Capacity building and social purpose organisations
The ability to perform functions, solve problems and set and achieve objectives in a sustainable way is the basis of any effective organisation; this is true for commercial and social purpose organisations alike. In the for-profit world, we understand that this organisational effectiveness comes from strengthening and aligning various functions across the organisation and that building this capacity takes significant time and investment. However, the social purpose organisations have historically been left shortchanged for capacity building work by their funding sources. They find themselves struck in the “Nonprofit Starvation Cycle”: “so hungry for decent infrastructure that they can barely function as organizations—let alone serve their beneficiaries” [ii].
Stuck in this cycle and resource poor, social purpose organisations find it challenging to fund, plan and implement capacity building and for some the capacity building needs might not even be apparent.
Impetus-PEF’s venture philanthropy model recognized for breaking this vicious cycle for its investees, draws on international examples of highly effective funder and charities, and is grounded in the capacity building framework from venture capital and private equity toolkits. It collaborates with its investees on the challenging task of assessing their capacity, identifying gaps and strategising how to bridge these gaps.
Impetus-PEF – Impetus-PEF was formed in 2013, following the merger of two venture philanthropy organisations in the UK, Impetus Trust (founded in 2002) and the Private Equity Foundation (founded in 2006). It partners with charities and social enterprises working with the 11-24 year old from disadvantaged background in the UK focusing on education attainment and work readiness outcomes for these young people .[iii]
Delivering capacity building through a unique three pronged package of support
There usually aren’t any quick fixes in building capacity and it is widely acknowledged as a longer programme of work. Impetus-PEF aims to work with investees in depth and over a number of years taking a progressive filtering approach to managing its investments. Impetus-PEF works with non-profits having £250k+ annual income, typically a few years past start up mode. Working at the start of the value chain is a direct function of Impetus-PEF’s intention to invest in capacity building the nonprofits to create outcomes. Thus the focus is on creating social value rather than financial return.
It provides a combination of financial and non-financial support to its investees:
Hands-on management support: Highly experienced, in-house investment team provides hands-on management support to the charity’s leadership and build capacity. Each investee is provided with an investment director, who
- Builds trust-based relationships within the charity (leadership, board, partner, SMT)
- Helps create and embed performance management processes, facilitate impact centric decisions, ensures ownership, accountability and follow through of decisions
- Connects the investee with relevant domain and impact experts as well as deploys pro-bono partners on capacity building projects
Pro bono expertise: Impetus-PEF maintains a highly engaged pool of skilled experts, who volunteer their skills to portfolio investees. Many of these experts are drawn from world-class professional brands, which include major law firms, accounting organisations and management consultancies. This expertise is deployed for specific, mutually agreed capacity-building activities. Last year, Impetus-PEF deployed 8,300 hours of probono expertise over 200 projects across its portfolio of investees. Major pro bono projects included:
- Full business planning
- Strategy reviews
- Financial modelling
- Board reviews
- Legal restructuring
- IP reviews
- Accounts integration
Core funding: It provides significant, long-term, unrestricted grant funding, often in partnership with other funders, enabling the organisation to build its capacity to deliver high quality programmes. The funding is linked to the investee meeting pre-agreed milestones, which are tracked on a quarterly basis.
Building capacity for impact
Impetus-PEF recently chaired a 12 member working group to examine the issue of Investment readiness and capacity building in social organisations for G8 Social Impact investment Taskforce. The subsequent report on the findings outlined that social sector needs two types of organisational capacity building[iv]–
- Building strong resilient organisation which can grow sustainably- Operational Capacity
- Building organisation which can reliably and predictably produce meaningful social outcomes, eventually to larger number of people – Impact Capacity
Impetus-PEF’s addresses this by supporting its investees to build both of these capacities in parallel (as it should be developed) to ensure that its portfolio organisations are efficiently run and focused on impact. The partnership with investees is managed through phased investments, with the ability and capacity to progress being reviewed at the end of each phase. The following diagram depicts Impetus-PEF’s three investment phases and capacity building activities delivered in each phase.
Impetus-PEF approaches capacity building as an incremental phenomenon. The quantum and kind of capacity building work stream for each investment phase are aligned with the advancement an investee is expected to make on the organisational effectiveness scale during that phase. Impetus-PEF measure organisational effectiveness using its performance framework based on five pillars[vi]:
- Leadership and Governance
- Programme (delivery and impact)
- Performance focus
- Organisational sustainability
Typically, reassessing aspirations and strategy provides the foundation for building capacity. This starts with articulating what the organisation wants to accomplish in the next phase of its development. Helping investee build their Theory of Change is a key work stream in the first phase of an Impetus-PEF investment. Conducted over 4 workshop days, the exercise is aimed at getting to an organisation wide agreement on the desired future state of the organisation and its programming. Ensuring that every part of the organisation is included in the process is crucial to its success – hence, a combination of trustees, senior management and frontline team all participate in the workshops. During the workshops, Impetus-PEF guides the charity to:
- Define its mission and the type of young people it wants to works with (its target population)
- Sets out the short-, intermediate- and long-term outcomes it will commit to securing for those young people
- Outlines the programme design which will deliver these outcomes
- Determines how it will manage that programme to ensure that every young person makes progress towards these outcomes.
This provides a “blueprint” which guides investee in planning and implementing changes to arrive at this, typically over 3-5 years. This also helps Impetus-PEF scope the capacity building work needed to support its investee in aligning strategy and organisational capacity.
When Impetus-PEF started its investment in Street League (SL), its programme delivered football sessions to engage and motivate unemployed and other economically disadvantaged young people. In the initial investment phase, Impetus-PEF supported [vii]
- Recruitment of new leadership team, Chair and other trustees;
- Clearer definition of SL’s target population – 16-25 years old from deprived communities;
- Development of Street league’s programme to include an academy offering, delivering skills based training and employability skills with an aim to progressing these young people into further education, training and/or employment
With shift in aspirations of its leadership along with Impetus-PEF’s impact driven capacity building support, delivered over various investment phases, Street League has
- Moved from measuring impact by counting how many people played football with them to measuring what really matters: actually getting the young people into work, training or education[viii]
- Delivers 5 nationally-recognised qualifications on the Academy programme
- Programme has grown to 12 cities across UK
- Currently, 70% of its graduates achieve one of the targeted outcome – progression to training, further education and/or employment[ix]
There are different ways in which social investors and foundations can support SPOs build their capacity, so that SPO’s are in control and have the flexibility to respond to their changing socio-economic environment. Impetus-PEF’s model is unique in the way it partners with its investees for longer term, with clarity of what needs to be accomplished and uses a combination of hands on management support, deployment of its network experts and unrestricted grant funding to strengthen SPO’s core outcomes producing infrastructure.
[i] Impetus-PEF practices a venture philanthropy model that includes some investments in social investment vehicles such as Social Impact Bonds where these support the wider portfolio strategy
[ii] Ann Goggins Gregory & Don Howard , Stanford Social Innovation Review, Fall 2009
[iii] Impetus-PEF website – http://www.impetus-pef.org.uk/who-we-are/our-mission/
[iv] Impetus-PEF, Building the Capacity for Impact Report, prepared for UK National Advisory Board to The Social Investment Taskforce, Sep 2014
[v] Introducing Impetus-PEF slide deck and interview with Julia Grant, Portfolio Director, Impetus-PEF
[vi] Introducing Impetus-PEF slide deck and interview with Julia Grant, Portfolio Director, Impetus-PEF
[vii] Impetus Impact Report results 10/11, Page 22
[viii] Introducing Impetus-PEF slide Deck, Quote by Matt Stevenson-Dodd, CEO-Street league on why Charities come to Impetus-PEF
[ix] Street League website – http://www.streetleague.co.uk/impact/we-re-proud-of-our-track-record/
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