The Cracks Are Showing: A Candid Look at Capacity in the Social Sector

An organization's capacity, its people, systems, processes, and relationships, is the infrastructure that makes its mission possible. Like most infrastructure, it's invisible until it starts to crack.

Those cracks are becoming more visible across the social sector. The ways of working that got us here can’t simply continue unchanged. Building a stronger social sector requires an honest look at where we are today, where we want to be, and how we get there.

SXSW EDU 2026 offered a moment to pulse check how the sector is navigating mounting pressure during a meetup co-hosted with Nicole Rodriguez Leach, Executive Director of Grantmakers for Education.

We brought together nonprofit leaders, educators, grantmakers, and consultants for a candid conversation about the state of capacity building in philanthropy. We explored the beliefs people hold, what we’re seeing on the ground, and how the ecosystem needs to shift.

In our time together, it was clear this conversation has never felt more urgent.

What We Heard

Capacity building is essential, and must be funded as such

“Capacity building is necessary and the only way to create real innovation and change.” – Nonprofit leader

Capacity building makes long-term impact possible, yet it remains one of the hardest areas to resource effectively. Organizations need sustained funding, dedicated time, and focused attention to strengthen their people and systems. At the same time, support must match the pace and complexity of today’s challenges. Capacity investments can be described in three ways:

• Painkillers, which address immediate and urgent needs
• Vitamins, which support strategic growth over time
• Vaccines, which build resilience across the broader ecosystem

This is about people and our missions, not just systems

“Humanity must be at the center.” – Nonprofit leader

“If people aren’t okay, the work won’t be either.” – Nonprofit leader

Capacity building is not just about tools or processes. It is fundamentally about people, culture, and leadership. This includes professional development, workplace culture, adaptability, and strategic planning.

Strong relationships hold this work together. Cross-sector collaboration and communities of practice play a critical role in helping organizations learn, adapt, and sustain their efforts.

Long-term thinking and short-term survival don't have to be at odds

“Mission-alignment comes first, and capacity building and sustainability go hand in hand.” – Educator

• Capacity building must shift from being seen as a one-time intervention to an ongoing, integrated effort.
• Artificial intelligence is emerging as a major lever for change, but it requires thoughtful and inclusive integration. At the same time, strategic planning, leadership development, and organizational systems must become more adaptable to keep pace with evolving needs.
• There will always be a need for painkillers. The challenge is ensuring that we are also consistently investing in vitamins.

Where Do We Go From Here?

If we are asking more of nonprofit and philanthropic leaders during this time of rising need and uncertainty, then more is also required from the broader ecosystem.

Funders and philanthropic leaders must provide unrestricted capital alongside targeted capacity-building dollars. They should also rethink how impact is measured and better align funding practices with the realities grantees face.

Nonprofit leaders can strengthen their case by more clearly connecting capacity-building efforts to outcomes and mission impact.

Everyone has a role to play in continuing this conversation. Share these insights with your networks! The more we lift up candid dialogue about the sector, the easier it becomes to recognize its critical role in powering a thriving philanthropic ecosystem.