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Abstract
This study measured 3 indicators of nonprofit effectiveness and the extent to which capacity-building activities improve these indicators of effectiveness. Nonprofit organizations contribute 16% to the gross domestic product of the U.S. economy. Nonprofit organizations provide a variety and multitude of services that are needed to support vulnerable populations for the good of society. Scandals and requests for increased funding have promoted a focus on organizational effectiveness and performance. However, measuring the effectiveness of nonprofit organizations has been elusive because stakeholders have varying perspectives of what should be measured. This research focused on 3 aspects of the effectiveness construct: financial ratios, board effectiveness, and reputation. These 3 aspects were measured using the independent variable of capacity building. Capacity building represents initiatives employed by organizations to improve aspects of their operations that assist with accomplishing their mission. Capacity building stands to provide an organization with enhanced capabilities to meet the effectiveness expectations of their many stakeholders. The surveys and interviews conducted in this study stressed the importance of organizational capacity and capacity-building activities. Organizations that had a high frequency of capacity-building activities demonstrated organizational performance improvement, a higher degree of board effectiveness, and more financial efficiency.
