Five Core Competencies of Nonprofit Organizations

It was early in my career when the idea of core competencies emerged in the business literature (see article and book).  While the term has fallen out of the “buzzword category,” the idea of core competencies is far from dead.  In fact, now, more than ever, your nonprofit strategy needs to be grounded in knowing your core competencies. They are essential to the DNA of your organization. We are facing political, social, and economic uncertainty, that requires every nonprofit to focus on their foundations of strategy.  Without investing in a clear understanding of your competencies, your nonprofit will be less resilient and adaptable in the future.

This is the second of an article series on nonprofit courage.  The premise of the series is simple. If nonprofit organizations don’t think and act courageously, the uncertainty of the future will undermine those who are fragmented rather than focused.  In the last article (here), I outlined five macro principles of courage. In this article (and three future articles), I want to get down into the weeds of the micro principles.  Clarity about core competencies is the first principle, and in my mind, a competency approach is driven by two shaping trends.

First, we have a sea change going on in Washington.  While it is unclear how drastic the changes to public policies will be, we should anticipate major changes to many of the core programs that comprise the government’s social contract with the people of this country. The philosophical and ideological change that this country is facing will be significant.  There is no partisan judgment here. It is simply a reality.  There will be major changes in national programs and services, funding priorities, and outcomes that lie ahead.

Second, there is a steady growth in the number of philanthropists and foundations that are narrowing their scope and going after “big bets.”   The big bet philosophy is the venture capital mindset that concentrates resources to those ideas where there is the potential of delivering an exceptional social return.  Unfortunately, experience has demonstrated that this approach has littered the philanthropic landscape with numerous failures (see here, for an example) and promising interventions that have been cast aside as “orphans” when philanthropic ADHD sets in. Yet philanthropic concentration is a trend that, according to a recent report, has some troubling implications related to power and equity.

In short, nonprofits are being faced with a context of political and philanthropic uncertainty that might force dramatic shifts in both program and revenue stability.  Without a disciplined strategy, this context of uncertainty is the breeding ground of reaction, mission drift, or denial. This brings us back to the “why” of a strategic approach to core competencies. Having a clear and shared understanding of your nonprofit’s core competencies is the foundation upon which you can build a durable and adaptable strategy in the face of uncertainty.

So how does nonprofit build a core competency approach to strategy? At this point, nonprofit core competencies might differ from the for-profit world to some degree. In the for-profit world, core competencies are driven by proprietary and insular knowledge and processes that impact the customer value proposition. In other words, in the for-profit world, core competency starts with the question, “What can we do better than anyone else and how hard is it for others to replicate what we do?”

In the nonprofit world, the value proposition is collaborative and external. Those receiving programs and services are often different than those who pay for (or at least subsidize the transaction).  Further, the “commerce” of nonprofits often depends on collaborative actions of several programs or organizations that work in synchrony (or sequentially) to create impact.  As a result, I would like to suggest five core competencies of nonprofit organizations need to focus on:

1.  Theory of Change: The first core competency is expertise and clarity about what you do, how you do it, and whether it matters. Most nonprofit leaders would flippantly say, “Done. Next?” … Not so fast. Show me your theory of change. Better yet, let me randomly pick one of your board members and one of your staff members and ask them to show me your theory of change.  Oh. Wait. You are really part of the 90+ percent of nonprofits that do not have a written and effective theory of change (more detail here)?  Without being clear as to why you exist and how your work matters, you will become irrelevant because there is rapidly decreasing value to “good works” delivered by institutions. Outcomes trump intentions.

2.  Communication: Significantly less that 15% of nonprofits in the 2016 Northwest Nonprofit Capacity Survey reported having a written and effective communication plan. That is astounding when you consider that a core competency of nonprofits is their ability to communicate the value and impact of their work.  Ask yourself three quick questions.  When was the last time you were in the news media? When was the last time you sat down with a funding agency or government official just to talk about your programming (without asking for money)? When was the last time you hosted an open house or webinar investor’s briefing?  If the answer is more than a month ago, you have work to do to improve your communications.

3.  Revenue Model: The strength of a nonprofit is also judged by its ability to develop a solid revenue model that is both reliable and autonomous and that is anchored to your theory of change. The strongest nonprofits that I know, are those that invest in building a board and advisors who help them plan and implement a strong revenue model (see here). Without revenue and contingency planning the uncertain future has the potential of creating jarring disruptions in the flow of your revenues.

4.  Staff Development: In the core competency literature, there is a strong focus on both process (external knowledge) and the internal (tacit) knowledge, skills, and shared culture of an organization’s team. With each staff turnover, the loss of internal knowledge is a major hidden cost to the organization. Those companies, and nonprofits, that do a better job cultivating and retaining their staff can leverage external and internal knowledge as a competitive advantage. Staff development is not something “we get to” after we address our “urgent” list of things to do, rather staff development is a core competency to invest in.

5.  Transparency: Finally, a core competency that intersects the previous four, is transparency. While I have written about transparency before, we are entering a time when your value will be judged by how strategic, focused and forthright you are.  So, ask yourself, how current is the information about your nonprofit on your website? When was the last time you updated your GuideStar (or equivalent) profile?  How engaged are you in sharing your best practices with others or talking frankly about your challenges and failures?  Being open about who you are is courageous and should be counted among your core competencies.

Perhaps this not the list of core competencies that your nonprofit would imagine.  Perhaps you think, “our core competency is trauma-informed care,” or “our core competency is to be a social service safety net to families in poverty.” While those kinds of statements are your programmatic competencies, the uncertainty that lies ahead demands that your nonprofit pay attention to organizational core competencies.  These competencies are the next level up in your strategy. 

So why is this article considered courageous thinking?  When you read the 2016 nonprofit capacity survey referenced above, the data are appalling (more here). Few nonprofit organizations have developed written and effective plans related to any of core competencies listed above.  Without planning and intentionality, nonprofit leaders position themselves to react (often defensively) as the future unfolds.  Sitting on the sidelines and hoping for the best is a definition of fear.

Conversely, courage belongs to those nonprofits that are looking towards the future and offensively investing in their core competencies before the east winds blow. It is my contention that the time to invest in core competencies is now because looking at the horizon, we can see the east winds gathering speed and we know that there is a storm coming to the nonprofit sector.

As always, your thoughts are welcome.

~ Mark

Photo Credit: Rudy and Peter Skitterians