The title of the article next to an illustration of people putting a puzzle together, representing nonprofit capacity building.

Nonprofit Capacity Building: How to Grow Your Organization

When researching nonprofit capacity building, the definitions you find may seem a bit vague. You may hear the term at a board meeting, fundraising team gathering, or networking event and wonder “What exactly defines my nonprofit’s capacity, and why is it so important to build?”

The truth is that many definitions of nonprofit capacity building are very generalized because the term means different things in the context of different organizations. What allows an animal shelter to grow and support its mission may look much different from what an environmental organization, museum, or public school needs to thrive.

No matter what type of nonprofit you run, here’s what you’ll need to know about capacity building:

To help your organization forge its own path, we’ll define what nonprofit capacity building may look like for different organizations and offer tips for creating a strong capacity building strategy that fits your nonprofit’s needs.Get a demo of our matching gift software to jumpstart your nonprofit capacity building.

What is nonprofit capacity building?

The National Council of Nonprofits defines nonprofit capacity building as “whatever is needed to bring a nonprofit to the next level of operational, programmatic, financial, or organizational maturity, so it may more effectively and efficiently advance its mission into the future.”

This definition is relative to your nonprofit’s unique goals and operations, but the ultimate objective is to realize your operational potential. That way, you can fulfill your mission to the best of your nonprofit’s ability.

To build capacity, your nonprofit may employ a mix of three approaches:

  • Individual. By investing in individual team members, you can ensure your team has the resources and training they need to be successful in their roles. For instance, you may offer a mentoring program to help new employees acclimate to your organization and get advice from their coworkers.
  • Organizational. Tools like office equipment and fundraising software help your organization run more effectively. To secure the resources needed for organizational capacity building, you may turn to corporate partnerships or brainstorm ways to diversify your revenue.
  • Systemic. At the systemic level, you may lobby for policy changes that will help your organization better fulfill its mission or strengthen your nonprofit’s board. Many nonprofits turn to a community of practice for assistance, which is a group bonded by a common goal that provides knowledge about nonprofit causes and helps organizations apply for grants.

When you combine individual, organizational, and systemic nonprofit capacity building, you fortify all areas of your organization and ensure each has the resources necessary to carry out mission-critical work.

Why is nonprofit capacity building important?

Nonprofit capacity building allows your organization to create a healthy infrastructure that supports future growth and longevity. Through capacity building, your nonprofit will receive a variety of benefits, including:The benefits of nonprofit capacity building, as outlined in the text below.

  • Enhanced impact. When you increase your nonprofit’s operational capacity, you can expand your nonprofit’s programs and services. As a result, you can make a greater impact on your community and beneficiaries. For example, an animal shelter’s increased capacity would enable it to offer additional spay and neuter services and rehome even more animals.
  • Improved sustainability. One of the top methods of nonprofit capacity building is diversifying your revenue streams. With funds flowing into your organization from different sources, your nonprofit will be more financially stable and sustainable.
  • Increased efficiency. Investing in tools and training that help team members perform their roles effectively makes day-to-day tasks more efficient. With less time going to logistics, you can spend more time on mission-critical activities.
  • Better adaptability. With funding from different sources and a variety of resources at your disposal, your nonprofit will be better equipped to take on challenges. Whether you’re trying to keep up with trends in your nonprofit’s sector, responding to crises, or adjusting to evolving community needs, your organization can quickly adapt and carry on with its mission.
  • Long-term viability. Ultimately, nonprofit capacity building sets your organization up for long-term success. It ensures you’re taking full advantage of all resources at your disposal to enact lasting change in your community.

Your nonprofit’s focus should be your mission. When you allocate time to capacity building, you strengthen your nonprofit’s operations so all underlying processes are as efficient as possible, allowing your mission to remain at the forefront.

How to Create a Strong Nonprofit Capacity Building Strategy

Like with any strategy, it’s essential to follow a systematic approach to building your nonprofit’s capacity. That way, you can craft a strategy that’s thorough and fits your organization’s unique needs.

To develop your nonprofit capacity building strategy, keep these steps in mind:The steps for creating a strong nonprofit capacity building strategy, as outlined in the text below.

1. Start with your mission.

As mentioned before, your mission is at the heart of your nonprofit’s operations. Think about how all elements of your organization come together to support your mission, and determine any areas you could improve to better achieve your goals.

For example, an organization for at-risk youth may have a mentoring program that has worked well for beneficiaries in the past but is currently understaffed. This nonprofit may look into hiring additional staff members or volunteers to manage the program so it can better fulfill its mission of providing a brighter future for at-risk students.

As your organization grows and changes, so may its priorities. Before diving into the nonprofit capacity building process, take a careful look at your mission to ensure it still reflects your organization’s current services and values. You may eliminate facets of your mission if they’re no longer relevant or make additions if your nonprofit has taken on new initiatives.

For instance, a healthcare organization may have added a focus on stopping the spread of COVID-19 to its mission in 2020 when the pandemic began but might have removed this element in May 2023 when the World Health Organization (WHO) declared an end to the global Public Health Emergency (PHE) caused by the virus.

2. Evaluate your needs and current resources.

Next, assess your organization’s most pressing needs and whether you have the resources to address them. While some needs may be more readily apparent, others may require further investigation.

All staff members, board members, and volunteers have different perspectives on your organization that allow them to identify unmet needs. Send periodic surveys that invite these stakeholders to provide feedback on your nonprofit’s operations. You may also host discussions during team meetings to obtain more candid feedback on your organization’s needs.

Once you’ve compiled a list of your nonprofit’s highest-priority needs, evaluate your current resources’ ability to fulfill them. You may consider the following questions when assessing your needs and resources:

  • Is there a deadline for addressing this need?
  • What are the costs associated with addressing this need?
  • How many team members do we need to address this need?
  • Do we have the appropriate equipment to address this need?

If your nonprofit has some resource gaps to fill, brainstorm how you can efficiently acquire the tools you need at a low cost.

For instance, you may find that your organization is eligible for a grant that would help you cover the costs of obtaining fundraising software. Additionally, if you don’t have enough staff to address a pressing need, you may tap into your corporate partnerships to see if they’re willing to donate their services pro bono or leverage your volunteer network.

3. Get your team involved.

Your team’s involvement in nonprofit capacity building shouldn’t end with them offering their initial input. Lean on the support of staff, board members, and volunteers to implement your capacity building plans.

Your board in particular should have a role in creating your capacity building strategy. As the governing body of your organization, your nonprofit board can decide how to best allocate resources for capacity building and successfully address each need.

If you need additional support in developing your nonprofit capacity building strategy, enlist the help of a nonprofit consultant. An outsider’s perspective may be just what your organization needs to provide an objective opinion about your capacity building priorities.

4. Determine your goals and timeline.

Clear goals and metrics will break your needs down into manageable goals and help you evaluate your progress. Stick to the SMART (Specific, Measurable, Achievable, Relevant, and Time-Bound) goal framework to ensure your goals are actionable.

Let’s say that your nonprofit is looking to develop a new onboarding process that better informs team members of their responsibilities, company culture, and your mission. Take a look at how your team may qualify and quantify this objective using the SMART goal framework:The SMART goal framework for creating useful nonprofit capacity building goals, as outlined in the text below.

  • Specific. Our human resources team will create and implement new onboarding materials that give a more holistic, comprehensive view of each team member’s role, the organization’s culture, and the underlying nonprofit mission and services.
  • Measurable. Our goal is to increase new team member efficiency by 20% by providing them with the resources they need to succeed from the start.
  • Achievable. In the past, we’ve made slight improvements to our onboarding process and have seen small gains in new team member efficiency. We’re hoping that a larger-scale revamp of the new hire onboarding process will allow us to see even greater results in employee motivation and productivity.
  • Relevant. When team members have a better understanding of their roles and how they contribute to the organization’s purpose, they’ll work more efficiently and effectively. Consequently, we’ll spend less team member time on logistical tasks and more on urgent, mission-critical work.
  • Time-Bound. Our human resources team will develop this new program over the course of the next quarter. Then, we’ll roll it out to the next batch of new hires and measure their subsequent performance.

Applying the SMART goal framework to your nonprofit’s needs can also help you determine which ones to address first. You may be able to address multiple needs at once or have to prioritize certain needs over others in order to commit your full attention and resources to each one.

5. Invest in the right tools.

Once you’ve further defined your goals, you may notice you’re missing some of the tools or software you need to succeed. For instance, if you’re launching a campaign to promote a new service your nonprofit is offering, you may need to invest in new marketing software that will automate your outreach.

Although it’s best to take full advantage of the resources you currently have, an investment in the right tools is an investment in your nonprofit’s future. To increase your nonprofit’s capacity, it may be worth it to purchase new software or obtain additional resources that will make your nonprofit’s operations more efficient.

6. Track your progress.

Before you embark on your nonprofit capacity building efforts, set up benchmarks that allow you to mark your progress. You may schedule monthly check-ins with the appropriate team, take notes on the state of each project, or survey those involved with each endeavor to see where you can improve your efforts.

For all goals with clear performance metrics, make sure to check your campaign data regularly to ensure you’re on track. For example, if you’re running a capital campaign and intend to raise $10,000 overall, download reports from your fundraising software each month that indicate how much money you’ve raised in the past month and how much you’ve raised throughout the campaign.

5 Ways to Enhance Your Nonprofit’s Capacity

Now that we’ve covered the basics of nonprofit capacity building, it’s time to dive into some specific strategies you can implement to enhance your nonprofit’s capacity. While your organization’s specific plan will depend on your goals and resources, here are some ways nonprofits in a variety of sectors can expand their operations and increase efficiency:Ways to build your nonprofit's capacity, as outlined in the text below.

1. Invest in matching gift software.

Our top recommendation is to invest in matching gift software. Companies that offer matching gift programs match their employees’ donations to eligible nonprofits. While most companies match employee contributions at a 1:1 ratio, some match at a 2:1 or even 3:1 ratio.

However, 78% of donors are unaware if they’re eligible for matching gift opportunities. As a result, they don’t fill out matching gift requests, and nonprofits collectively miss out on $4-$7 billion in matching gift funds each year.

Matching gift software resolves this matching gift gap by automatically informing donors of their matching gift eligibility and prompting them to fill out a matching gift request form. Nonprofits can embed this type of tool right on their donation pages so that donors can submit their requests immediately after contributing. Check out the video below to learn more about how our matching gift software, 360MatchPro, helps nonprofits earn more:

As the video explains, 360MatchPro users raise 35% more in matching gifts each year. This passive income allows charitable organizations to expand their programming and ultimately help more beneficiaries.

To make the matching gift process more efficient and help your nonprofit earn even more, some matching gift platforms offer auto-submission. Instead of donors filling out a matching gift request form, all they have to do is input their company email address and check a box indicating they’d like to opt into auto-submission. Then, the platform creates and sends the request to the donor’s employer on the donor’s behalf, driving even more matches to completion.Click through to get a demo of our matching gift software and build your nonprofit's capacity.

2. Provide professional development opportunities.

When you invest in each individual staff member at your nonprofit, you fortify the team as a whole. Professional development opportunities allow team members to hone their skills and build confidence.

The types of opportunities you may offer include:

To ensure team members are motivated to participate in professional development opportunities, survey them to see which they’d be most interested in. Then, implement the most popular methods to begin growing your staff’s skills while measuring the opportunities’ engagement and impact.

3. Diversify revenue streams.

Imagine your nonprofit’s only source of revenue is from individual donations. You have a large donor base with many generous recurring donors. However, the economy starts to decline, and you notice donation revenue is decreasing as a result. Suddenly, you begin to worry that you won’t have enough funds to cover all of your programming and have to start cutting important services that your beneficiaries depend on.

Building your nonprofit’s capacity should make your organization more sustainable. However, if you rely on one main revenue source, you put your nonprofit at risk.

Tapping into a variety of revenue streams allows your nonprofit’s finances to remain steady, even if one source dries up. We recommend leveraging a combination of the following revenue streams:Different revenue streams for building your nonprofit's capacity, as outlined in the text below.

  • Individual donations. These may include one-time donations, recurring donations, planned gifts, major gifts, and in-kind donations.
  • Corporate philanthropy. Charitably-minded companies contribute to nonprofits through matching gifts, volunteer grants, community grants, event sponsorships, automatic payroll deductions, annual giving campaigns, and more.
  • Earned income. Your organization can earn funds by selling merchandise, charging membership dues, and selling event tickets.
  • Investments. Sometimes, nonprofits receive major gifts in the form of endowments that they can deposit into an investment account. Your organization can also open and invest in a brokerage account, just like individuals can.
  • Grants. There are all sorts of different grants out there that government entities, corporations, and foundations provide to nonprofits. You can even apply for specific nonprofit capacity building grants.

Once you’ve properly diversified your nonprofit’s revenue streams, keep track of how much you’re earning from each method for internal and tax filing purposes. If you need help reporting your nonprofit’s revenue, partner with a nonprofit accountant.

4. Rework your strategic plan.

Your nonprofit’s strategic plan serves as your roadmap for success. It aligns your organization’s goals with its values to provide a strong foundation for decision-making.

Since your strategic plan helps you prioritize projects and navigate challenges, it’s a good idea to revisit it when trying to build your nonprofit’s capacity. You may find that your organization’s initial strategic plan is not comprehensive enough to cover all of your current operations or that the goals outlined in your plan no longer reflect your nonprofit’s current priorities.

When you update your strategic plan, you can get all your team members on the same plan and provide more direction to your nonprofit capacity building efforts.

5. Network with other industry professionals.

From time to time, you may feel stuck with how to properly build your nonprofit’s capacity. Luckily, there are many nonprofit professionals out there who have gone through the process and can provide advice on how to improve your organization’s operations.

Networking is essential to gaining insider industry knowledge and building inter-organizational relationships. Start networking with other nonprofit professionals by:

By connecting with others in your industry, you can help each other navigate challenges and learn from each other’s experiences. Along the way, you’ll acquire tips that will help you build your nonprofit’s capacity and operate more efficiently.

Wrapping Up

Nonprofit capacity building is an ongoing process. As your organization grows and changes, new ways to scale your operations or function more efficiently will emerge. It’s up to your team to build a strong foundation for building capacity by evaluating your organization’s values, goals, and resources. Then, develop a strategy based on your nonprofit’s current needs and work with staff, board members, and volunteers to implement it.

Want to dive deeper into some of the nonprofit capacity building strategies we’ve covered? Check out the following resources: