Tavan Pechet on How Nonprofits Can Build Their Capacity and Prepare for 2021

At a time when nonprofits are under more strain than they have been in a long time, their services have never been more necessary. Tavan Pechet is the president of Pechet Advisors, and he has a thorough understanding of both the importance of capacity-building and how nonprofits and grantors can do it as effectively as possible. He was kind enough to take some to chat with us about these issues, as well as how organizations are coping with COVID-19 and other trends we should be looking out for in the nonprofit sector in 2021. 

Resilia: How are grantors and nonprofits adjusting to COVID-19, particularly in terms of how they allocate their budgets and manage limited resources? How will these changes shape their behavior in 2021?

Tavan Pechet: Issues like due diligence and financial management are vital. COVID showed grantors and organizations why these issues are so important – there’s a vast disparity between nonprofits that have prioritized good financial planning and those that only had a few weeks of cash in the bank at the beginning of the pandemic. It’s perfectly reasonable for grantors to refuse to fund organizations that haven’t managed cash flow responsibly.

Grantors often know a lot about financial management and have other forms of operational expertise that can help organizations build capacity. For example, a grantor could provide financial support to help a nonprofit hire the right third-party CFO, develop an effective fundraising training strategy, or bring in people for strategic planning. This is why we should expect to see more capacity-building grants in the future – a grantor may say to a nonprofit, “We love the work you’re doing, but you’re not managing resources the way we need you to.” 

Resilia: Do you expect to see more collaboration in the nonprofit sector in 2021? 

Tavan Pechet: Yes. Coalitions of nonprofits are working together on programs, but they’re also collaborating more than I thought they would on fundraising. This allows small and mid-size organizations to leverage relationships that are critical to big donors.

One of the reasons for increased collaboration in the sector is the significant overlap between the problems communities face. Consider an issue like the lack of access to broadband, which can have implications for students who don’t have the same digital educational tools, families who can’t take advantage of telemedicine in the middle of a pandemic, and so on. In the past, many donors didn’t understand the extent of this interconnectivity, but hopefully we’re seeing growing awareness of it. 

Resilia: How do you think interactions between grantors and nonprofits are changing? How can they build healthier relationships?  

Tavan Pechet: Grantors will increasingly work with organizations on capacity-building. One of the first things nonprofits should look into is a strategic planning consultant who can help them identify better and cheaper ways of doing things, which technology platforms will reduce costs, which financial strategies make the most sense, and so on. Nonprofit governance, which can help organizations scale sustainably, is wildly underplayed – especially in smaller nonprofits. 

Grantors have to focus on empowering management teams. While it may make sense to restrict funding to a specific area of focus (such as strategic planning or personnel), let organizations figure out how they want to structure their operations and bring people in. It has to be the nonprofits taking the initiative, not grantors. The emphasis on capacity-building among grantors is a wonderful trend, but they should be wary of imposing on organizations. 

Resilia: Despite the fact that COVID-19 vaccines are being distributed, we’re still inundated by a huge wave of infections. What should grantors be doing to help nonprofits get through the pandemic? 
Tavan Pechet: First, lighten the restrictions and reporting requirements that bog nonprofits down. Second, recognize that this is not the best time to go out and find new issue areas and organizations – double down on organizations you know and trust. Ask yourself: Have I done my due diligence on this organization? Is my money going to have an appreciable impact?