1) Capacity building in non-profits involves investing in overhead costs like leadership development, strategic planning, and financial management in order to help an organization better fulfill its mission. 2) However, non-profits often underinvest in capacity building due to pressures from funders and the public to keep overhead costs low, despite evidence that such investments can significantly improve an organization's programs and sustainability. 3) Case studies show that foundations who provide targeted capacity building grants see impacts like improved services, strategic planning, and fundraising from beneficiary organizations. Where impacts are most generated includes areas like decision making tools, board leadership, and organizational learning.

1. Capacity Building in NPOs
Needs versus Reality
October 2013 |Presentation

2. NOV
A
About Nova
Israel's leading organization in the field of consulting and strategic
development for social organizations.
Nova is registered since 2005, has led over 160 consulting projects.
To date more than 700 volunteers including senior mentors from the
business sector, team leaders from leading consulting firms and outstanding
students took part in the organization.
Organizational
strategy focus
Strategic
marketing
development
Organizational
effectiveness
Development of
independent revenues
Performance
measurement
Nova’s diverse range of services allows it to customize solutions that fit your
NOP’s needs.

3. What is capacity building
How much is invested in capacity building in NPO’s
The Israeli Perspective
Capacity building value
Content

4. Definitions
Capacity Building- Whatever is needed to bring a
nonprofit to the next level of operational, programmatic,
financial or organizational maturity in order to more
effectively and efficiently fulfill its mission (National
council of nonprofits-‫אזרחית‬ ‫למנהיגות‬ ‫מקביל‬ ‫ארגון‬ )
When talking about lack of resources for capacity
building, we also talk about lack of investment in
Overhead costs or Managerial infrastructures.

5. Leadership Capacity Adaptive Capacity
The Core Capacity Assessment Tool (CCAT) is a 146-question online survey that measures a nonprofit organization’s
effectiveness in relation to four core capacities—leadership, adaptability, management, and technical capacities—as well as
organizational culture.
What an organization needs in order to fulfill its
mission?
Management Capacity Technical Capacity
CCAT
Leadership Adaptability
Program
Capacity
Sustainability
+ + =
TCC
Group
Administrative
cost
Fundraising
cost
Special events
cost
Overhead cost
+ + =
Bridge
span
Approach A:
Approach B:
The need of developing organizational capacities is translated to overhead costs:

6. Leadership Capacity
The ability to create and sustain the
vision, prioritize, make decisions,
provide direction and innovate
. EXAMPLES: Board and executive
leadership development, leadership
transitions, human resources, internal
communications
Adaptive Capacity
The ability to monitor, assess,
respond to and create internal and
external changes
. EXAMPLES: Community needs
assessment, organizational assessment,
program evaluation, strategic planning,
collaborations and partnerships
Citations source: Bridgespan (2008), Nonprofit overhead costs
“Because general management
positions tend to be viewed as
OH, they are the most difficult
to justify to stakeholders”
“Due to lower pay in the nonprofit sector, key
positions are often filled with junior people with
little relevant training or experience”
Leadership and Adaptive capacity are the
most important ones

7. Management Capacity
The ability to make effective and
efficient use of organizational
resources
. EXAMPLES: Financial management,
service delivery, program evaluation and
replication, outreach and advocacy.
Technical Capacity
The ability to implement key
organizational and programmatic
functions.
. EXAMPLES: Marketing and
communication, technology, legal skills,
fundraising, earned-income generation,
accounting, and facilities management
“Our systems are a
patchwork job…we
are always looking
for the lowest cost
solution”
“Our lack of investment in
technology results in system
crashes. If we were a for profit
company, our IT budget would
be at least 5 times what it is”
“We’ve known for a
long time that a COO
is vital to our growth
but haven’t been able
to fund it”
Citations source: Bridgespan (2008)
But management and technical capacities
are also crucial

8. What is capacity building
How much is invested in capacity building in NPO’s
The Israeli perspective
Capacity building value
What is for today

9. A vicious cycle- why NPO’s don’t invest
enough in overhead
Unrealistic funder
expectations
Pressure on
NPO’s to conform
Spend little on OH
/
Underreport their
expenditures
Source: Bridgespan (2008)

10. Funders do not incline to invest in OH
15%
10% 10%
8%
Foundation 1 Foundation 2 Foundation3 Foundation 4
Percent of program grants
allocated for indirect costs
Indirect cost allocation may differ by program
type within foundations
Over 50% of American adults
believe NPO’s should have OH
rate of 20% or less
Nearly 4 out of 5 believe OH
should held under 30%
Those surveyed ranked OH
ratios and transparency to be
more important in determining
their willingness to give than
demonstrated success of the
organization
Source: Better business Bureau’s Wise Giving
Alliance Survey (2001)
The public perceives low OH
cost as a sign of efficiency
Source: Bridgespan (2008)

11. Dialogue with social investors is not up
front
17%
60%
34%
30%
24%
16%
5%
No dialogue on any of these topics
Program expansion
Facility needs
Developing financial reserves
Working capital needs
Cash flow concerns
Debt burden
My organization can have open dialogue with
funders about…
66% of NPO’s have up to 3 months of expenses in their cash flow, 24% have up
to 1 month
A dialogue regarding
real financial needs is
missing
Source: Nonprofit Finance Fund (2013)

12. Sources of pressure to limit administrative
and funding expenses
Source: Center on Nonprofits and Philanthropy at the Urban Institute (2004)
36%
30%
24%
21%
8%
Government agencies Donors Foundations Federated campaigns Charity watchdogs
Do you feel pressure from _____ to limit OH, fundraising
and administrative expenses?

13. NPO’s report less OH than actual spent
21% 22% 21%
13%
32%
35%
26%
17%
Organization 1 Organization 2 Organization 3 Organization 4
Reported Actual
Overhead costs include Development costs
and Management & General costs
Causes are pressure from social investors
and uncertainty regarding IRS’s definitions
Reported VS actual overhead costs in 4 NPO’s
“The 20 percent norm is
perpetuated by funders,
individuals and nonprofits
themselves. When we
benchmarked our
reported financials, we
looked at others and we
realized that others
misreport as well”
Bridgespan’s client interviewed for
the report, Bridgespan (2008)
Source: Bridgespan (2008)

14. Some foundations invest directly in capacity
building: Mostly in the capacity building process
Annenberg Foundation: Provide training. Focus on leadership and boards.
Community Foundation of Monterey County: For geographically-based cohorts or
networks, offer a series of skill-building workshops.
Ford: Create a fund for small grants so that grantees can attend workshops of
their choice.
Haas Jr. Fund: Design OE grants to enhance leadership and/or offer leadership
development programs for grantees.
Global Fund for Children: Offer a capacity self-assessment tool that Programs can
use with grantees to better assess areas of capacity strength/needs.
Hewlett Foundation: Reorganize the OE Program so that it consults to Programs
on how best Programs make OE grants. Create an OE Cookbook 2.0 or an OE
toolkit for Programs (and for OE).
Edna McConnell Clark Foundation: Invest in fewer anchor grantees with a higher
level of service over a longer amount of time to impact the field. Co-design with
grantees and Program a longer-term capacity building plan per anchor grantee
that is aimed to deliver greater Program outcomes.
Source: OE Goldmine research Project (2011)

15. What is capacity building
How much is invested in capacity building in NPO’s
The Israeli Perspective
Capacity building value
Content

16. The public perspective
I am Finished with
Donations!
The Fat Paycheck of
the NPO’s CEOs
In which NPO does one earn
1.53 million shekels per
year?

17. The government policy restricts G&A costs
The Maximum Rate of
Administrative and
Overhead as a Percentage of
the Total Turnover
Income (NIS)
22%0-10
18%25-‫אוק‬
13%25-50
11%50-100
7%100 and up

18. New voices start being heard
2014 Applied in Grants
to Establish
Organizational
Effectiveness

19. What is capacity building
How much is invested in capacity building in NPO’s
The Israeli Perspective
Capacity building value
Content

20. The Packard Foundation case study
Sine 1997 the David Lucile
Packard Foundation has
awarded 1391
Organizational Effectiveness
grant to over 900
organizations.
Most of the OE grans were
for hiring a consultant for one
year
90% of the grants ranged
between $20K and &60K’
with an average of $40K.
The Packard Fundation capacity
building grants
New
capacity
was built
and has
sustained
itself with
significant
organizatio
nal wide
impact,
53%
New
capacity
was built
and has
sustained
itself with
some
organizatio
nal wide
impact,
30%
No new
capacity
was built?,
17%
83% of grantees reported new
sustained capacity was built
“At the Packard Foundation, we believe that well-managed and -governed organizations
are more likely to achieve their programmatic goals, and we invest in projects aimed at
developing grantee management skills and organizational capacity”
Source: OE Goldmine Research Project (2011)

21. Packard’s research show that impact of
OE on grantees can be determined
3%
8%
23%
47%
19%
No impact on program
services
Some (but no measurable)
impact on program services
Some measurable impact on
program services
Significant measurable impact
on program services
Transformational and
measurable impact on
program services
Impact of OE grant on program services
Over 2/3 reported
significant
measurable impact
Specific ways that OE
grants impacted
programs:
• Improved program
quality and reach
(35%)
• Becoming more
strategic with
programing (23%)
• Increased visibility,
community support
and leadership role
in the community
(10%)
• Increased program
resources (10%)
Source: OE Goldmine research Project (2011)

22. Where impact was most generated?
18%
21%
25%
27%
42%
Adaptive- Organizational
Learning
Technical- Fundraising skills
Adaptive- Organizational
Resource sustainability
Leadership- Board Leadership
Adaptive- Decision making
tools
New or long-term results by categories
(n=169)
Decision making tools-
Developing and using tools to
make decisions such as
strategic plans, evaluation tools,
fundraising plans, etc
Organizational resources
sustainability- Maintaining
financial stability in order to
adapt to changing environments
Organizational learning- Self-
assessing’ using assessment
data/ findings to conduct
strategic planning and following
through on strategic plans
Definitions:
Source: OE Goldmine research Project (2011)

23. A correlation between R&D investment and
organization growth had been proven..
7%
5%
4%
2%
Exhibiting
Many R&D
behaviours
Exhibiting
some R&D
behaviours
Exhibiting
very few
R&D
behaviours
Exhibiting no
R&D
behaviours
Average annual growth rate
1. Evaluating a program to figure out what
works’ rather than deciding if it works
2. Gathering data directly from program
recipients to determine how to improve
programs
3. Engaging key leaders and staff in
interpreting the client- derived data
4. Determining outcome metrics by listening
to’ documenting and sharing actual client
success stories and results
5. Bringing design leaders together to assess
and address the resources needed to
deliver programs effectively
6. Leveraging R&D insights to inform the
management of program implementation
Source: tcc group (2011), Success by design
45%
25% 25%
R&D Practices (from the Core Capacity
Assessment Tool)
% of NPO’s:
5%

24. …Alongside the impact of an IT investments
0
100
200
300
400
500
600
Annual IT costs Annual IT benefits realized
IT infrastructure costs and
estimated benefits for TLT
Source: Bridgespan (2008)
IT FTE’s
IT systems
costs
Staff time
savings
Staff
required to
add same
value without
IT systems
System cost
synergies
$524K
$170K
Estimated
benefit of
technology
investment =
$324K/year

25. An organization should be ready for an
effective capacity building investment
12%
21%
34%
36%
44%
46%
53%
57%
59%
68%
No organizational crisis
Resources to implement profect follow-up
Ready to look at options openly
Team readiness/ capacity
Board involevement
Consultant fit
Executive director engagement
the right time for the project
Resources to implement the project
Organizational readiness
Factors contributed most to capacity building success
Source: OE Goldmine research Project (2011)
Capacity building should be held when it is the right time for the
organization, stake holders are committed to change and there are
enough resources for project implementation

26. The responsibility for fostering
investment in capacity building is mutual
Social investors
Supporting organizations with general
operating funds
Committing to paying a greater share
of administrative and fundraising
costs in use-restricted grants
Fostering more open discussion
about overhead
NPO’s
Developing a strategy that explicitly
recognizes infrastructure needs
Communicating the logic for
increased overhead investment
through the organization and to the
board
Providing social investors with better
ways to measure performance than
program ratios.
Dialogues about “real” overhead rates can help shift the focus to the
real target - outcomes

27. Bibliography
Bridgespan (Apr 2008), Nonprofit Overhead Costs,
http://www.bridgespan.org/Publications-and-Tools/Strategy-Development/Nonprofit-
Overhead-Costs-Break-the-Vicious-Cycle.aspx#.UlEO_Ianrkg
The Core Capacity Assessment Tool (CCAT), http://www.tccccat.com/
Nonprofit Finance Fund (2013), State of the Nonprofit Sector Survey Results,
http://nonprofitfinancefund.org/files/docs/2013/2013survey_nat_summary.pdf
Better business Bureau’s Wise Giving Alliance Survey (2001),
http://www.bbb.org/us/storage/16/documents/WGA%20guides/holiday07.pdf
Center on Nonprofits and Philanthropy at the Urban Institute(2004), Who Feels
Pressure to Contain Overhead Costs?
TCC group (2011), Success by design, http://www.tccgrp.com/pdfs/7-
21_TCC_Briefing_Paper_LR.pdf
OE Goldmine research Project (2011), Executive Summary, http://packard-
foundation-
oe.wikispaces.com/file/view/Final%20OE%20Goldmine%20Executive%20Summary%20Oct
ober%2030%202011.pdf/271555728/Final%20OE%20Goldmine%20Executive%20Summar
y%20October%2030%202011.pdf

28. ‫המצגות‬ ‫לכל‬ ‫קישורים‬
28
‫ניהולית‬ ‫אפקטיביות‬
‫ידע‬ ‫ניהול‬
‫עצמיות‬ ‫הכנסות‬ ‫פיתוח‬
‫יעוד‬ ‫קהילות‬
‫השלישי‬ ‫במגזר‬ ‫שיווק‬
‫אסטרטגיה‬
‫יישום‬ ‫לתוכנית‬ ‫מאסטרטגיה‬
‫השלישי‬ ‫במגזר‬ ‫והערכה‬ ‫מדידה‬
‫של‬ ‫מדידה‬‫תוכנית‬‫טיפולית‬
‫מודל‬‫תיעדוף‬‫פעילויות‬
‫מקצועיים‬ ‫מתנדבים‬ ‫ניהול‬
‫מקומיות‬ ‫רשויות‬ ‫עם‬ ‫עבודה‬
‫בארגון‬ ‫חדשה‬ ‫פעילות‬ ‫פיתוח‬
‫נתונים‬ ‫מבוסס‬ ‫ניהול‬
‫ופיתוח‬ ‫מחקר‬ ‫יחידת‬ ‫הקמת‬(‫מו‬"‫פ‬)‫בעמותה‬
‫השלישי‬ ‫במגזר‬ ‫מיזוגים‬
‫בוחן‬ ‫מקרי‬ ‫אוגדן‬ ‫השלישי‬ ‫במגזר‬ ‫מיזוגים‬
‫בוגרים‬ ‫קהילת‬ ‫הקמת‬
‫בעמותה‬ ‫שינוי‬ ‫בתהליכי‬ ‫המנהל‬ ‫ועד‬ ‫תפקיד‬
‫בונים‬ ‫איך‬‫תוכנית‬‫שעובדת‬ ‫עבודה‬
‫בוגרים‬ ‫קהילת‬ ‫ניהול‬
‫ומתנדבים‬ ‫לעובדים‬ ‫משוב‬ ‫הדרכת‬
‫השלישי‬ ‫למגזר‬ ‫מבוא‬
‫בוגרים‬ ‫בקהילת‬ ‫והערכה‬ ‫מדידה‬
Capacity Building NPOS

29. Contact Information
http://www.novaproject.org/
info@novaproject.org
29th Karlibach, 2nd floor, Tel Aviv
Open only to graduates
of Nova