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Capacity Only Equals Impact if there’s a Why and a How

Most parents would be horrified if their child’s school bus showed up in the morning missing a headlight, its brakes, and a few seats.  Or if it arrived with a driver desperately talking on three different cell phones trying to convince station owners to pump the bus with enough gas to get to school. I certainly wouldn’t let my kid hop on that bus.

Unfortunately, many nonprofits serving the most vulnerable populations in America find themselves in a state similar to this school bus: with the responsibility to fulfill an important need, but without the resources to properly do so. As Billy mentioned in his most recent Sharing Our Growth post, “nearly all of the incentives in the nonprofit sector run against long-term investments in capacity.”  Which leads to hollowed-out enterprises, diminished capacity, and fragmented social impact.

I don’t want to belabor the point that funders all too often underfund and misunderstand the capacity needs of nonprofits.  The Nonprofit Overhead Cost Project and Bridgespan’s work around The Nonprofit Starvation Cycle have valiantly exposed the costs to social impact of this continued underinvestment.  As a community, we can and should continue to raise general awareness among the funding community that, as Billy puts it, “Capacity Equals Impact.”

But finger wagging will only get us so far. If we truly believe capacity drives impact, then the nonprofit community must step up and prove it. Our organizations exist to create social impact. Funders want to invest in social impact. So, as organizational leaders, our duty in turning this picture around is to diligently articulate why and how capacity equals social impact.

In order to do this, we suggest that you and your organization proceed with three principles:

  1. Don’t ask funders to fund overhead, or infrastructure, or capacity.  Speak to the change they want to see in the world: continue to ask funders to fund social outcomes.  And explicitly detail how their money will be leveraged to achieve the largest social impact.
  2. As Sara explored in “Don’t be afraid to think big even if you’re small,” it is absolutely necessary to clearly articulate the social impact you aim to achieve.  And to directly and explicitly connect your organization’s business model to metrics tied to that social impact.
  3. With these direct and explicit connections, your organization can then articulate “what it is that makes things run” (i.e., the capacity needs inherent in your business model).  At Community Wealth Partners, we define capacity simply as those cogs necessary to execute the business model.  Most often, we’ve found that these cogs fall into three categories: Talent, Infrastructure, and Organizational Processes.

Being diligent and directed in understanding “what it takes” can help leaders articulate more explicitly what “capacity” actually means for their specific organization and why and how building that capacity means creating social impact.

This approach will only work, though, if leaders are resolute in defending their business model. To be effective, you must be willing to say to funders: “We are committed to achieving x, y, and z social outcomes. We have a business model that can produce these outcomes. And we must fully invest in all components of this business model.  Otherwise, we cannot achieve the stated social outcomes.”  Adaptability and flexibility, of course, are key characteristics of strong organizations.  But so are focus, discipline and accountability.

If leaders begin to take the reins of this battle for capacity funding and to show funders that a bus without brakes cannot feasibly deliver children safely to school, then I believe funders will begin to internalize the message: “Capacity Equals Impact.”

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Diana Peacock

About Diana Peacock

As a director, Diana Peacock engages in strategic partnerships with leadership teams, provides client engagement oversight and supports the overall growth and development of the firm. Diana has worked with a broad range of nonprofits and foundations, with particular focus on youth-serving, family services, and community development organizations. She has deep experience leading non-profit executives and Boards through strategy design and business planning, helping them pivot their organizations’ focus to meet growing needs and solve bigger social problems. Diana excels at assisting organizations with defining their impact, especially in highly complex environments, and has facilitated a successful merger of two national nonprofits. See Diana's full bio

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