The Conference of Southwest Foundations 55th Annual Conference

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The Conference of Southwest Foundations55th
Annual Conference
Capacity BuildingA National
PerspectiveSeptember 24, 2003
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Just as a citys physical infrastructure
crumbles over time if it is not maintained, so it
is with nonprofit infrastructure. While the
signs of erosion are rarely dramatic in one
year, prolonged neglect will ultimately result in
their total breakdownand the collapse of the
programs they operate Joyce Bove and Lawrence
Mandell both nonprofit managers and those
that fund them must recognize that excellence in
programmatic innovation and implementation are
insufficient for nonprofits to achieve lasting
results. Great programs need great organizations
behind them. Venture Philanthropy
Partners Nonprofits cant be helped by
embracing different reforms as their popularity
increases or wanes. They must set priorities
carefully and invest their scarce reform energy
on a handful of priorities . Paul Light
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A Climate That Pressures Nonprofits to Reform

• The crisis of legitimacy sparked by scandals
• The demands of funders, clients and advocates and
  the public
• Growing competition among providers including for
  profit entities
• A dramatic rise in the number of organizational
  consultants helping the sector identify problems
  and implement solutions
• Increasingly professionalized workforce that has
  led to a large degree of similarity across
  organizations and sectors.

Source Snapshots, The Tides of Nonprofit
Management Reform, May 11, No. 11, The Aspen
Institute
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The Four Tides of Reform

• The scientific management model establishes a
  template of best practices that all nonprofits
  should adopt
• The war on waste model seeks to improve nonprofit
  performance through mergers, acquisitions, shared
  administrative costs, and other techniques
  borrowed from the corporate sector
• The watchful eye model exposes nonprofit
  organizations to public scrutiny through
  disclosure as a tool for discipline
• The liberation management model seeks outcome
  measurement as the ultimate guide for nonprofits,
  regardless of how they are configured

Source Snapshots, The Tides of Nonprofit
Management Reform, May 11, No. 11, The Aspen
Institute
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The (Proposed) 100 Billion Opportunity In The
Nonprofit Sector

• Reduce Funding Costs 25B
• Distribute Holdings Faster 30B
• Reduce Program Service Costs 55B
• Trim Administrative Costs 7B
• Improve Sector Effectiveness Unknown

Source Bradley, Jansen and Silverman, The
Nonprofit Sectors 100 Billion Opportunity, Harvar
d Business review, May 2003
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What Is Capacity Building?

• The ability of nonprofit organizations to fulfill
  their missions in an effective manner.
• (John S. and James L. Knight Foundation)

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What Nonprofits Need

• Strengthening of their internal systems
• Diversifying their funding bases
• Improving their management practices
• Incorporating into their operations sophisticated
  contracting
• Marketing and fundraising strategies
• Tools to document their impact
• Capital funding and loans
• Assistance in using technology to implement
  programs and activities
• They need to learn to lobby to protect programs,
  services and missions

Source Cynthia Gibson, Helping Nonprofits Help
Us, Spring 2002, Carnegie Reporter,
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Seven Elements Of Organizational Capacity
The higher-level elements of capacity define the
organi-zations ultimate purpose and translate
that purpose into a concrete set of goals,
programs and required skills
Aspirations
Culture
Culture
Strategies
Organizational skills
The foundational elements of capacity allow an
organization to build/achieve its organizational
skills, strategy and mission/vision
Organiza-tional structure
Human Resources
Systems and infrastructure
Culture
Source Effective Capacity Building In Nonprofit
Organizations, Venture Philanthropy Partners
McKinsey Company, 2001
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Measuring Organizational EffectivenessThe
Competing Values Framework
Human Relations Model Participation, discussion,
and openness as ways to improve morale and
achieve commitment
Internal Process Model Internal processes such
as Measurements, documentation, And information
management As methods to achieve
stability, Control and continuity.
Open Systems Model Relates insight,
innovation, And adaptation as a path towards
external recognition, Support, acquisition
and growth
Rational Goal Model Seeks profit and
productivity through direction and goals.
Ronald Rojas,A Review of Models For Measuring
Organizational Effectiveness Among For-Profit
and Non-profit Organizations. Nonprofit
Management Leadership, Vol. 11, No.1, Fall 2000
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5 Areas Where Most Leaders Could Use Some Help

• Making Better Decisions
• Personal Accountability for Results
• Professional and Personal Growth
• Dealing with Isolation
• Managing and Adapting to Change

Source The Executive Committee (TEC)
http//www.teconline.com
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Organizational Capacity Building Subjects

• Accountability/Ownership of Results
• Board Development
• Business Planning
• Change Management
• Communications
• Financial Management
• Fundraising
• Human Resource Management
• Knowledge Management
• Leadership Development

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Organizational Capacity Building Subjects (Contd)

• Management Development
• Marketing Management
• Operations Management
• Organizational Structure/Decision Making
• Outcomes Management/Measurement
• Strategic Planning
• Team Development/Group Problem Solving
• Technology Management

Note This list of categories excludes
program/service specific capacity building
topics which are equally important, but
certainly vary by sector, community and level of
need
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Some Areas Where Communities May Need To Improve

• Building community-wide consensus on critical
  issues
• Citizen participation
• Community studies and trend analysis
• Community visioning and planning
• Convening citizens, community leaders, and policy
  makers
• Determining the assets and needs of the community
• Leadership development
• Public education
• Racial tensions
• Resource development
• Service delivery systems
• Technology and communications systems
• Volunteer recruitment

Source Connolly and Lukas, Strengthening
Nonprofit Performance A Funders Guide To
Capacity Building, Wilder Publishing, 2002
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Core Components of An Effective Foundation
Capacity Building Initiative

• Comprehensive - strive for one stop shopping
• Customized service must be custom tailored to
  the need of the recipient client
• Competence Based providers must have requisite
  skills to do the work and both funders and
  grantees must be knowledgeable consumers
• Timely funding shouldnt be too slow to be
  relevant or too quick to allow the appropriate
  context and preparation. Moreover, the duration
  of funding is an important issue.
• Peer-connected its important to build in peer
  to peer networking, mentoring and information
  sharing
• Assessment-Based spend the time up front
  properly scoping the intervention and have
  accountability measures built into the process
• Readiness-Based grantees must be intervention
  ready and to fully leverage the benefits of the
  engagement
• Contextualized assistance should be applied in
  a vacuum and it should fit reasonably well with
  other initiatives already underway

Source Thomas Backer, Strengthening Nonprofits
Foundation Initiatives for Nonprofit
Organizations, The Urban Institute, April 2001
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Capacity Building Strategies Used By Funders

• Program grants that promote organizational
  effectiveness
• General operating support grants
• Grants specifically to promote organizational
  effectiveness
• Capital financing for nonprofits and
  intermediaries
• Grant support to capacity builders and
  intermediaries
• Grants to conveners, educators and researchers
• Direct management assistance

Source Connolly and Lukas, Strengthening
Nonprofit Performance A Funders Guide To
Capacity Building, Wilder Publishing, 2002
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Segmenting NPOs by Their Access To and Use of
Consultants
Large Size Resources
Well-Known Charities
Hospitals
Less Market Discipline Primarily contributed
income. Less business competition
More Market Discipline Primarily earned
income. More business competition
Local Community Development Corp.
Local Social Service Agency
Small Size Resources
Source Consulting To Nonprofits An Industry
Analysis, Harvard Business School Social
Enterprise Field Study, April 1999
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How the Market Is RespondingSegmentations and
Potential Pairings

• Small, less market-disciplined nonprofits tend to
  be served by solo practitioners or
  volunteer-broker organizations
• Large, less market-disciplined nonprofits tend to
  attract consulting from large business
  consultants offering pro bono services
• Small, market-disciplined non-profits tend to
  hire boutique firms
• Large, market disciplined organizations and solo
  practitioners
• Small, non-market disciplined nonprofits with
  management support centers

Source Consulting To Nonprofits An Industry
Analysis, Harvard Business School Social
Enterprise Field Study, April 1999
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Lessons Learned from Capacity Building Funders

• Follow others promising practices
• Do no harm
• Develop clear expectations regarding
  confidentiality and communication
• Build on nonprofits strengths
• Remember that one size does not fit all
• Be patient and flexible
• Coordinate efforts with other funders
• Hold your organization to the same standards you
  expect of others
• Keep the focus on mission

Source Connolly and Lukas, Strengthening
Nonprofit Performance A Funders Guide To
Capacity Building, Wilder Publishing, 2002
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Recommendations for 3rd Party Funders

• Sector-Level Interventions
• Help nonprofits build skills and capacity
• Tackle the major challenge of performance
  measurement
• Think hard about funding practices and the
  sometimes problematic incentives
• Address the challenges posed by small scale
• Consulting Industry-Level Interventions
• Collect and provide information about consulting
  availability and quality
• Create a central registry and/or information
  clearinghouse
• Capture best practices and support knowledge
  generation that will benefit all players in the
  industry
• Push for greater scale/decreased fragmentation of
  the industry
• Recognize the limits of consulting

Source Consulting To Nonprofits An Industry
Analysis, Harvard Business School Social
Enterprise Field Study, April 1999
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Recommendations for 3rd Party Funders

• Segment-Level Interventions
• Support nonprofits with the greatest need and the
  least access
• Guide the matching between consulting segment and
  nonprofit segment
• Engagement-level Interventions
• Encourage and facilitate accountability
• Help ensure accountability when payment is not a
  factor (e.g., pro bono work)
• Help stimulate competition in the consulting
  industry by requiring a competitive bidding
  process as a prerequisite for funding consulting
  (however dont just encourage low price bidding)
• Help nonprofits diagnose need, to overcome the
  gap between need and demand
• Fund implementation as well as front-end
  strategic review

Source Consulting To Nonprofits An Industry
Analysis, Harvard Business School Social
Enterprise Field Study, April 1999
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Appendix
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Comparing the Four Tides of Reform

• Scientific Management
• Key terms Standards, codes of conduct
• Central assumptions A set of core practices
  makes all organizations effective
• Focus Internal improvement
• Primary implementator Individual organizations
• Cost of Implementation High
• Time to higher performance Moderate to long,
  particularly if new systems are involved
• Measurability of change High
• Level of Independence Low
• Stress On Organization High
• Patron Saint Frederick Taylor
• Patron Organization National Charities
  Information Bureau
• Strengths Promotion of basic good practices
• Weaknesses Possible focus on unimportant
  elements of organizational performance

Source Paul Light, Making Nonprofits Work
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Comparing the Four Tides of Reform

• War on Waste
• Key terms Reorganization, downsizing, strategic
  alliances, reengineering
• Central assumptions Staff, processes, and
  sub-sectors can be organized to create maximum
  efficiency
• Focus External efficiency
• Primary implementator Large funders or
  collections of nonprofits
• Cost of Implementation High
• Time to higher performance Short to long,
  depending on degree of reorganization
• Measurability of change High
• Level of Independence Low to high
• Stress On Organization High
• Patron Saint Michael Hammer
• Patron Organization Local corporations and
  funders
• Strengths Elimination of duplication,
  concentration of funding resources
• Weaknesses Fear within the organization,
  reductions in diversity

Source Paul Light, Making Nonprofits Work
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Comparing the Four Tides of Reform

• Liberation Management
• Key terms Deregulation, outcomes management,
  employee empowerment
• Central assumptions Organizations should focus
  on results-not rules-and be entrepreneurial
• Focus Internal freedom and competitiveness
• Primary implementator Individual employees and
  organizations
• Cost of Implementation Low to high, depending
  upon density of rules and structure
• Time to higher performance Short to long,
  depending upon density of rules and structure
• Measurability of change Low to moderate
• Level of Independence Very High
• Stress On Organization Low
• Patron Saint Al Gore
• Patron Organization United Way of America
• Strengths Focus on measurable progress toward
  mission
• Weaknesses Potential loss of discipline, focus
  on wrong customers

Source Paul Light, Making Nonprofits Work
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Comparing the Four Tides of Reform

• Watchful Eye
• Key terms Transparency
• Central assumptions Making financial and
  performance information visible will allow
  competition to weed out inefficiency
• Focus External visibility
• Primary implementator Individual donors
• Cost of Implementation Low on release of
  information, high on generating information
• Time to higher performance Short if information
  is raw, long if information must improve
• Measurability of change High
• Level of Independence Low to high
• Stress On Organization Low
• Patron Saint Ralph Nader
• Patron Organization GuideStar
• Strengths Openness, donor empowerment
• Weaknesses Inaccuracy, manipulation

Source Paul Light, Making Nonprofits Work
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Capacity Building Lessons Learned from the Paving
Pathways To Sustainability Project

• It is very difficult yet crucial for the leader
  to maintain some objectivity when assessing the
  capacity of their organization.
• Assessments that identify capacity gaps may end
  up amplifying those gaps, if not careful.
• If done properly, capacity work should raise the
  bar organizationally, which may make some people
  uncomfortable staff may leave the organization
  as a result of an enhanced focus on capacity
  issues and this isnt necessarily a bad thing.
• It can be difficult to find the right talent to
  meet an organizations capacity needs finding
  the right people takes time and may involve
  making some mistakes along the way.
• Be wary of deficit consulting only identifying
  things that are broken that need to be fixed.
• When it comes to organizational capacity building
  work, there isnt a finite end. It is an
  on-going process of improvement.

http//www.pavingpathways.org
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General Lessons Learned from the Paving Pathways
To Sustainability Project

• Any significant change initiative takes time, and
  its easy to loose momentum.
• Dont assume that the skills, resources or time
  needed exist in-house to make the changes needed.
• Risk is a very personal issue and needs to be
  carefully examined before moving forward. The
  level of risk tolerance will vary by organization
  and may also vary by issue.
• If an organization tries to do too much too
  quickly, it will affect its ability to make
  significant progress on any one issue.
• Often times an organizations peers may have
  experienced something that it can leverage to its
  benefit dont feel the need to recreate the
  wheel or operate in a vacuum.
• It is often difficult to translate theory into
  practice, and this is particularly true if there
  is confusion over or resistance to the theory
  have more than one solution or tool at your
  disposal.

http//www.pavingpathways.org
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General Lessons Learned from the Paving Pathways
To Sustainability Project

• The challenge of any change initiative is
  communicating the message(s) down below senior
  levels staff will inevitably resist what they
  dont know or understand.
• Project goals and objectives needs to be
  integrated into everyday organizational language,
  otherwise it will get lost in the translation.
• The best ideas dont always come from the top
  solicit feedback from all levels of the
  organization.
• Things wont always work out as envisioned, often
  times for good reason be prepared to be
  flexible.
• The project team must do what it says it is going
  to do management credibility will be under a
  microscope.
• Dont underestimate the need for the board to
  feel involved in the communication loop,
  especially as the organization moves closer to
  making decisions.

http//www.pavingpathways.org
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Ed Robinson President Capacity Building
Solutions Inc./ TEC Chair Group
663 301/774-0383 robin_ed_at_capacity-building.com