From funding programs to building organizations: A CSR guide to nonprofit capacity building

Corporate giving has traditionally focused on a fairly straightforward question: What programs should we fund? A company might support a food bank's meal program, fund an after-school initiative or provide a grant for a community health project. That funding matters. Programs need resources to operate, and nonprofits need companies willing to invest in their work.

But there is another question worth asking: What if companies helped strengthen the nonprofit itself, not just the individual programs it runs?

That is the basic idea behind nonprofit capacity building, an approach to corporate social responsibility (CSR) and philanthropy that helps nonprofit organizations develop the skills, systems, people and resources they need to become more effective over time.

The National Council of Nonprofits defines capacity building as "an investment in the effectiveness and future sustainability of a nonprofit." In other words, instead of only funding what a nonprofit does today, capacity building helps the organization become better equipped to deliver its mission tomorrow.

What is nonprofit capacity building?

Capacity building sounds complicated, but the idea is actually pretty simple. Every nonprofit has two sides to its work. There is the mission work people see: providing meals, mentoring students, protecting the environment, supporting families, rescuing animals or advocating for a cause. Then there is everything required to make that work possible: leadership, fundraising, marketing, technology, financial management, staff development, data, strategy and internal systems.

Capacity building invests in that second category. Examples include developing a communications strategy, improving volunteer recruitment, planning for leadership succession, updating technology and improving the way an organization measures outcomes.

The specific need will be different for every organization. A small nonprofit might need help developing its first real fundraising strategy. Another might have outgrown its technology. A growing organization might need stronger management systems, while an established nonprofit may need to rethink its marketing or develop its next generation of leaders. The common thread is that the investment makes the organization itself stronger.

How is capacity building different from traditional grantmaking?

The easiest way to understand capacity building is to compare it with program funding.

Program funding asks: What can this nonprofit accomplish with this funding?
Capacity building asks: What could this nonprofit accomplish if the organization itself were stronger?

Imagine a nonprofit trying to increase the number of families participating in a free community program. A traditional grant might pay for another 100 families to participate. A capacity-building investment might help the nonprofit improve its marketing strategy, build a better donor program, implement a new CRM or train its staff. Those improvements could help the organization reach more families and raise more money year after year.

Neither approach replaces the other. Nonprofits need money to deliver programs. They also need healthy organizations capable of sustaining and growing those programs. The opportunity for CSR teams is to think about supporting both.

Why is capacity building important?

Nonprofits are often expected to do a remarkable amount with limited resources. The pressure to keep overhead low can make it difficult to invest in the very things that would help an organization become more effective. Technology gets postponed. Staff development falls down the priority list. Marketing becomes reactive. Strategic planning gets squeezed between more urgent needs.

Research from CEP found that only 30% of nonprofit leaders reported receiving any capacity-building support from funders in their most recent fiscal year. At the same time, nonprofit leaders ranked capacity-building and organizational-effectiveness grants among the forms of funding that have the greatest impact on strengthening their organizations.

That creates a difficult cycle. If nearly every available dollar needs to go directly toward programs, nonprofits have fewer resources to improve how they operate. But without those investments, it can become harder to grow programs, reach new donors, develop staff or adapt to change.

Capacity building can help break that cycle.

What can companies fund as capacity building?

One of the advantages of capacity building is that it can take many forms. Companies do not necessarily need to create a large new grant program to get started. Depending on the needs of their nonprofit partners, companies can support:

• Marketing and communications: messaging, brand strategy, digital marketing, campaigns, donor communications and audience development.

• Fundraising: donor acquisition, fundraising strategy, grant development and building more sustainable sources of revenue.

• Technology: CRM systems, websites, cybersecurity, data systems, AI tools and other technology that helps teams work more effectively.

• Leadership and staff development: training, coaching, management skills and succession planning.

• Strategy: strategic planning, growth planning and help making difficult organizational decisions.

• Financial management: budgeting, accounting systems, financial planning and developing a more sustainable funding model.

• Measurement: systems and skills for tracking outcomes and understanding what is working.

• Operations: processes, tools and systems that reduce administrative work and make better use of limited staff time.

And capacity-building support does not always have to come in the form of cash.

Capacity building can go beyond grants

Companies have something nonprofits often struggle to access: expertise.

Nearly every company has people with skills that can help strengthen a nonprofit, from marketing, finance and technology to HR, operations, data and strategy. These are capabilities businesses rely on every day, but nonprofits, especially smaller organizations, may not have the budget or staff to build all of them in-house.

Companies may also have products and tools that can help. Technology platforms, software, professional services and other business resources can give nonprofit teams access to capabilities that would otherwise be difficult or expensive to obtain.

That means companies can think beyond financial contributions when supporting nonprofit partners. By providing access to their people, expertise, products and tools, they can help nonprofits build capabilities that continue creating value long after a traditional grant has been spent.

That creates opportunities for CSR programs to combine funding with other forms of support. Skills-based volunteering, training, technology access, expert advisory support and shared services can all help nonprofit partners build capabilities they might otherwise struggle to afford.

The goal is not for a company to decide what a nonprofit needs and then swoop in with a solution. In fact, that can undermine the whole idea. Capacity-building efforts can fall short when funders make assumptions about what organizations need based on the funder's own preferences rather than the nonprofit's priorities.

The better starting point is much simpler: Ask the nonprofit.

Start with what nonprofits say they need

A good capacity-building program should not begin with a predetermined menu of corporate resources. It should begin with a conversation.

What is getting in the organization's way? Where does the team feel stretched? What capability, if strengthened, would make the biggest difference over the next year or several years?

For one organization, the answer might be fundraising. For another, it might be technology. For another, it could be marketing, leadership development or strategic planning. That distinction matters because capacity building works best when nonprofits have a meaningful say in identifying their own priorities.

It also changes the relationship between companies and nonprofit partners. Instead of asking only, "What program can we fund?" CSR teams can ask, "What would help your organization become stronger?" That can lead to a very different conversation.

How CSR teams can add capacity building to an existing program

Capacity building does not require abandoning grants or redesigning an entire CSR strategy. A company could start by selecting a group of existing nonprofit partners and asking each organization to identify one or two capabilities it would most like to strengthen.

From there, the company can look at what it already has available. That might include funding, employee expertise, technology, training programs or outside partners that can provide specialized support. The important part is to avoid treating capacity building as a one-time workshop or a box to check. Building stronger organizations takes time.

There is also evidence that this kind of support works. A recent CEP study found that among nonprofit leaders who received capacity-building support alongside multiyear general operating funding, 82% said the capacity-building support was very or extremely helpful. Leaders said it helped them plan for the future, invest in staff and make targeted improvements to their organizations.

Nonprofits don't just need funding to keep programs running. They also need the ability to invest in the people, skills, technology and systems that make those programs possible. When CSR teams support those underlying capabilities, they help nonprofit partners become stronger and better equipped to deliver their missions over time.

A broader way to think about corporate impact

Program funding answers an important question: What good can this funding do right now?

Capacity building adds another: What could this organization do if it were stronger next year, and the year after that?

For companies trying to deepen the impact of their nonprofit partnerships, that is a powerful shift. A grant can fund a program. An investment in strategy, technology, fundraising, marketing, leadership or organizational systems can help a nonprofit become better at delivering many programs over time.

CSR teams don't have to choose between funding missions and building organizations. They can do both. The most lasting way to support a mission is to help strengthen the organization responsible for carrying it forward.

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