Advancing Capacity of Organizations: A Strategic Conversation

In one of the early posts to this blog I offered a taxonomy to help nonprofits think about organizational capacity, resource development planning and fundraising. In that post I described capacity development as the practice of developing and maintaining staff skills, organizational systems and intellectual and physical resources required to meet your organizational mission. In short, I suggested that capacity building is thinking about what it takes to maintain and build your organization. I have been working with several organizations on thinking about organizational capacity and thought I would revisit the concept of capacity in a little more detail.

If you do a Google Search on the term organizational capacity you will see that there is not shortage of resources to help organizations think about capacity building (I reference a couple of the most practical resources below). Unfortunately such a search will reveal a couple of things. First it will show that successful companies invest in infrastructure and capacity as a normal part of doing business. Second it will show that in the nonprofit world, agencies strive to under-invest in capacity as a way to demonstrate “effectiveness.” The idea is, “our overhead is low so we must be good.” This disconnect between the “for profit” and nonprofit agency thinking about infrastructure has been described by at least one set of authors as a starvation cycle. In the long-run, it is argued, under-investing in agency capacity is detrimental to any organization, The purpose of this post is not to overview all of the elements of capacity or even discuss how to build capacity but offers a facilitation approach to a strategic conversation about capacity building. What kind of conversation will result in an agency specific plan to develop capacity? While this post is geared towards nonprofits such strategic conversations might have place in commercial ventures as well.

Organizational capacity has the domains of: a) governance, leadership and strategy, b) organizational systems and infrastructure, c) reliable and autonomous funding, d) strategic partnerships, e) evidence based programming, and f) evaluation and outcome systems. On one level, capacity can be measured using rubrics and other metrics to identify gaps between where an organization is now and where it needs to be. Philanthropic foundations that fund capacity building efforts often take this quantitative approach. However, capacity building can rarely be reduced to a “present or absent” checklist. Rather, capacity is better reflected as a strategic conversation that involves, story, aspiration and strategic intention. I would suggest that there are four questions inform a strategic conversation:

Where are the Critical Weaknesses? While I just suggested that an objective assessment of the capacity portrays an incomplete picture of agency capacity, such an assessment does need to be the starting point of a capacity exploration. While assessment of an established nonprofit agency might involve a more substantive assessment than is required in assessing a smaller agency, an objective review of capacity domains serves as the baseline understanding that frames the conversation. In this assessment, agency staff, board and possibly other stakeholders need to engage in frank discussion about critical weaknesses requiring immediate attention. One can think of any number of critical weaknesses such as a lack of adequate fiscal controls or a lack of HR policies and procedures that could trigger immediate action.

What are the Leverage Points? A second question reflects on agency capacity and explores what is the leverage effect of focusing capacity building on one single element. Is there one part of capacity building that can be leveraged to advance the agency’s larger goals? For example, one agency that I worked with was planning to launch a fundraising campaign targeting small donors. Prior to implementing the campaign the agency invested in capacity by redesigning its website to make online donations easier. When the small donations campaign was launched, online donations represented the primary donation method and the revenues exceeded the investment in the website redesign by a large percent.

Where are the Opportunities? Another component of the critical conversation is to discuss the opportunities that present themselves. In this challenging economic environment, a discussion of capacity might be a good time to explore concepts of reducing overhead to increase capacity. Discussions of co-housing agencies or even the big “M word” (merger) might be fair game in the discussion of opportunity. In this case, sharing overhead might actually free up resources to invest in other facets of capacity. For some agencies strategic conversations about capacity resulted from opportunities presented by prospective Federal stimulus dollars.

Where is the Energy and Passion? A final question that can inform capacity discussions is one that is best answered when the process is opened to the broader community of volunteers and other stakeholders. By opening the scope of perspectives, the conversation can increase vision, energy and passion. For example, younger volunteers might use their instinctive technology skills and take the lead on developing a new social media outreach campaign for the agency. In another example, an executive director told me the story of hosting a capacity building conversation including the agencies that funded them. The conversation surfaced the fact that one of the funding agencies was going through a department-wide upgrade of computers and because of the conversation the agency decided to donate their older machines to the nonprofit. For a couple hundred dollars to install, configure and network the computers the executive director said it resulted in a significant technology upgrade and standardization of computers for his agency.

With these four framing questions the next step to consider how you structure a strategic conversation about agency capacity. Hosting a strategic conversation about capacity could neatly fit into a board/staff retreat or a similar block of at least 2-4 hours. As suggested earlier, while not an end to itself, a capacity needs assessment should be conducted prior to the strategic conversation. With a block of time dedicated to the task and assessment data complied, a strategic conversation might include the following format.

Presentation of the Assessment Data: Whether you use traditional presentation slides, story telling or other visual representation, it is important that everyone in the team is oriented to where the agency stands now. The second part of the assessment presentation is to frame the vision of where the agency could or should be. By presenting where you “are” and “where you want to be” you identify the gap that needs to be filled.

Reflection and Movement Building: The second step of the strategic conversation is to create the opportunity for the group to reflect and engage. While movement building is perhaps an ambitious word to describe this stage, the idea is to not just talk but to create energy and excitement around the potential. This stage might be achieved by a modified scenario planning exercise, appreciative inquiry process, or by using more traditional prioritization exercises.

Create Strategic Intentions: The third step is to create strategic intentions around capacity. Strategic intentions in this instance ate narrow and focused around the capacity needs and, while in sync with the agency strategic plan, are more likened to key implementation objectives. The task for this phase of the conversation is to break capacity building into components that can be managed as a whole. For example, moving from annual fiscal reviews to a formal audit might be one intention and a separate intention might be the development of a donor relationship database. Both together, however, are about improving fiscal management.

Develop an Implementation Plan: The final stage of the conversation is to develop broad implementation strategies. In this stage, there should be a range of creative strategies developed to achieve the strategic intents. In some ways the strategies might look more like a brainstorm list than a step-by-step workplan. By having broader implementation plans allows for adaptive management of an array of opportunities.

Document the Agreements and Plans: As in all group process there needs to be some documentation of the strategic intents and implementation plan. Communication and feedback loops also need to be built into ensure accountability to the plan.

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Agency capacity is intimately tied to the long-term growth and success of any venture. Unfortunately, in the nonprofit world, many organizations have been acculturated to under-invest in capacity. This cycle needs to be broken. Capacity building needs to be acknowledged as a core responsibility of nonprofit agency management and all strategy must include the development of strong systems and infrastructure that support the missions of the organization. Hosting a strategic conversation that results in concrete yet flexible action plan is a major first step to raising awareness of capacity needs. Such awareness has never been more needed than in these challenging social and economic times. An agency willing to have a strategic conversation about capacity will find that such an investment results in the rewards of a clearer focus and greater infrastucture to carry out one’s organizational mission.

As always your feedback is welcome.

In Depth Capacity Assessment tool: Venture Philanthropy Partners Capacity Assessment Grid
Great qualitative tool for smaller agencies: Tool for Assessing Startup Organizations

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Advancing Capacity of Organizations: A Strategic Conversation

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