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Tools You Can Use

Capacity Building Defined and Demystified

Resource
Strengthening Nonprofit Performance: A Funder's Guide to Capacity Building

Contents
What Exactly is Capacity Building?
    • Definition
    • Six components
Capacity Building Activities that Strengthen a Nonprofit
Types of Capacity Building Providers and What They Do
Where to Find Resources and Providers

 

From Vince Hyman, former Publishing Director, Fieldstone Alliance:

MANY OF YOU who read this newsletter refer to yourselves as "capacity builders." The term is well-worn and used by many. But what do we mean by it? What are we doing when we build capacity?

In 2001, with support from The David and Lucile Packard Foundation, we commissioned Paul Connolly of TCC Group (then Conservation Company) and Carol Lukas from Fieldstone Alliance (then Wilder Foundation) to look at this question. Following is an excerpt from their book, Strengthening Nonprofit Performance: A Funder's Guide to Capacity Building.

What Exactly is Capacity Building?

Definition
Capacity includes capabilities, knowledge, and resources that a nonprofit needs in order to fulfill its mission through a blend of sound management, strong governance, and a persistent rededication to achieving results.1

Capacity building refers to activities that strengthen a nonprofit organization and help it better fulfill its mission. These activities include, among others, strategic planning, technology upgrades, operational improvements, and board development.

Six components
Organizational capacity is multifaceted and continually changing. Connolly and Lukas's model—as shown in the figure below—depicts six interdependent factors that contribute to the health and performance of a nonprofit organization.2

Components of Organizational Capacity
Organizational capacity consists of six interdependent components, all of which interact with the external environment.

Diagram of the six components of organizational capacity

Each of the components serves a critical role in an organization's overall effectiveness.

Mission, Vision, and Strategy: These are the driving forces that give the organization its purpose and direction.

The effective organization has a clear mission, identity, and values. It is actively involved in regular, results-oriented, strategic, and self-reflective thinking and planning that aligns its strategies with its mission, values, and organizational capacity. It involves stakeholders in a way that ensures its mission and programs are valuable to the constituency it serves.

Governance and Leadership: This is the lubricant that keeps all the parts aligned and moving.

In an effective organization, board members are engaged and representative, with defined governance practices. The board effectively oversees the policies, programs, and operations, including review of achievement of strategic goals, financial status, and executive director performance. The organization is accomplished at recruiting, developing, and retaining capable staff and technical resources. The organization's leadership is alert to changing community needs and realities.

Program Delivery and Impact: These are the nonprofit's primary reasons for existence, just as profit is a primary aim for most businesses.

The effective organization operates programs and conducts activities that demonstrate tangible outcomes and impact appropriate to the resources invested. Programs are high quality and well regarded. The organization uses program evaluation results to inform its strategic goals. The organization understands community needs and has formal mechanisms for assessing internal and external factors that affect the achievement of goals.

Strategic relationships, finance, and internal operations and management are all necessary mechanisms to achieve the organization's ends.

Strategic Relationships: The effective organization is a respected and active participant and leader in the community, and maintains strong connections with its constituents. It participates in strategic alliances and partnerships that significantly advance the organization's goals and expand its influence. It communicates well with external audiences.

Finance: The effective organization successfully secures support from a variety of sources to ensure its revenues are diversified, stable, and sufficient for the mission and goals. The finance plan is aligned with the mission, long-term goals, and strategic direction. The organization has high visibility with key stakeholders and links clear, strategic messages to its finance efforts.

Internal Operations and Management: The organization has efficient and effective operations and strong management support systems. Financial operations are responsibly managed and reflect sound accounting principles. The organization utilizes information effectively for organizational and project management purposes. Internal communications are effective, and the organization's culture promotes high-quality work and respectful work relationships. Asset, risk, and technology management is strong and appropriate to the organization's purpose.

In addition, a variety of other factors can influence a nonprofit's needs at any time, including the organization's

  • Age and developmental stage
  • Size
  • Kind of work it does
  • Cultural or ethnic identity
  • Environment in which it functions

Capacity Building Activities that Strengthen a Nonprofit
There's a wide range of activities you can undertake to enhance your organization's ability to deliver programs, expand, and be adaptive and innovative. Here are a few examples:

Mission, Vision, and Strategy
   Strategic planning
   Scenario planning
   Organizational assessment
   Organizational development

Governance and Leadership
   
Leadership development
   Board development
   Executive transition

Program Delivery and Impact
   
Program design and development
   Evaluation

Strategic Relationships
   
Collaboration and strategic restructuring
   Marketing and communications

Finance
   
Fund development
   Business planning for revenue-generating activities

Internal Operations and Management
   
Human resource management and training
   Financial management
   Operations
   Technology and information systems
   Facility planning
   Legal issues
   Volunteer recruitment and management
   Conflict resolution

Types of Capacity Building Providers and What They Do
Nonprofit managers and trustees usually work on their own to improve organizational performance. However, many outside individuals and groups—capacity building providers—also provide such assistance. These include researchers, writers, publishers, trainers, educators, facilitators, and consultants. The following list describes different types of capacity building providers and the services they offer.

Management support organizations (MSOs)—nonprofit consulting and training groups, sometimes volunteer-based and sometimes professionally staffed.

Examples: CompassPoint Nonprofit Services in San Francisco, the Center for Nonprofit Management in Dallas, LaSalle University's Nonprofit Management and Development Center in Philadelphia, or the International Council on Management of Population Programmes in Malaysia.

Some MSOs have a local or regional focus; some are national or international in scope. They may also differ in their organizational concentration (planning, board development, marketing), industry focus (arts, education, immigrant organizations), staffing model (volunteers, affiliated independent contractors, or paid staff providers), fee basis (from totally subsidized to market rate), and level of experience and quality.

Intermediariesnonprofits that provide an array of support including capacity building assistance, re-granting, loan and equity programs, research, convening, and advocacy.

Often funders use intermediaries to help them build capacity with networks of nonprofits, rather than dealing individually with each nonprofit.

Examples: Fieldstone Alliance offers a full range of research, consulting, training, and publishing services. Local Initiatives Support Corporation (LISC) provides grants, loans, equity investments, and other capacity building assistance to community development corporations. The Hispanic Federation offers fund development, grantmaking, technical assistance services, and advocacy.

Community support organizations (CSOs)—CSOs are intermediary organizations dedicated to improving the way the community solves problems.3 They provide capacity building support to communities in much the same way that MSOs support nonprofit organizations.

Examples: The Collaboratory for Community Support in Ann Arbor, Michigan, the Community Development Institute in Oakland, California.

Research groups—groups specializing in evaluation or offering full-service research. Chapin Hall Center for Children or the Urban Institute are examples. Many research groups are affiliated with universities and colleges.

Academic institutions—business schools and programs in nonprofit management, public policy, communications, and organizational development such as the Hauser Center for Nonprofit Organizations at Harvard University.

Independent consultants—numerous individuals with varying levels of experience and skill working with nonprofits. No certification or licensing body regulates who can hang a shingle as a consultant or trainer.

For-profit consulting firms—firms specializing in nonprofit and philanthropic issues, such as TCC Group, as well as large corporate strategy firms that have nonprofit practices, such as McKinsey & Company.

Retired executives—individuals who provide services independently or through professional associations or organized community service programs such as Service Corps of Retired/Active Executives (SCORE) or the Small Business Association.

State associations of nonprofits—organizations that provide advocacy, support, information, and networking for nonprofits such as the Minnesota Council of Nonprofits or the Maryland Association of Nonprofit Organizations.

Where to Find Resources and Providers
More than six hundred capacity building providers belong to the Alliance for Nonprofit Management, a professional association dedicated to "increasing the effectiveness of individuals and organizations that help nonprofits build their power and impact."

We've also compiled a list of helpful resources at: http://www.fieldstonealliance.org/client/links.cfm

Sincerely,

Vince Hyman
Publishing Director
Fieldstone Alliance

June 20 , 2006

 

Notes
1Christine W. Letts, William P. Ryan, and Allen Grossman, High Performance Nonprofit Organizations: Managing Upstream for Greater Impact (New York: Wiley, 1998).

2Adapted from Paul Fate and Linda Hoskins, Organizational Assessment Guides and Measures (St. Paul, MN: Wilder Center for Communities, 2001). Some of these components are derived from Norman J. Glickman and Lisa J. Servon, "More Than Bricks and Sticks: Five Components of Community Development Corporation Capacity," Housing Policy Debate 9, no. 3 (1998):497–539.

3Joseph A. Connor, Stephanie Kadel-Taras, and Diane Vinokur-Kaplan, "The Role of Nonprofit Management Support Organizations in Sustaining Community Collaborations," Nonprofit Management & Leadership 10 (Winter 1999): 127–136.r call 1-800-274-6024.

 

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