Over the past few years, foundations of all types have embraced “capacity building” for their grantees as a core part of their strategy for generating social impact. Their strategies include providing a range of supports for their grantee partners from add-ons to existing program grants to larger scale organizational strengthening programs. What these foundations all have in common is a belief in something we call a “capacity dividend”: the notion that investments in their grantee partners’ capacity offers “returns” in the form of greater efficiency, effectiveness, and ultimately greater social impact.
But how does this understanding of the power of ‘capacity building’ change for foundations that have an outsized influence in their community? Does being the primary funder in a particular domain or location come with special responsibilities? Should this dynamic change a foundation’s investment strategy?