committed leaders with the resources and support they need to increase the impact of their programs and strengthen their organizations.

We at VPP focus the majority of our funding and time in six key areas: helping nonprofit leaders build strong management teams, create effective and engaged boards, gain clarity of mission and goals, define sustainable economic models with diverse funding streams, improve products and services, and create a culture of performance tied to concrete social outcomes. If these core issues are not addressed, not much else matters.

It was gratifying for us to see that the need for focused support for nonprofit capacity building was a recurring theme last week at the national Independent Sector (IS) conference in Cleveland. One speaker, Gary Yates, president and CEO of the California Wellness Foundation, went so far as to challenge grantmakers to dedicate as much as 50 percent of all grant dollars to core operating support. IS President Sara Melendez challenged corporate and foundation funders to make capacity building a priority over infatuation with exciting new programs. Despite this high-level discussion of the importance of capacity building, we know that we still have a long way to go before the commitment among funders reaches a critical mass. And even when individual funders make an investment in capacity building, they often underfund the opportunity.

We simply have to acknowledge that helping organizations take steps to really strengthen themselves and grow is a challenging and very costly process. And yet, we don’t believe that there is any other choice. The nonprofit sector is at a critical juncture, a potential tipping point. If both public and private funders are willing to step up to the plate in a much larger way to seriously and strategically support capacity building and leadership development, we could begin to get beyond a short-term triage mentality and help nonprofit leaders build to last. This will require grantmakers and grantees alike to speak with a louder, more unified voice when federal, state, and local funding decisions are being made. It may also mean that foundations should distribute annually more than the relatively small percentage of their endowments (five percent) that they are obligated to distribute by law. And it certainly demands that our society introduce new and creative funding instruments to benefit the nonprofit sector.

Just as we strengthen ourselves as a country to fight terrorism, we must help the nonprofit organizations working day in and day out on the frontlines of our communities to strengthen themselves so they can more effectively confront an enemy already firmly entrenched in our homeland: a poverty that is robbing young children of their chance to thrive and sapping our nation of its true human potential.