As the need for services from the nonprofit sector continues to increase, funders and nonprofits alike are peering into the future with legitimate questions. Is our organization doing all it can today to fulfill its mission? Can we do more? How will our organization sustain itself in the future? What changes can we make now to prepare for future stability?

The following three practices will help your nonprofit plan for and secure its future financially, programmatically, and organizationally.

1. Understand capacity building and why it’s important.

Those involved in the nonprofit sector, whether funders, board members, or staff leadership are talking about the importance of capacity building. Some understand it; others don’t. The first step to ensuring a high level of capacity building is to understand what it is and why it’s so important.

The James Irvine Foundation says that, “Capacity building is any activity – such as strategic planning, board development, operational improvements, and technology upgrades – that strengthens the ability of a nonprofit to achieve greater performance and impact.”

The National Council of Nonprofits adds that, “Capacity building is not just about the capacity of a nonprofit today—it’s about the nonprofit’s ability to deliver its mission effectively now and in the future. Capacity building is an investment in the effectiveness and future sustainability of a nonprofit.”

Nonprofit organizational capacity encompasses a range of capabilities, knowledge, and resources that a nonprofit organization needs to be effective in achieving its mission. Organizational capacity is multifaceted and continually evolving.

The James Irvine Foundation lists four types of capacity: adaptive, leadership, management, and technical—and explains them as follows.

Leadership and adaptive capacities are the most critical. They usually drive an organization, and management and technical capacities follow. Adaptive capacity is the ability to monitor, assess, respond to, and stimulate internal and external changes. It enables an organization to be reflective, innovative, flexible, and resilient.

A nonprofit can strengthen its adaptive capacity by conducting periodic needs assessments, organizational assessments, and program evaluations; engaging in knowledge management and planning; and pursuing collaborations and partnerships.

Leadership capacity is the ability of all organizational leaders – both senior executives and board members – to inspire, prioritize, make decisions, and provide direction in a concerted effort to achieve the organizational mission.

Leadership capacity can be enhanced through board development, executive leadership development, and leadership transition planning. Many nonprofits build their capacity on a regular basis as part of their everyday leadership and management work.

2. Conduct an organizational assessment to identify opportunities for capacity building.

Capacity building is not a one-time effort to improve short-term effectiveness, but a continuous improvement strategy toward the creation of a sustainable and effective organization. But we have to start somewhere. Beginning with an organizational assessment helps us learn which core capacity areas may require more attention.

Such an assessment requires significant time and resources, so the board and staff must make a commitment to conduct the assessment and then to engage in appropriate capacity building activities. It’s also a good idea for organizations to inform their funders about their plans. Foundations and individual donors alike will respond positively to an organizational initiative that enhances their investment.

The goal of assessments is to collect data that can help the nonprofit evaluate whether or not it is making progress towards various goals, including whether the nonprofit can demonstrate that it is making progress advancing its mission. 

Organizations that are serious about measuring their progress and evaluating their outcomes typically engage in a self-assessment process, whether organization-wide, or focused on certain aspects of their programs or activities. For example, board members can conduct self-assessments to determine how engaged the board is, or whether knowledge or experience gaps exist that future board members might fill.

Staff members might engage in a self-assessment and goal-setting process in connection with an annual/regular evaluation of their performance. Or, assessments might be focused on a few, or all programs a nonprofit offers in connection with a grant report, or simply to evaluate the nonprofit’s progress towards its goals. 

Here’s a tool to conduct an assessment to determine if your organization is ready for capacity building. In addition, the National Council of Nonprofits offers many tools for nonprofits to use in evaluating and planning for capacity building.

3. Develop a leadership succession plan.

Some nonprofits have strong programs and activities but no leadership succession plan. For a nonprofit in that position, succession planning is key to protecting and prolonging its effectiveness, and thus is a critical step in its capacity building journey.

How should leadership succession happen? A committee of the board, such as the board development or board governance committee will generally focus on leadership succession at the board level, while staff leaders are most often charged with identifying transition plans for staff’s leadership succession.

Because the board is ultimately responsible for oversight of the executive director, typically it is also the board's role to initiate succession planning for the executive director/CEO. Board members invest lots of energy and time supporting the chief staff leader - it's their fiduciary responsibility to ensure the long-term sustainability of the organization - which can depend on there being the right leader in place. Astute boards understand that succession planning is not just making a plan. It's a risk management strategy to ensure the sustainability of the organization.

Leadership transitions can leave organizations vulnerable to environmental stresses, such as a loss of external funding because a long-time donor is taking a wait and see approach to the new leadership, or such as the loss of institutional knowledge when a long-tenured leader takes information with her about relationships or other expertise. Grantmakers can play a critical role in helping nonprofits prepare for, or helping support them during a transition of leadership.

Wherever your nonprofit is in the capacity building trajectory, it’s important to be strategic, intentional, and diligent about pursuing a clear plan to ensure the high capacity, long-term and short-term, for your organization. There are many tools available to help with this process.