As with many ranking systems, the 100 Best Nonprofits to Work For in Oregon is a survey-based process. It combines the rankings of self-reported, staff survey responses and an employer benefits survey.  The scores of the organizations are then parsed into categories or small, medium, and large nonprofit agencies.  According to the Oregon Business Magazine, 170 nonprofits participated in the survey with over 5,500 individual employee surveys received from participating agencies.

Underneath the “contest element” of the 100 Best ranking, is a very important organizational management tool. From the perspective of those I spoke with at the recognition event, the ranking of “100 Best” was, indeed, the expression of an organizational culture of continuous improvement rather than a “bragging rights” contest.

Perhaps this thinking was best captured in a conversation I had with an Executive Director of an organization that has been on the list for three years.  Clearly animated she said, “The survey has each of my employees giving us feedback on our work environment, our management, and communications, along with their opinions about how well we are doing on mission, goals, career development, and compensation. The information is way more valuable to me and my board than the award” (A bit later in the conversation she did concede that the award was also important in fundraising, marketing and her agency was glad to have received it).

As I pondered the “best of event” my mind began to wander into thinking about continuous improvement as an organizational mindset.  As my consulting practice is based on nonprofit performance improvement, my first stop down the road of thinking was to do a quick math calculation.  There are almost 16,000 public charities registered in Oregon (source) and yet only 170 agencies participated in “100 Best” survey process.  That means only 1% of the nonprofit organizations in Oregon were considered for the designation of “100 Best.”  I am not suggesting that only 1% of nonprofits are interested in being named among the “best” but the statistic does beg the question, “how many nonprofits intentionally strive to be among the best?”  In this post, I want to reflect on the role of a “best thinking mindset” for nonprofits and offer some practical strategies for getting started on a continuous improvement process.

Engage Everybody: One of the first principles of continuous improvement is that it is not a “solo practice” or even a top down “management event.”  Continuous improvement is foremost a shared culture and only secondarily is continuous improvement a practice. Here is a simple diagnostic. Stop and think about how often in a board or staff meeting did you hear the question, “What can we do to improve…?”  How many different people ask the question?  Does the question relate to your agency’s programs, operations, evaluation –or all the above?  If your self-reflection suggests that continuous improvement is not as active as a value as you would like in your organization, then start a conversation about the critical need for continuous improvement in the nonprofit sector today.  A few reasons for continuous improvement include: a) growing demands for services require high quality services delivered effectively, b) funders are increasingly demanding continuous improvement, c) high performing organizations are more stable and thriving work environments. (here is an interesting masters thesis on the topic)

Self Assess: Once you have a critical mass of interest in continuous improvement then it makes sense to identify the opportunities for improvement. One way to assess your opportunities is to facilitate a conversation using an appreciative inquire approach that identifies your Strengths, Aspirations, Opportunities and Results (see here & here).  This can be either preceded or followed by a more detailed assessment using more formal assessment tools (great online tool database here).  With an assessment complete, prioritizing your needs is an exercise of determining which of the needs map with your organizational aspirations and hold the greatest potential of a positive return on the invested time and energy required to make the improvement

Develop a Focus: At this stage of the process, it is important to develop a way to focus the energy and attention of the entire organization.  Focusing organization attention can be accomplished using tools such as a written workplan (see here & here) or a visual organizer (see here).  Further, developing a focus includes creating a tracking process to ensure process is being made on performance improvement plans developed.

Rapid Cycle Test: Performance improvement is operationalized with the use of an iterative process to create, measure and monitor changes over time.  One such process is to frame change as a “rapid cycle test” that is a four step cycle of Plan, Do, Study Act (here is a great primer).  In short, this process suggests change is: a) planned, b) implemented as a pilot (do), c) followed by a study of the results, and d) the results acted on (either further implementation of the change or revision of the change in another cycle of piloting).

As this performance improvement cycle becomes an embedded cultural practice, your organization will become stronger. Indeed, operationalizing a performance improvement culture is clearly the mark of a “best of” organization.  I would like to reiterate,  performance improvement is a critical nonprofit management competency to master and increasingly is not optional. The rapidly changing times demand that nonprofit organizations focus myopically on developing the highest level of organizational functioning and still reach higher. Borrowing from the iconic Harry Potter books, getting to where you want to be requires, a clear destination, determination to get there, and deliberate effort.  Performance improvement requires no less.

As always, your thoughts are welcome.

Last week I facilitated my last board meeting as chair of Resolutions Northwest (RNW), Oregon’s largest nonprofit community mediation center.  With this meeting, I completed five years of service on the board as a member, treasurer and, for the last three years, board chair.  During my time on the board, the darkest days were those when the agency managed a turbulent staffing crisis and again, when it weathered the elimination of a longstanding contracted service program. The brighter days are those of late, where, in the last three years RNW has nearly doubled its revenues, expanded its facilitation and restorative justice programs, and has begun to engage volunteers and donors more deeply in the success of the agency.  With a newly developed strategic plan, solid community partners, and a deep commitment to keeping the strategic plan active and alive, I am leaving RNW as a vibrant organization well positioned for continued growth.  In this post, I wanted to offer some reflections on core attributes of a strong nonprofit board. I talk about these from the “blended” perspective of being both a nonprofit consultant as well as outgoing board chair. The article is a companion to an earlier post I wrote on nonprofit board performance (link here) and represents additional and somewhat overlapping principles that will help boards to be successful.  These principles include:

• Developing Organizational Depth: Most nonprofit board members are earnest in their commitment to support the organization that they serve.  Indeed the commitment to a mission is often the beginning of service on a board.  Turning commitment into effectiveness, involves helping board members gain organizational depth.  It is my belief that organizational depth is experiential and best gained by engaging board members in the core of the agency’s programs and services. As examples: job shadowing, volunteering at the program level, and conducting joint board/staff training sessions are some ways to provide opportunities for board members to gain organizational depth.

• Creating a Strong Board Chair – Executive Director Relationship: An anchor to the success of my board service with RNW was my developing a strong productive relationship with the RNW’s Executive Director.  Betsy Coddington and I developed positive working relationship that was, at various times, configured as collegial, coaching, and even confrontational.  The chair should not simply be the spokesperson for the executive director nor should it be vice versa. The relationship between board chair and executive director is based on relational authority and not positional authority. The board chair-executive director relationship is well articulated in a Journal for Nonprofit Management (linked here).

•  Understand Nonprofit Management: Early in my board experience with RNW, I saw firsthand the challenge of having a board chair who lacked a strong understanding of board governance and nonprofit operations.  Indeed, as a human resource crisis unfolded, the chair abruptly resigned, leaving the executive committee to move forward without him. Fortunately, other and I were able to step in to help. More than any other event I ever came across, before or since, this incidence left an indelible imprint of the importance of having board leadership team who understand principles of nonprofit management and governance.  It also underscored that this resident knowledge needs to be embodied in the entire executive committee and ideally across the entire board.  Indeed, building such understanding is the reason many boards set up mentorship programs, board development workshops and structure succession planning for leadership positions.

• Building a Board Intentionally: I posted a blog entry almost a year ago that outlined an approach to thinking about board membership (linked here). While today, I might broaden the concept of fundraising to include civic reach and use slightly more refined language (based on my evolving practice and experience) the outline of the post remains useful.  Building an intentional board is an ongoing process of the systematic expansion of a board.  The core expectation for all board members starts with an understanding of governance but beyond that expectation, a board should build membership around an alchemy of operations expertise, content expertise, and development expertise (a mix of resource planning, fundraising, and civic reach). Intentional board building takes longer than accepting any willing volunteer into board service. Intentionality implies that due diligence becomes more refined, recruitment more strategic, and that a board is willing to engage in thoughtful outreach to the community in search of strong board members.

• Staying Focused on the Strategic: As readers of this blog know, nonprofit strategy is a core theme of my consulting practice. So it should come as no surprise that I believe that effective boards are those organizing around strategy.  At one point in my tenure as board chair at RNW, we decided intentionally not to pursue a formal strategic planning process. We chose instead to spend a fraction of the time we would have spent in strategic planning to create one-two page strategic intentions that defined a short-term strategy across four operational areas.  The board then focused on these intentions and the made significant progress across all four areas that resulted in new programs, revenues, and focus for the organization. The strategic intentions served well as a “bridge strategy ” for a short operational period. Concurrently, we sent time building the capacity of the board and, once in place, we engaged in a formal strategic planning process to guide the organization’s growth over the next 4-5 years.   A relentless focus on the strategic is essential to advancing the capacity of nonprofit agencies.

• Establishing a Strong Advisory Network: My experience as a board member and consultant suggests that many boards often don’t understand the critical role advisors play in nonprofit management. I have heard many boards oppose investing in basic advisory support such as an accounting firm, information technology (IT) support, or a human resource (HR) service provider, even though such advisors are critical to risk management and effective governance.  Along with IT, HR, and accounting, over my years at RNW we established relationships with consultants for services such as grant writing and fundraising.  While with some initial resistance to overcome, the strategic use of consultants strengthened RNW’s organizational practices.  Effective boards recognize and value the support of external expertise.  Competent staff, an engaged board, and the strategic use of external consultants create a “three-legged stool” of support for an organization’s capacity.

• Measuring Progress: Effective boards establish clear accountability to themselves, the agency’s staff and to the larger community.  Self assessments, quality benchmarks, performance dashboards serve as tools to increase accountability and transparency.  By periodically stopping, assessing, and reflecting a board is in a stronger position to improve, adapt, and change.  I left RNW’s board just as we completed a board self-assessment that provided rich data to be used by the board as they begin a performance improvement process.

• Fostering Effective Board Operations. Of course there are other facets of developing a strong board such as creating a good operational structure, documenting relevant by-laws, effectively using of committees and formally evaluating board performance.  Unfortunately, many boards confuse strong board operations with a strong board but as this post illustrates, board operations are just one variable contributing to an effective board.

As the current political landscape continues to promise economic uncertainty and possibly even deep cuts to the social service infrastructure, nonprofits will need to adapt and change. For many nonprofits this ability to adapt and change will be directly correlated to the focus and strength of the agency’s board. Indeed, I suggest that only a strong and effective board is capable of designing and delivering the kind of strategic guidance that will be required to navigate the uncharted waters ahead.  While the list of effectiveness indicators in this blog is not necessarily complete, it does represent focused, actionable touch points that can serve as the basis of assessing the strengthening the effectiveness of a nonprofit board.  For any agency thinking about the future, these principles of effectiveness give a point of reference by which an agency can judge the strength and direction of its board.

As always your thoughts are welcome.

Resources:

Companion 12 page PDF:  Ten Steps for Building an Effective Nonprofit Board: A Checklist for Action

Further Study: To help think about board development, I would point you to a recent eNewsletter where I highlighted board development resources (link here).

Post Script: I would be remiss not to thank the current and former staff and board members of Resolutions Northwest who have helped shaped the organization as a power for good in the community.  And in appreciation to their dedication I encourage you to support the organization by making a one time or monthly gift to support peacemaking and conflict resolution in the greater Portland area.  You can donate here.

• Multiyear Funding: When the strategic plan is finished does it outline a clear pathway for developing an integrated approach to multiyear funding that provides stability to the organizations programs and infrastructure?

• Capacity Building: When the plan is implemented will the capacity of the agency be strengthened?  Have we considered the operational systems and support required to ensure a healthy and growing organization?

• Risk Taking: Does the plan lead us outside of a business as usual scenario in ways that challenge us to excel? Is the plan bold enough to encourage the agency take calculated (yet protected) risks to increase the impact of our programs and services?

• Movement Building: Programs and services change lives while movements change communities.  Does our strategic plan reflect movement building that has the potential of leveraging change at the community level?

• Making a Difference: Does our plan outline a pathway to demonstrate a clear and compelling impact? Will we be able to answer the question, “do we make a difference?”

Again, the list of “meta ideals” might differ from organization to organization but the common thread is that they are anchored to the core organizational values and aspirations. These ideals answer the question, “What do we as an agency want to become?” While the mission of today may be clear, the ideals drive the focus of the mission for tomorrow.  One agency might be ready to become a “game changer” while another agency’s big idea might be to reinvent their funding model to ensure sustainability.

If, in practice,  the use of BIG ideas is tackled at the front end of the planning process then the principles can then serve as the compass points during the planning process and sometimes, more importantly, revisiting  the ideals at the the end of the planning process can become useful final evaluative criterion to check the plan’s completeness. As I have worked with numerous teams on strategic planning, the process often (and ideally) starts large, aspirational and almost dreamy. As teams work to prioritize and define with some specificity, the end of the process is often mired in details — “now should be be projecting a .5 FTE or .8 FTE development associate?”  When the final copy is produced. the board has likely seen five or six iterations of the plan and the final vote is often, “yes. let’s be done with this monster.”  Rather than that sort of unceremonious end to a large investment of time, energy and passion, reflecting on how well the plan addresses the “big ideas” related to what an agency wants to  become can give energy and vitality to the approval and implementation of a strategic plan.

While this post may seem like it is discussing a tiny facet of strategic planning (and I agree it is), I am writing about it because it is a facet that it often overlooked.  By intentionally including reflection about “big ideas” in the strategic planning process, it can help frame, reinforce and energize a process. For any agency committing to a thoughtful strategic planning process the “Big Ideas” are critical tools to build and maintain focus and give a point of reference by which an agency can judge the authenticity of the finished strategic plan.

As always, your thoughts are welcome.

Fast forward to a few days ago. I was participating in a synchronous chat using Twitter on the topic of creating a “courageous nonprofit board.”  Twitter is an abysmal tool to have a meaningful conversation with forty or fifty nonprofit professionals, however, it was interesting to see the group spew out a steady stream of almost random 2-3 sentence messages.  While as coherent as the playground of a preschool, the messages passing across my computer screen did offer the opportunity for me to further self-reflect on the topic of board development.

In the past, I have written episodically on the topic of board development and, in this post, I wanted to put in writing some thoughts about an evolving framework for board development. While not complete, I hope it serves as some directional anchor points that nonprofit leaders can use to think about board development and performance.

The Oregon Attorney General has boiled Nonprofit Board service down to a 12-page booklet with lots of white space. Many nonprofit boards would do well to start organizing their operations around the core functions of care, loyalty, obedience, and oversight. However, once the basic structure is in place, it is important to get outside of the core and into the “white space.”  Indeed, once a board gets into the white space the pathway gets interesting as it in the white space where the metal of high performing boards is tempered. So what exactly is found in the white space? I would suggest the following attributes:

Commitment, Consensus and Community It is my fundamental belief that high performing boards cannot exist without a tacit sense of community. Board and staff will be successful in direct proportion to the degree that there is a shared sense of purpose and focus that is organized around a commitment and consensus (as in general agreement and not unanimity). In practical terms, it means building board membership first and foremost from the perspective of  the agency’s vision, mission, community and culture.  Without social connectivity between board member and the organization, the board will be challenged to excel.

Internalizing Theories of Change, Leverage, and Scale A second dimension of a high performing board is for members to understand how the agency seeks to effect change. It is essential that a board is clear about the social impact intended by the agency, specifically: 1) how the agency employs theories of change, 2) how the agency’s internal programs and services and its external partnerships leverage or magnify impact and 3) how the agency’s growth trajectory will ultimately scale the social impact.  Cultivating a strong understanding of the theoretical framework for the agency is not only an intellectual exercise but becomes the core language and frame of reference used by board members as they discuss strategy, performance improvement, and is the place from which the board makes decisions.

Understanding the Local Nonprofit Ecosystem A third dimension of a high performing board is for the board to understand the nonprofit and social service sector in general and possess a deep understanding of the local nonprofit and social service ecosystem. Understanding how the local nonprofit agencies, government, philanthropic organizations, citizens and business collectively work to address community needs, enables a board  to better use their civic reach to strengthen the agency they serve.

Engaging in Three Core Planning Processes One of the themes of my blog this year is to focus on the core nonprofit planning processes. As I have written before, strategic planning, evaluation planning, and resource development planning are three intersecting disciplines that serve as the strategy core for a board. Indeed, the simplest measure of board performance is the degree to which they invest time, energy, and resources in the three domains of nonprofit planning.

Organizing around the Long View A final dimension of a high performing board is to organize around the long view. It is my belief that high performing boards are measured over years and not months. Boards become high performers with an intentional and disciplined approach to developing a deep understanding of the agency it serves.  Such a board also cultivates learning and inquiry management practices that comprise an iterative learning-to-action cycle over time.  Culture, history and enthusiasm are grown with intentionality and patience. Strong boards take time to develop.

Most nonprofit board members have a passion and mission affiliation for the organization where they serve. Most board members also bring high-value skills and experiences that can support the growth the agency.  The task of leadership is to recognize the contributions of each board member and to weave together the individuals into a collective board that becomes more than the sum of its parts.  Offered in this post are germinal ideas that can be used to help nonprofit boards strengthen and clarify that process of weaving together a high performing board.

As always, your thoughts are welcome.

This post is one of a continuing series on strategic planning and is based on my work facilitating strategic planning with nonprofit agencies. In strategic planning one of my initial conversations with an agency executive director will invariably include a discussion about the use of the strategic plan following its development.  The savvy executive director will describe the concrete ways in which the plan will be used to support agency governance.  S/he will describe the use of performance measures connected to the plan goals and strategies and the specific tools that help the board and staff manage their progress on implementing the plan.  More common however, the the executive director that laments how the exercise of strategic planning rarely impacts the agency in a deep and substantive way.  In this scenario, I am often asked, “how can this strategic planning process be different?”  In this post, I wanted to review the fundamentals of how use the process of strategic planning to increase organizational capacity.

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The obvious direct impact of strategic planning is the written strategy that is created.  At its most basic level in creation of a strategic plan is the DNA of capacity development.  Done well, a strategic plan offers a roadmap for the growth and  development of an organization. With intentional effort to keep the plan present and alive using simple performance monitoring tools, (like a dashboard or scorecard) an agency directly benefits from its investment in strategic planning.  However, I believe the face value of a strategic plan is only the beginning of the use of a strategic plan. Some other layers of using strategic planning to build capacity include the following:

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Board, Staff and Stakeholder Development: While textbook strategic planning can be a very pedestrian process of assessing the current internal and external environment, developing priorities and strategies, and writing a document, I believe the potential of strategic planning is to use the process to develop the energy, passion, skills and knowledge of board, staff and stakeholders.   Strategic planning is about engagement and focus of people and not just about data.  In planning a strategic planning effort, one of the framing questions should be “at the end of this process, how will out staff, board and stakeholders be different?” If this question is pursued intentionally then strategic planning offers and agency to develop the understanding, passion, and commitment of board, staff and stakeholders.  In this context, the planning process can and should include empowerment and learning community approaches. Indeed, a strategic planning process is successful to the degree that it creates a deeper understanding of the role and function of the agency in solving compelling social needs.

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Strategic Dialogue:  Having facilitated the development of numerous strategic plans, I find some of the greatest energy in the process comes as I work with an organization to gather “outside” perspectives.  While not commonly done, I am a strong believer that  organizations benefit from seeking advice and perspective from outside of the agency.  Insights coming from other agencies working on the same issue, from funders, donors, community partners and even agency clients, yield not only valuable strategic planning insights but often begins the process of dialogue.  Once the strategic plan is developed, I encourage agencies to continue the conversation with their funders, donors, community partners, and clients by sharing the strategic directions of the plan.  Some agencies bristle at the concept of sharing such sensitive, internal knowledge and reference the for profit sector’s contention that strategy is proprietary and needs to be guarded. I would counter that being transparent about strategy is actually strategic in the social sector.  Sharing knowledge about strategy makes explicit the position, direction and focus of an agency and can be used to define a larger community or regional agenda.  Engaging in such a dialogue with partners, funders, donors, clients and the community at large fosters collaboration and increases the potential of creating a network of strategies that can improve the collective social impact of all stakeholders.

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Field Building: Paired with the concept of strategic dialogue, a third use of a strategic plan is that it holds the potential to improve the field of practice.  Strategic Planning offers a unique and compressed exercise in evaluation, innovation and system design.  When strategic planning is resourced, well-designed and not simply a rote exercise it is a laboratory experience that has both internal and external dimensions.  Too often a strategic planning process is myopically inward content with asking the question, “how do we succeed in fulfilling our mission?”  While there is no denying that strategic planning is designed to create an organizational future, strategic planning also influences the collective future of the field of practice in which the agency operates.  In addition to how does the organizational “we” succeed there is also a dimension of how does the collective “we” succeed.  One outcome of strategic planning could be the free sharing of lessons learned.  By giving away your knowledge, you enable the the social sector to collectively enhance the knowledge base and field of practice.

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Taken together, strategic planning becomes a layered process of developing capacity.  Clearly and unequivocally the foundation of strategic planning is the creation of an organizational pathway to the future.  However, if layers of “human capital” development, strategic dialogue, and field building are added to the foundation of strategy, a strategic plan becomes a powerful tool to expand agency capacity. Facilitating a strategic planning process is more than following one of any number of strategic planning textbooks.  Strategic planning is large, shaping and capacity-building and it is the responsibility of facilitators to “bring life” to a strategic planning process.  I believe, it is only through this larger lens of capacity development do nonprofits build meaningful strategic plans.

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As always, your comments are welcome.

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This week I had the privilege of attending a community lecture for regional Arts organizations by Michael Kaiser, President of the Kennedy Center.  His topic was the economic challenges being faced by arts organizations and framed the lecture as the Arts in Crisis.  I went into the packed theatre expecting to hear the fairly familiar terrain that corporate donations are down, retaining major donors is more important than ever, diversifying your funding base is critical, and board involvement is key.   Some of that familiar ground was covered but Kaiser left the road and rose like a kite into the air. He first caught the gentle breeze and higher up leaped onto the mighty winds.  While he never directly said it, his is message was clear.  The crisis in Arts Organizations is not an economic crisis but it is a “crisis in thinking” and leadership.  He argued that strength and stability during these challenging economic times comes through transformative creativity and not through cutting budgets (For an awesome summary of the entire presentation check out Lisa Radon’s excellent blog).

As a performance improvement facilitator who works with a wide range of nonprofit agencies, I have seen this “crisis in thinking” over and again. Many nonprofit agencies are in their second and third consecutive years of budget cuts. Increasingly stressed staff (who can vaguely remember the concept of pay raises or benefit increases) are being asked to do more and more with the proverbial less and less. The gap between service costs and traditional revenues continues to widen and the compounding effects of sequential years of consecutive 3, 4 or 5% budget cuts are fracturing the integrity of many organizations.  Senior management and Boards of Directors in these organizations are becoming equally fatigued by constantly responding to an anemic resource environment.  So it is understandably challenging to walk into an organization and say, “stop trying to defend the gains you have made and start thinking using transformative creativity.” Yet this is the critical message for the nonprofit sector today.  Trying to reduce your way fiscal health undermines the organizational core and is the equivalent of burning your furniture to keep warm.  Unless you have lots and lots of furniture, in the end, you will be both cold and have nothing to sit on.

At the same time, I am not suggesting that conservative management of expenses is imprudent.  Indeed, I have seen innovative nonprofit agencies, gain efficiencies by renegotiating leases on space and/or equipment, outsourcing back office functions, and redesigning technology expenses at a considerable savings.  However, there comes a time and place where program effectiveness and, more importantly, the larger social impact of an agency is undermined by a myopic and relentless focus on reduction.  A theme that continues to serve my clients well is that success looks beyond the crisis at hand and stakes out ground in the future social impact of the organization. As I have written before, envisioning social impact requires intentional design of the “tomorrow” that an agency wants to create.

Helping nonprofit organizations get beyond the “crisis in thinking” requires a facilitator to work with teams across several domains that include the following:

Focus on Participatory Leadership:  My guess is that is that if I searched the web for the term participatory leadership, I would find that some consulting group has probably trademarked the concept.  However, what I refer to is not something out of a box or training program but is a the commitment to the ongoing study of leadership from the perspectives of vision, equity, culture.  Transformative creativity (or getting beyond the crisis) requires a compact between the layers of an organization where there is cooperative ownership, participatory systems and a learning culture.  I was recently reading a study by McKinsey & Company on successful transformations that described the critical role of balancing top down leadership with a culture of participation, equity and ownership across the staff and board.  Such cultures need to be seeded as a “big idea” and then cultivated by skill development and supporting systems. Indeed, I have facilitated more than one board-staff retreat where the primary outcome was to begin the development of a participatory culture.

Focus on Outcomes:  One of the revolutions within the nonprofit sector and philanthropy is a growing discontent with producing good results.  Philanthropists and leading nonprofit organizations want to make a larger social difference.  The coming wave of change (that will swell to a tsunami) is an increasingly myopic focus on social impact and outcomes rather than program impact.  This week I read a fantastic article by the Board Chair of Venture Philanthropy Partners (this article is the third article in a series he has been writing). In this article he minced no small words as he wrote: “Let me say this as bluntly as I can to nonprofits and funders alike: The challenge of managing to outcomes has little to do with systems, processes, or technology. The real challenge is that organizations cannot hope to manage to outcomes unless they have in place an engaged board; leadership with conviction; clarity of purpose; and a conducive, supportive performance culture.” The organizations of tomorrow are those who are focusing on creating social change that is larger than the results generated by programs.  A focus on outcomes asks, “How can we create a sum that is greater than the total of our parts?”

Focus on Mission, Vision and Margin: In my last post, I detailed the concept of mission and vision in strategic planning and in creating social impact models.  The point that I was making in that post was was underscored in an article on the Acumen Fund’s blog that discussed the role of mission, margin and mandate as levers to scale interventions and create social impact.  If you want a much lengthier discussion on the relationships of these concepts, I highly recommend the study of the book Strategic Giving: The Art and Science of Philanthropy by Peter Frumkin.  While I will warn you that Frumkin’s book is over 400 pages, it provides a depth of understanding about social impact and is a must read for any organization serious about transformative creativity. By focusing on the larger vision and placing mission and mandate in the context of a clear vision, organizations will, by default, move into strategic thinking rather than crisis thinking.

Organizations in the social sector face unique challenges in this lackluster economy.  Agencies that are focusing on defending their core also need to make room to think about how to increase capacity and effectiveness.  In seeking to navigate the twin challenges of maintaining and being strategic, facilitators need to realize that leadership, outcomes and the design process (in between the leadership and outcomes) comprise the foundation for transformative creativity.

I recently attended a panel discussion geared towards grant makers on the topic of nonprofit capacity building.  The panel discussed capacity assessments, the role of training, coaching and consulting and evaluating capacity building efforts.  As with many lunch presentations there was much more content than time, however, it was interesting to hear the “30,000 foot view” of capacity from funding agencies’ perspectives.   As one who has worked with nonprofits in capacity building for many years, the discussion of tactics by the panel revealed little new information.  However, what was interesting in the presentation was the discussion of the “disconnect in thinking” between funding agencies and nonprofit agencies around the concept of capacity.  The disconnect in thinking can be summed up in this way:  When nonprofit agencies think about capacity building, especially in the context of seeking a capacity building grant, they really are asking for operating support for specific projects.  When grant makers talk about capacity building, they are talking about developing infrastructure.  Adapting an illustration that one participant gave, it is like a vegetable garden where the nonprofit is concerned about a particular plant in the garden and the grant makers are increasingly interested in the root system and soil that supports the entire garden.  In previous posts I have discussed the concept of initiating a capacity building conversation and also discussed capacity building in the context of resource development planning. In this post I want to discuss facilitating an organizational capacity planning process.

Before discussing the process, we first need to define what is meant when we discuss capacity and capacity building. As we are reminded in that now classic primer on nonprofit jargon “in other words,” (external link) capacity is one of those “vague, quasi-occult terms” that evokes the need for outside “expert” consultants who understand the deep mysteries of the concept.  The unfortunate byproduct of such a misunderstood word is that the ambiguity of the term makes the concept of capacity and capacity building seem daunting to an organization.  So as an opening premise, I would like to suggest a clear and concise definition of capacity as “the sum total of the  strategy, management, staffing, infrastructure, resources and operation of an organization.” The process of capacity building then becomes the deliberate assessment and improvement of those core elements of capacity.  The following is a suggested facilitated process for capacity building.

Assessment:  As with most organization development and performance improvement projects, the first step in the process is to take a systematic assessment of where you are right now.  There are several nonprofit organizational capacity assessment tools that can be found with a simple web search.  The grandfather of tools was developed for Venture Philanthropy Partners by the mega consulting firm of McKinsey & Company (external link).  This tool has been adapted by Marguerite Casey Foundation (external link) and has also been adapted by Social Venture Partners International (SVPI) and is available as an Microsoft Excel spreadsheet (external link). Taking the SVP tool as an example the rubric addresses: financial management, fund development, information technology, marketing and communications, program design and evaluation, human resources, mission, vision, strategy and planning, legal affairs, leadership development, board leadership.  Future versions of the SVP tool will address cultural competency and policy advocacy as additional areas.  My experience (and the experiences of a few colleagues) in using the SVP tool has been that the level of depth of the tool may be less relevant for smaller or grassroots organizations.  In these cases, another useful tool to consider is a “Tool for Assessing Startup Organizations” that was designed to be a due diligence supplement for grant makers (external link).  As I suggested, a web search will help identify additional approaches to capacity assessment. The point of drawing attention to several tools is less about “what  tool  to use” and is more about illustrating the need for a framework for systematically assessing your agency capacity.

Once you decide on an approach, implementing a capacity assessment ideally takes a 360 degree approach that solicits relevant input from staff, board, clients, funding agencies and other stakeholders. The wider and more inclusive the process, the wider and more inclusive will be the insights on capacity.  Note:  I would be remiss to point out that online surveys can be an effective way to conduct an assessment.

Dialogue and Planning:  The second stage of a capacity building process to create and intentional dialogue around the findings with three important goals that include: a) creating a shared understanding of where the agency is starting from and where it is going, b) deepening the spirit of community and commitment to strengthening the organization, and c) creating workplans that support capacity building.  While workplan development can be a time intensive process as I have suggested elsewhere I do want to underscore that reflecting on a capacity assessment should also be a time of building community and commitment.  The dialogue and planning process lends itself well to an “intensive” like a board and/or staff retreat, but also could be the basis for a “learning community” process that spans 4-6 months and includes spaces for homework and reflection.

Action:  The third stage of is the action stage of implementing capacity building workplans.  Recognizing that capacity building is an ongoing commitment to continuous improvement, there needs to be the intentional structures to manage and monitor progress over time. Since capacity building is really about improving an entire system is also useful to think of implementation as a series of “rapid cycle tests” using a model such as the Plan, Do, Study, Act (PSDA).  There are a number of good primers for this model online, (external link). Finally, it is important to keep in mind that the action stage will likely taking an agency into new organizational territory and will likely require some investments in the professional development of the agency’s staff and board.

Leverage:  The final step in a capacity building process is to be intentional about leveraging your efforts for capacity building.  This brings us back to my opening discussion of grant makers’ perspectives on capacity building.  The organization that invests in the systematic planning for capacity building is uniquely positioning itself to pursue a capacity development grant.  For example, I know of one agency that received a three-year capacity building grant after taking an entire year to asses and begin to implement a plan to build capacity that the entire board stood behind. Based on the demonstrated movement towards capacity, the agency was well positioned to seek a capacity building grant. A grant-writing acquaintance once stated that when it comes to capacity building grants that funding agencies “want to improve organizations –not rescue them,” and so it is imperative for organizations to start from a position of strength.  I believe that the leverage of capacity building grants is most effective when agencies are already engaged in the forward motion of capacity building.

I recently read a great article titled “On not letting a crisis go to waste: an innovation agenda for Canada’s community sector” (external link) that reinforced the concept that the nonprofit community/social sector is being tempered as we continue to struggle out of the economic recession of the last several years. Implied and stated in the article is that agencies demonstrating vision, leadership, adaptability and innovation are the ones who will not only strengthen themselves but help strengthen and reinvent the social service and community sector.  For many nonprofits this journey of innovation and opportunity begins with an intentional facilitation of a capacity building process.



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.

1. 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.

 

2. 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.

 

3. 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.

 

4. 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.

 

5. 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..

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.

In Depth Capacity Assessment tool:  Venture Philanthropy Partners Capacity Assessment Grid

Great qualitative tool for smaller agencies: Tool for Assessing Startup Organizations

Considering the strategic agenda is indeed a critical conversation related to strategic planning.  In addition to exploring what framework supports the culture of an agency, organizations need to assess the strategic domains and create a strategic agenda that will guide a strategic planning process.  If you reflect on the organizational domains of practice it becomes clear that there is a wide range of possible agendas that can inform a strategic planning process.  Let’s consider a few of these organizational domains.

Foundational Agency Capacity:  At the core, agencies grow and prosper based on a clear and bold mission, vision, goals, strategies and operating practices and performance outcomes.  For many organizations this capacity is established and enduring and, in the absence of a significant environmental change (e.g., the periodic disruptive technology in software and computer industries), these foundations will rarely be the primary agenda for strategic planning.

Operating Infrastructure:  At a more tactical level, organizational systems include such functions as human resources, finance, business process, marketing, and governance that each has unique strategic needs as organizations grow and change. Growth, down-sizing and changes in the external environment all keep pressure on the operating infrastructure to adapt and continuously change.

Service Delivery & Products:  Every organization that is healthy and growing strives to improve the delivery of services and products that supports the mission and vision of an organization. Having a strategic, performance improvement mindset about service delivery and products is critical to any organization. Active strategic agenda for managing improvement is critical to contemporary organization.

Resource Development: Still another strategy domain is the volatile domain of revenue development.  How resources flow into an organization need to be considered from the perspectives of reliability, autonomy, concentration and diversification.  Unfortunately, as the recent brutal economic downturn has taught us, the resource development domain does not neatly fit into 3-5 year strategic planning cycle.  Managing resource development is more aptly described as a process of ongoing opportunity and risk management.

Performance Measurement: In an age where advantage goes to those who demonstrate ongoing performance outcomes, thinking strategically abut how an organization measures success is increasingly a standard practice for organizations.  Investments increasingly come with demands to document performance.  Performance measurement, whether it is gauged as return-on-investment, changes in community-level social indicators or some other metric, is one more strategic domain that agencies need to consider in planning.

Organizational Crisis:  A final domain for strategy related to those challenges born out of an organizational crisis.  Some of these challenges or crises are predictable and come with some lead time.  For example, when an organization founder chooses to step out of a leadership role or a new large investment (like a grant in the nonprofit world) is secured. Other crises are caused by random and unpredictable events such as a lawsuit by an employee or an unexpected cut in revenues that force talks of merger.

Considered individually, each of these six strategic domains (and there are likely others) have the capacity to create, expand or narrow a strategic planning agenda.  When taken together, however, it becomes resource intensive and perhaps even daunting to imagine a single strategic planning process capable of adequately addressing all of these domains.  So as the concept of strategy is explored, even as casually as we have in this blog, we can see that critical step in considering a strategic planning process is to define the strategic agenda.  What is the purpose of the strategic plan?  What domain or domains are you addressing and for what purpose?  Without such consideration the strategic planning process can quickly become a consuming task splitting efforts in multiple directions.   “We need help creating a strategic plan,” is not the complete statement but rather it is the stem that is followed by “for the purpose of….”  The focus, clarity and agenda of a well planned strategic planning process needs to be carefully considered before embarking on the planning journey.

In building the case for strategic planning, we move from identifying a planning framework that culturally fits with your organization and now considers the important question of defining the strategic agenda.  However, before embarking on a strategic planning process there are still two more conceptual overlays that include momentum and accountability, which will be the subjects of the next two posts.

*some of the details of the case study have been changed.

While there are literally dozens of books, websites and blogs devoted solely to the topic of nonprofit boards it is still a common phenomenon for nonprofits to struggle to identify the strategic composition and functioning of their board of directors. What kind of people should be included on the board? What business sectors should the board represent? What skills should be expectations related to fundraising and other contributions to the functioning of the organization? I would suggest that there are four critical conversations that are helpful to creating a strategic nonprofit board.

The first critical conversation is about the foundation of a nonprofit board is a discussion of the board’s role in governance. Governance has several dimensions the first of which is to provide strategic direction to assist the nonprofit fulfill its mission. Board members should bring, first and foremost, the ability to think strategically, systemically and systematically. The second most important function of board members is the ability to provide oversight. Inherent in oversight is the spirit of inquiry and active participation. Governance means that board members ask reasonable questions to ensure that the agency programs and operational practices are compliant with legal requirements, the agency’s mission, agency policies, and any restrictions placed on contributions by donors and other funding sources. Ensuring adequate fiscal control and appropriate use of funds is another governance function of a board. A final governance function is to ensure oversight of the executive director of the agency. The conversation about governance is to assess the strength of your board in ensuring these functions. Are the skills and knowledge of board members adequate to provide governance? How do you measure it? How do to re-measure it as the board membership changes?

The second conversation relates to the board’s ability to provide strategic guidance to the agency operations. Board members are not expected to serve as “quasi-staff” working for the agency as HR consultant, accountant, etc., however, as you consider the operational functions of the agency such as human resources, accounting, marketing/public relations, program planning and evaluation, and risk management, there is a legitimate question of does your board posses the skills and knowledge to help guide the agency to build a strong organizational capacity? The distinction between providing strategic guidance and serving as “quasi-staff” is important. It is temping for smaller nonprofits to try and identify board members who can provide pro-bono human resource or marketing experience but such a strategy can cause potential conflict of interest between the governance of the operations and the actual operations. Boards members can’t effectively govern and provide direct operational support. Board guidance questions, observes and reflects on organizational operations but rarely, if ever should the board get operational. Guiding the development of organizational capacity becomes more important during times of organizational growth or down-sizing and is also important during times of crisis or transition, such as when the executive director leaves the agency. The strategic board conversation then becomes about the adequacy of the board to provide guidance related to organizational development. Does the board collectively possess the skills (or have access to folks who do), when the board is needed to support organizational capcity development?

The third strategic board conversation relates to the board’s understanding and more importantly, content expertise related to the mission of the non-profit. If the organization mission is related to positive youth development or housing services, what level of expertise in those issues do board members have? Again the conversation is not about board members providing operational support to the agency but strategic support. Do board members understand the current and emerging trends related to positive youth development or affordable housing issues? Do board members have expertise to develop informed program directions or positive strategies that will support the growth and development of the agency as it seeks to meet the mission-driven needs in the community?

The fourth strategic board development conversation is about the board and fundraising goals and strategies of the agency. Conventional wisdom drives many nonprofits to seek, as the Holy Grail, influential board members connected to potential donors or at the least, board members willing to make an “ask” for money. Unfortunately this framework truncates the strategic discussion. In reality boards should seeks members who can provide strategic support to the fundraising mix unique to the agency. So, for example, if a nonprofit is heavily dependent upon government contracts the agency would benefit by board members who can help the agency provide maintain strong relations with the government agencies. Conversely a board that seeks to develop a strong community of small donors, a tactical approach for the board would be to seek board members with experience in grassroots community organizing, the use of technology-based social media tools, or small event planning.

Taken together, developing a strategic board requires several strategic conversations about governance, organizational capacity, content expertise and fundraising. These conversations should be supported by honest assessments of skills that comprise the current board. Out of such conversations comes a clearer strategic intent that informs board recruitment and can subsequently organize and focus board training and board operations.

Here is a link to a self assessment spreadsheet that I developed to support the start of conversations.