Over at Social Velocity, Nell Edgington raises a good point:

I met with a nonprofit Development Director earlier this month who has had a really hard time convincing their CEO and board to let them spend money on a donor database and some fundraising materials. Yet, at the same time the Development Director is expected to raise millions of dollars in revenue. That sounds completely crazy, doesn’t it?  But in the world in which I work that is often the rule rather than the exception. Infrastructure, capacity, fundraising, marketing, and operations dollars are somehow bad, dirty, not necessary, dismissed.

In my experience, local government’s are quite stingy when it comes to investing in the capacity-building of key local organizations that they contract with.   This is indeed shortsighted.  Everyone gets mired in painful systems and low quality human capital because no one wants to make the initial investment in replacing the mediocrity.

Now, the issue is what is good policy to get out of the downward spiral Edgington highlights.  In some cases, like Austin’s Community Housing Development Organization operating expenses grant, local government’s are providing some bridge financing by funding basic expenses.  Also, Community Development Block Grants can help with operational expenses.  I am certain that some enlightened policymakers probably are supportive of allocations of existing funds of programs like CDBG for capacity building.  But all of these are in the status quo and they definitely do not create culture change amongst funders.

So, what is to be done? Personally, if I was leading a non-profit, I would organize my Board members propose that local governments create pools of capacity building grants.  The grants would only be for ROI positive projects such as changing technology, investing in fundraising, or acquiring human capital that greatly improves the efficiency or effectiveness of the organization.   If foundations see that cities and counties are boosting the impact of organizations by investing in proven capacity-building moves, it might jumpstart some competition, and they’ll replicate those programs in their own way.