NextBillion - An Initiative of the William Davidson Institute at the University of Michigan

Friday, January 16, 2015

In many ways, these are changing times in U.S.philanthropy. The emphasis on data and measuring impact more closely, pushing for scale and large-scale solutions, social investing and performance metrics, crowd-funding and digital networks has created the sense that the social sector – and nonprofits along with it – has reached an inflection point that may soon fundamentally shift the way funds are raised and spent on causes and social change.

Yet these trends often disguise some underlying fundamentals that aren’t changing. The big constant, of course, is the steely resistance of overall U.S. philanthropy to grow; it has remained at or just below two percent of GDP for a couple of generations. So the pot is not growing – yet both the number of nonprofits and their expected contribution to the social safety net are. Competition is growing, demand is growing, and so are the expectations of many grant-makers for data, reporting, scale, and impact. These trends have been constants over the last decade, and don’t appear to be shifting anytime soon.

This puts increasing pressure on the one unit that is not particularly in favor in the salons of civic power and philanthropy: the organization.

From my consulting work, I know that organizations are increasingly facing financial pressure away from program oriented gifts and grants, and toward their capacity to create growth and sustainability, and manage that process well with talented and committed people. Of course, there are exceptions in the highly capitalized precincts of the elite institutions of higher learning and culture – but among the nation’s roughly 1.5 million nonprofits, the stress of raising undirected general capacity funds against a landscape that increasing favors targeted, results oriented grants can…

So I’m proposing the most important philanthropic buzzword for 2015 and beyond – that’s right, capacity.

I’d love to see more philanthropists, foundations, and giving companies focus on building organizations for the long term, investing in staff ability and systems, and providing resources for organizational stability. When well-meaning board members tell my clients that organizations should “operate more like businesses,” this is what I think of.