September Topic: How Can Nonprofits Invest in Change?

This month, we’re exploring how nonprofits are using “change capital” to invest in organizational transformation and thrive in the long-term.

How do nonprofits approach investing in transformative organizational change? Image by Gérard Beaulieu.
How do nonprofits approach investing in transformative organizational change? Image by Gérard Beaulieu.

This post is the seventh in a monthly series of investigations into the practices, processes, and behaviors that organizations undertake in order to stay continuously adaptive. Learn more about this series.

We’re continuing with our new editorial direction, in which we’re deeply exploring our 2014 Research QuestionHow do organizations stay continuously adaptive?

In September, we’re focusing on the topic of change capital to explore how we can build a capital structure to invest in organizational transformation and thrive in the long-term.

What is change capital, exactly?

For a long time, I associated the term “capital” or “capital campaign” with the act of accumulating millions of dollars for an endowment or a new building — probably because that’s how I was familiar with the term. But endowments and buildings don’t strike me as change capital. They’re more akin to “stability capital.”

So, then, what is change capital?

My understanding (right now) is that change capital is the resources your organization needs — both financial and human — to stay responsive to shifting external conditions. In other words, it’s the money, skills, and knowledge you’ll need to adapt what you do (your programs) and how you do it (your operations and structure) to the demands of an evolving world.

Who is leading the charge in change capital right now?

Nonprofit Finance Fund (NFF) is all over this topic, so I’ll use their research and practice as a jumping off point.

According to NFF, change capital is:

“an investment in a organization to:
1. support improvements in the efficiency or quality of its program or operations, or
2. support growth, downsizing or other adjustments to the size and scope of the organization to better support its costs with reliable, recurring revenue.”

This mostly makes sense to me: it’s a strategic investment in change.

But, after reading their definition, I still have two questions:

  1. What about change that goes beyond “improvements” and “adjustments”? I’m trying to figure out where transformative change, the kind that’s about letting go of old practices that aren’t working in favor of new approaches, fits into this definition. To me, this definition seems relevant when thinking about technical fixes, but not about innovation and adaptive change.
  2. What about the human element? This definition doesn’t explicitly name the value of change management or process facilitation, which are, to me, essential parts of change. If discussion of human capital isn’t included, might this definition imply that financial investment itself promotes change? I have a hunch that powerful change comes in the combination of financial change capital and appropriate process intervention, which creates the space and conditions help people navigate that difficult and vulnerable work.

On both questions, I’m biased by my experience at EmcArts, where we forge a deep connection between adaptive change, change capital grants, and strong process facilitation.  In our experience, capital alone, of any kind, rarely makes change happen.

In fact, one of the things I’m most proud at EmcArts is that our Innovation Lab programs support participants with a combination of intensive process facilitation and capital change grants to support both the human and cash costs of testing out new approaches.

I’d argue that if we want the sector to be adaptive, rather than incrementally focused, we have to make sure that both the financial and human elements are baked into the way we think and talk about change and change capital.

So, what does change capital look like in practice?

I’m excited that we’ll be doing an interview with the folks at Global Action Project later this month. They recently published an article, “Change Capital Investments: One Tool for Moving to Abundance,” that outlines their process in using change capital and discusses the relationship between grantees and funders in creating space for change capital.

We’ll also be talking with Holly Sidford of Helicon Collaborative, one of the main architects of NFF’s work on change capital. She also worked with NFF’s Leading for the Future initiative. In my conversation with her, I hope to dive deeper into understanding how $1 million in change capital was implemented at ten organizations.

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How can non-profits invest in change?

This month, we’re exploring a few questions to understand how you and your organization thinks about capital structures and investment in change.

About
Karina Mangu-Ward is the Director of Strategic Initiatives at EmcArts.