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Capacity Strategy Capacity Building Philanthropy Sector Insights Funders Jan 30, 2026

Capacity Building: What We Know and the Questions Ahead

What capacity building research shows and misses — about funding, equity, and impact, and the questions informing Catalyst Exchange’s next report.

Capacity building is central to the social sector’s ability to deliver lasting impact. It shapes how public sector institutions and nonprofits organizations function and evolve – by supporting strong teams, financial management, adaptive strategy, meaningful evaluation, and the systems required to sustain mission over time. Yet, capacity building remains inconsistently funded, unevenly accessed, and poorly understood field-wide, including what it takes for these investments to lead to real, durable change.

At Catalyst Exchange, we work alongside mission-driven leaders, funders, and intermediaries to strengthen organizational capacity through structured advising, continuous learning, and connection to expertise. As we prepare to launch our inaugural State of Capacity Building report this year, we began with a foundational step: a scan of existing research published over the last two decades. That review surfaced a clear takeaway. Despite a rich body of research about capacity building, it offers limited insight into today’s operating realities, current funding dynamics, and the time-bound pressures organization leaders are navigating now.

Together, the literature points to both what the field broadly agrees on and what it still lacks. It highlights persistent capacity challenges, mismatches between nonprofit needs and funder practices, and meaningful equity gaps in access to support. At the same time, it leaves critical questions unanswered about alignment, access, and outcomes.

In this blog, we step back to reflect on what the existing literature reveals about the current state of capacity building research, and where it falls short of capturing today’s realities. We then highlight consistent findings that emerge across the studies, grounding the conversation in what the field knows so far. Finally, we look ahead to the questions, actions, and engagement we hope to advance through Catalyst Exchange’s upcoming State of Capacity Building report.

 

What the Literature Tells Us and What It Doesn’t

Across two decades of national research, a set of patterns emerges. Capacity challenges are widespread, interconnected, and shaped by structural funding dynamics. Equity gaps persist. While funder practices have evolved, misalignments remain. 

At the same time, most studies focus on a single audience (either nonprofits or funders) and rarely examine how their experiences intersect. Many rely on self-reported data collected at a single point in time, making it difficult to understand how capacity needs can shift or compound over time. As a result, the field lacks a shared, data-informed understanding of how capacity building is funded, accessed, and experienced across the full ecosystem.

With that context in mind, the findings below reflect what the literature consistently shows: where capacity building systems fall short, and which organizations are most affected.

 

What We Learned from Existing Reports

  • 1) Capacity challenges are widespread and reinforced by existing funding structures

Nonprofit leaders consistently report challenges across multiple capacity domains at once. The Building Movement Project’s Meeting the Need (2022) finds that nearly 80% of leaders struggle with operations, communications, and development, with fundraising itself cited as a top capacity challenge.

This creates a tension: organizations need stronger fundraising, staffing, and infrastructure to build capacity, yet short-term, project-restricted funding limits their ability to invest in those very systems. As a result, leaders report having funding for programs but not for staff, reserves, or long-term sustainability - patterns also reflected in the Nonprofit Finance Fund’s State of the Nonprofit Sector Survey (2025).

  • 2) Staffing and burnout are persistent capacity constraints

Talent challenges remain one of the most urgent capacity issues in the sector. The Center for Effective Philanthropy’s State of Nonprofits 2025 reports that a majority of nonprofit leaders continue to struggle to fill vacancies due to insufficient funding to recruit, retain, and support staff, an issue that has persisted from 2023 through 2025.

Burnout compounds these pressures. Leaders report high concern about both staff and executive burnout and consistently identify flexible, core funding as the most effective lever for sustaining organizational capacity over time.

  • 3) BIPOC-led organizations face distinct access and equity gaps

Equity gaps in capacity building support are among the clearest findings in the literature. According to the Building Movement Project (2022), leaders of BIPOC-led organizations are more likely to seek capacity building support, but receive it less consistently than white-led organizations.

BIPOC respondents also report greater difficulty finding providers who understand their organizations and communities, pointing to a shortage of culturally grounded, equity-informed capacity building support. These barriers reflect deeper issues of trust, fit, and power within the capacity building ecosystem.

  • 4) Funder practices show progress and persistent mismatches

Recent national data from the 2025 National Study of Philanthropic Practice highlights how funder priorities and practices are evolving over time. For example, a growing share of funders (74%, up from 45% in 2017) now report that DEI is central to their strategy. The data also points to mixed patterns in how funders support nonprofit capacity.

While explicit capacity building support has declined from 86% of funders in 2017 to 77% in 2025, more funders are providing multiyear and general operating support, which can strengthen capacity in less formal ways. Still, a key mismatch remains: while 80% of funders require evaluation, 38% do not fund it, creating unfunded capacity demands for nonprofits.

5) Capacity building works best when it is contextualized and supported over the long-term

Across studies, effective capacity building is described as contextual, continuous, and collective. Research from GEO (2016) and the National Council of Nonprofits (2017) highlights the value of peer learning, cohorts, and networks that are trust-based and sustained over time.

These approaches contrast with one-off technical assistance and help illuminate why tailored, relationship-driven forms of support are often associated with sustained capacity strengthening.

 

From What We Know to What Comes Next

While these findings are consistent, the literature also makes clear what is missing. Across studies, we still have limited visibility into:

  • How capacity needs align or fail to align with funder priorities
  • How capacity building needs and access shift over time
  • Who can access capacity building resources, and under what conditions

Even broad sector snapshots, such as Independent Sector’s Health of the U.S. Nonprofit Sector, note persistent data gaps by organization size, subsector, and leadership demographics. Without parallel data from nonprofits and funders, the field lacks a shared baseline for understanding where capacity building investments are working and where they are falling short.

Catalyst Exchange's 2026 State of Capacity Building report is designed to address these gaps. Rather than replacing existing studies, the report will:

              • Synthesize nonprofit and funder perspectives to map the capacity building ecosystem

              • Surface misalignments, gaps, and opportunities across funding, delivery, and access of capacity building services

              • Establish a baseline snapshot that can be tracked and updated over time

              • Translate findings into field-facing insights

The inaugural report will focus on education and youth development organizations, drawing on a multi-audience survey and Catalyst’s experience as a capacity building intermediary and advisor. Our goal is for this report to become a recurring, field-facing resource that reflects current realities while pointing toward data-informed action.

This spring, we’ll be launching a survey and inviting partner organizations to participate – stay tuned for an opportunity to contribute your insights. We look forward to continuing this conversation and sharing more as the report takes shape.

Sources Referenced
Sun Young Yoon, Ph.D. and Erin Harless

Sun Young Yoon, Ph.D. and Erin Harless

The Strategy & Insights team at Catalyst Exchange advances our strategic vision by driving organizational learning, alignment, and continuous improvement. We design rigorous measurement systems and translate data into clear, decision-relevant insights – turning research and strategy into actionable initiatives, measurable outcomes, and compelling stories that strengthen Catalyst’s model and inform practice across the field.