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<nettime> Jonathan Peizer: The Quiet Revolution In Non-Profit Capacity S
geert lovink on Thu, 27 Nov 2003 07:13:28 +0100 (CET)

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<nettime> Jonathan Peizer: The Quiet Revolution In Non-Profit Capacity Support

From: "Jonathan Peizer" <JPeizer {AT} sorosny.org>

Satisfying Donor and Non-Profit Objectives: The Quiet Revolution In
Non-Profit Capacity Support

By Jonathan Peizer

The economic downturn of the last three years once again served
to highlight the tenuous institutional capacity most non-profits are forced
to rely upon to survive in good times and bad. Many non-profits with
exceptional programs had to consider closing because funding dried up and
they had limited ability to support themselves. While the business
environment is cyclical, capacity issues are a chronic problem for the lion'
s share of non-profits globally. This will continue to be the case until the
dynamics of traditional donor support and its detrimental impact on capacity
funding is dealt with realistically. It's time for the sector to embrace new
paradigms that have evolved naturally and quietly over the last few years
with the help of new technologies and a few visionary institutions.
Non-profits willing to provide capacity support to their peer organizations
and the progressive donors that support them are creating the new strategic
paradigm of non-profit capacity support. Non-profits with appropriate
organizational capacity deliver on their mission more effectively and are
far more effective devising ways to support themselves and limit donor

While a subset of non-profits rely on generated income to
support their activities, most rely primarily on donor subsidies. These
subsidies come from a variety of sources but there is one characteristic
typically consistent among all donor groups whether it comes from private
foundations, individual donors, governments or membership. Donors are
interested in supporting program activities and not accountants,
technicians, administrators and organizational infrastructure. Individuals
who manage non-profits are often more interested in focusing on the
organization's compelling mission than they are on building, managing and
subsidizing these organizational support structures as well.

The irony is that most donors and grantees aspire to the same
state of civil society Zen mythically referred to as - sustainability. In
this karmic state, the donor withdraws support gradually while the
non-profit takes on more responsibility for supporting its own operational
activities. Ying and Yang are achieved when the non-profit generates enough
income to support its operational budget and only approaches donors for
underwriting its more attractive programmatic activities. As in most things
Zen, it's all about knowing your positions. A non-profit cannot be expected
to assume the position of ever supporting itself if:

1) The organization doesn't place the importance on capacity that this issue
2) Donors don't support capacity.

In the traditional funding paradigm, the reason support is
provided for program over administration can be logically rationalized from
the donor's perspective. All donors are faced with the same issue: how can a
single donor demonstrate noticeable effect in the area it perceives
important to solve a problem of social value? Noticeable effect is important
to donors because their constituents, board members or living donors expect
the money they expend to demonstrate tangible results. The vast majority of
donors answer the "how to achieve noticeable effect" question by creating
well defined niches and funding criteria based on geography, sector and
sub-issues within the sectors they choose to support. Donors purposefully
try to define a unique niche for themselves, so their first instinct is not
necessarily to partner with others and leverage their funding.  If that were
the case, spreading the burden of capacity support among donors would be
more easily accomplished.

Mission focused grantees are often viewed by donors as the tools
used to turn dollars into action on the ground - they are intermediaries
that assist in solving the problem. A donor supporting a portfolio of
organizations does not necessarily view any individual non-profit as the
solution to the social problem that it defines as its objective, even if the
individual non-profit sees itself that way. Institutional support can change
from year to year if another organization comes up with a new or creative
way to solve an issue, or if the criteria a donor uses to direct its support
changes. Since the donor's primary objective is to solve a social ill, most
funding is earmarked for programmatic activity and not on the capacity needs
of the intermediary it uses to achieve this objective. In fact, most
traditional donor funding criteria is heavily weighted against capacity
support. Funding a computer or accountant creates a hard case for
demonstrating noticeable effect on the ground -- the primary donor
objective. So while supporting capacity is a rational investment, it is one
step removed from the limited amount of funding a donor has to meet its
goals. Aside from that, it's not sexy, doesn't read very well in the annual
report of accomplishments and doesn't provide that "feel good" effect to
either the institutional donor or granny who is just trying to help those
poor starving kids.

In the commercial context, generating income requires investing
in institutional capacity. There is a clear cycle of benefit. Investment
creates organizational efficiencies, reduces expenses and most importantly,
meets the primary objective of generating more profit which can be recycled
into further capacity investment. This clarity of relationship and purpose
does not translate as well in the non-profit context. Investment in
non-profit capacity does not necessarily generate new revenue to re-support
the activity unless that is the purpose of the original subsidy. That is not
the primary objective of most donors, solving social problems is. Moreover,
a double overhead issue exists because donors use non-profits as vehicles to
accomplish their objectives. Donors already support their own overhead so
they are reticent to support the additional overhead of interchangeable
intermediaries they utilize to address their primary objectives. The most
similar non-profit example of a company investing in itself to achieve its
objectives is an operating foundation which supports its own program
activities through self-subsidy. In most cases however, donors support their
own capacity and fund non-profits to meet programmatic objectives
effectively splitting capacity and program support between two or more
institutions. Logically, without capacity support, a non-profit cannot
operate its programmatic activity as effectively let alone come up with an
infrastructure that allows it to generate enough revenue to support some of
its own activities.

Unfortunately, the donor grantee-relationship is not appropriately defined
as a partnership of equals providing different types of resources to meet
the same objectives. This exacerbates the problem because both sides
typically dance around the issue of capacity rather than addressing it
realistically. The typical donor-grantee support step [to varying degrees]
goes something like this: The overly solicitous grantees cow-tow to the
wishes of an overly imperious donor or one that must act as a gatekeeper,
insuring all proposals meet specific support criteria. The grantee's role is
to make a pitch and craft proposals that will result in the release of the
most funding dollars. It's obvious to most that capacity is not high on the
funding agenda so donors are pitched want they want to hear about -- 
programs that provide solutions to the social ills they are trying to
satisfy. Smart grantees pad a fraction of whatever capacity support they
really need into the request for program support. In the context of such
discussions and behaviors, its no wonder capacity support remains the
wallflower no one wishes to approach. Since it takes two to tango, the onus
does not rest completely on the donor's shoulders. Some non-profits are
managed as personality cults. They revolve around a few very, very committed
individuals who believe strongly in an issue. Less importance is attached to
developing a well-managed institution with long term sustainability plans
and management structures designed to outlive their association with the

This article is not designed to be a rant about the endless
limitations of capacity support in the non-profit environment. There are
non-profits that manage themselves well and take great care in developing
appropriate infrastructure. There are also donors that focus on supporting
individual organizational capacity. However, this doesn't change the fact
that the institutional funding paradigm on the macro-level is not designed
to efficiently handle capacity support to the vast majority of NGO's that
need it in the same way it is set up to effectively provide program support.

Better solutions do exist and have been evolving naturally over
the last few years, thanks in part to technologies like the Internet. These
technologies have allowed institutions to network, share, and aggregate and
distribute information, services and products far more easily than was
historically possible. Defining the capacity support issue as a sector-wide
problem, a few bold institutions and donors have addressed it using
technology and other tools to aggregate the capacity support needs of client
non-profits. Rather than supporting internal capacity of individual
non-profits, a model of external capacity support around aggregated demand
has evolved. Non-profits are buying into a high quality capacity support
service delivered at a reduced cost by other non-profits.

I've written about these intermediary organizations from a
technology perspective in the past; organizations like NPower, Tech Soup,
Aspiration, One Northwest, Ninth Bridge, Groundspring, etc. which aggregate
user demand for IT services and deliver a variety of support including
online tools, high touch technology support, software development assistance
and discounted IT products. These providers are referred to as Technology
Support Organizations (TSOs). This same capacity support paradigm has
evolved to address other non-profit activities as well. Intermediary
capacity support organizations identified as Management Support
Organizations (MSOs) have evolved to provide organizational, fiscal,
evaluative and other necessary management support services to non profits.
Innovation Network, Alliance for Non-Profit Governance, Bridgespan and
Compasspoint fall into this category.

Finally a third set of intermediary Advocacy Support
Organizations (ASOs) has evolved. Organizations like Media Rights,
Greenmedia Toolshed and the Center for International Media Action provide
nonprofits with advocacy and promotional expertise to better craft and
distribute their messages. Lack of capacity is not the only obstruction to
effective non-profit message crafting and advocacy. These activities are
often part of a mission driven program to affect a particular social ill so
they suffer less from lack of support related to administrative overhead.
Lack of expertise is often more the result of non-profit's general cognitive
dissonance related to promoting and marketing their activities. In a sector
where the currency of choice is the trusted source relationship, non-profits
rely on their work and not what they advertise about it to enhance their
standing with peer organizations and donors. As a result, promotional and
advocacy skills are often underdeveloped, and become capacity issues.

I label the range of these organizations operating across
disciplines as Intermediary Support Organizations (ISOs). The benefits of
ISO non-profits  providing high quality capacity support services to other
non-profits are significant:

- The ISO model is far more efficient because it allows for the
introduction of standards of service/support delivery and sharing best
practices across institutional clients. Non-profit clients typically compete
for funding and are often pressed for training time. They don't necessarily
learn from each other or from donors without a trusted source intermediary
providing them support and delivering best practices as a part it.

- ISOs provide pragmatic service at a lower entry cost to fellow NGOs
than most of their for-profit counterparts. They are also far more trusted
because the provider organizations share a basic set of mission principles
similar to the non-profits they serve. This is very important in a sector
where the currency of choice is the trusted source relationship.

- Many ISOs collect significant and invaluable meta-data on a
statistically relevant number of non-profit clients. This data can be used
to identify strengths and deficiencies on a sector-wide basis. Objective
data polled from non-profit clients allows for developing more effective
support strategies for the entire sector rather than relying on
circumstantial data, conjecture or assumptions.

- ISOs offer a realistic opportunity to solicit donor support for
capacity using a behavioral funding pattern they already subscribe to rather
than changing the entire paradigm - and they create a much cleaner cycle of
benefit and reinvestment for all involved. Donors are familiar with
intermediaries because they use non-profits to fulfill their programmatic
goals in much the same way. Donors can more easily support the programmatic
mission of an intermediary which is defined as supporting the mission other
non-profits through delivery of capacity services. After an initial donor
investment, most ISOs are built on models of sustainability that cover their
administrative costs through services rendered to the non-profit community.
Non-profits buy into more efficient capacity support at lower entry costs,
improving their effectiveness and leaving them money to utilize more
appropriately on other necessary activities including self-support.

- ISOs provide a much more efficient way to insure that all the
non-profits a donor uses to meet its objectives in the aggregate operate at
peak efficiency. Most donors fund initiatives vertically, by program area.
However, capacity issues cut horizontally across the entire portfolio of
non-profits they support to achieve these objectives. Donors can opt to
employ intermediaries to fill in the capacity gaps of their entire portfolio
rather than approaching the issue from the perspective of individual
institutions which change from year to year. Individual institutions also
benefit of course, but the important point is that both the practical and
perceptual needs of both donors and non-profits are met with this approach.

- It's far easier to solicit donor support for a single institution
whose mission is to support the capacity of a thousand NGO's in a consistent
manner than it is for one thousand institutions to solicit that same donor
for their individual and inconsistent capacity needs.

The natural evolution of ISOs to cover a variety of needs
suggests to me that a quiet revolution in the support for non-profit
capacity is taking place. This new paradigm should be considered and
leveraged far more strategically by donors, non-profits and the ISO sector
itself. Issues that individual ISO expertise areas address are all related
and reflect a problem suffered by NGO's globally. In defining the good,
better and best of all possible worlds for the process going forward I'll
make the following observations:

1. Supporting discreet intermediary organizations for a particular sector,
geography or problem area is good.
It is necessary to support the development of leading ISOs to cover each
area of capacity support. Intermediaries should be nurtured in their initial
development across sectors, geographies and capacity problem areas so that
they have the greatest impact on the most NGO's. These models need to be
adapted to different local circumstances (i.e. the developing world).
International E-riding which provides technology support to various sectors
and geographies is an example of this.

2. Supporting a coalition of intermediary organizations dealing with
issues in a single problem area like technology is better.
Grant Maker's for Effective Organization's (GEO) is a coalition of domestic
US grant makers focused on moving philanthropy forward in the direction of
strengthening grantee organizations that are supported. The Alliance of
Non-profit Management is another such organization as is the non-profit
Technology Enterprise Network (NTEN), a coalition of organizations focused
on non-profit technology support.

3. Recognizing and supporting ties between MSOs, TSOs and ASOs is best.
This is still a largely unaddressed issue. Both the funding community and
the nascent intermediary support sector must appreciate that the work of
TSOs, MSOs and ASOs are interrelated just as they would be if they were
individual support functions performed within a single organization.
Collaborations and interchange needs to be supported.

While this new model of capacity support may not help all NGO's
everywhere at once, it will assist far more non-profits address their
capacity needs that the current, less strategic approach does. As with most
civil society initiatives, progressive donors acting in collaboration rather
than as lone wolves will be required to underwrite the initial investment.
However, this model of capacity support is built upon the precepts of ISO
sustainability and aggregated demand - more importantly there are already
working models and empirical data out there that suggest it works better
than the current approach.

We must recognize that the current system of donor support is not set up to
address capacity in an efficient and fair manner. Therefore, other
approaches that work far more efficiently, leverage new technology but still
operate in the framework of traditional donor support must be employed.

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