Association of Small Foundations

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• Association of Small Foundations
• Measuring Capacity in Your Grantees
• November 10, 2005

BUILDING A STRONG FOUNDATION
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Workshop Agenda

• What is Capacity Building?
• Industry Factors Influencing Capacity Building
• Organizational Variables Influencing Capacity
  Building?
• Brief Thoughts On Applying Business Practices to
  NPOs
• Assessing Capacity Building Needs
• Case Study Discussion
• Whats Happening In The Field?
• Session Wrap-Up

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

• The ability of nonprofit organizations to fulfill
  their missions in an effective manner.
• (John S. and James L. Knight Foundation)
• HOW WOULD YOU DEFINE CAPACITY BUILDING?

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What Your Grantees Need

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

Source Cynthia Gibson, Helping Nonprofits Help
Us, Spring 2002, Carnegie Reporter,
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INDUSTRY FACTORS AFFECTINGTHE CURRENT CAPACITY
BUILDING ENVIRONMENT
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A Climate That Pressures Nonprofits to Reform

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

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

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

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

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

Note Whether we agree with this thinking or
not, this mindset exists and is growing
Source Bradley, Jansen and Silverman, The
Nonprofit Sectors 100 Billion Opportunity, Harvar
d Business review, May 2003
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Five Industry Forces Influencing The Environment
Threat of New Entrants
Rivalry Amongst Existing Competitors
Power of Buyers (Clients)
Power of Suppliers/ Funders
Threat of Substitutes
Source Michael Porter, Harvard Business School
(slightly adapted)
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Segmenting NPOs by Their Access To and Use of
Consultants
Large Size Resources
Well-Known Charities
Hospitals
Less Market Discipline Primarily contributed
income. Less business competition
More Market Discipline Primarily earned
income. More business competition
Local Community Development Corp.
Local Social Service Agency
Small Size Resources
Source Consulting To Nonprofits An Industry
Analysis, Harvard Business School Social
Enterprise Field Study, April 1999
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How the Market Is RespondingSegmentations and
Potential Pairings

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

Source Consulting To Nonprofits An Industry
Analysis, Harvard Business School Social
Enterprise Field Study, April 1999
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ORGANIZATIONAL VARIABLES AFFECTINGTHE CURRENT
CAPACITY BUILDING ENVIRONMENT
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What are some of your best war stories when it
comes to funding capacity building?

• And, what did you learn?

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Organizational Lifecycle Model
DECLINE
MATURITY
DECAY
GROWTH
REEMERGENCE
EMERGENCE/ START-UP
Strategic Focus Innovation
Adaptation Reaction
TIME HORIZON
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Market vs. Program/Service Mindset
PROGRAMS/SERVICES
MARKETS
Source Philip Kotler. Kotler on Marketing.
Executive Book Summaries. 2000.
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The Competing Values FrameworkMeasuring
Organizational Effectiveness
Human Relations Model Participation, discussion,
and openness as ways to improve morale and
achieve commitment
Internal Process Model Internal processes such
as Measurements, documentation, And information
management As methods to achieve
stability, Control and continuity.
Open Systems Model Relates insight,
innovation, And adaptation as a path towards
external recognition, Support, acquisition
and growth
Rational Goal Model Seeks profit and
productivity through direction and goals.
Ronald Rojas,A Review of Models For Measuring
Organizational Effectiveness Among For-Profit
and Non-profit Organizations. Nonprofit
Management Leadership, Vol. 11, No.1, Fall 2000
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BRIEF THOUGHTS ON APPLYING BUSINESS PRACTICES TO
THE SECTOR
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In the past, the nonprofit sector has
encountered significant organizational pressures,
financial challenges, and new demands and has
confronted significantly more difficult business
conditions. At the same time, the demand for
their services continues to increase. As a
reaction to these conditions the nonprofit sector
has been hoping for relief by indiscriminately
adopting the business practices of the
for-profit domain. Yet the superimposition of
for-profit practices on non-profit organizations
has not always produced the best
solutions -Ronald Rojas A Review of Models For
Measuring Organizational Effectiveness Among
For-Profit and Non-profit Organizations. Nonprofi
t Management Leadership, Vol. 11, No.1, Fall
2000
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What Are Standard Business Practices?

• Strategic Planning
• Change Management
• Financial Management
• Operations Management
• Human Resources Management
• Marketing Management
• Information Technology Management
• Knowledge Management
• Government Relations
• Shareholder Relations
• Strategic Partnering

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Applying Business Practice to The NPO Sector
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ASSESSING CAPACITY BUILDING NEEDS
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Core Capacity Building Methodologies
Leadership
Development
Board Development
Mission Effectiveness
Mission Effectiveness
Decision Making Structure
Strategic Planning
Communications Mgmt.
Change Mgmt.
Mgmt. Development
Mktg./ Development Mgmt.
Financial Mgmt.
HR Mgmt.
Knowledge Mgmt.
Outcomes Management
Team Building
Accountability/ Ownership
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Seven Key Capacity Building Assessment Questions

• Which reform agenda seems to be most prevalent in
  the organizations thinking and how will this
  affect their capacity needs?
• Where does the organization fit on the
  Organizational Lifecycle framework and how will
  this impact their capacity needs?
• How are the 5 Forces of its industry affecting
  the organization and how will this affect their
  capacity needs?
• What is the organizations growth strategy
  (market or product) and how will this impact
  their capacity needs?
• What is the relative size of the organization and
  how much market discipline does it have?
• Which values framework is the organization
  operating under and how will this affect their
  capacity needs?
• Where are the major capacity building methodology
  gaps? Why?

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Thinking about your current grantee pool- How
would you rate your ability to answer these
questions?- How would you go about answering
these questions?Best Practices on Capturing
Info?-
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More DetailedCapacity Assessment Questions

• Accountability Does the organization hold
  people accountable for their results? How?
• Adaptability Is the organization adaptive and
  able to respond well to changing industry
  dynamics?
• Asset Leverage Does the organization do a good
  job of leveraging the assets it has at its
  disposal?
• Attitude Does the organization foster a clear
  high performance environment?
• Board Effectiveness Is the board considered a
  strong organizational asset?
• Collaboration Does the organization have a
  track record of collaborating well with other
  entities?
• Creativity To what extent does the organization
  cultivate a creative environment?

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More DetailedCapacity Assessment Questions

• Crisis Management What is the organization's
  track record of dealing with crisis situations?
  And, are they in a constant sate of crisis?
• Culture for Change Does the organization
  historically embrace change or avoid it?
• Entrepreneurial Culture Does the organization
  possess an obvious "can do" attitude where things
  get done despite obstacles?
• Financial Management How strong is the
  organizations current economic situation? What
  is its related capacity to absorb risk?
• Human Resource Management Does the organization
  effectively understand and implement HR
  strategies that create a positive work
  environment for staff?
• Information Technology Does the organization
  effectively leverage technology to its benefit?

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More DetailedCapacity Assessment Questions

• Integrity of Purpose Is it consistently clear
  to you and other stakeholders what the
  organization stands for and how it uses the
  information to access funding?
• Leadership Vision Does every staff person you
  talk to understand the values, vision and
  direction of the organization?
• Management Talent Does the organization have a
  strong base of management talent?
• Marketing/Business Development Does the
  organization effectively market its programs and
  services?
• Market Leadership Is the organization
  considered a market leader by its peer group?
• Network of Support Does the organization have a
  broad and deep network of supporters?
• Operational Redundancy Does the organization
  have the back-up capacity bench strength to
  support key roles and programs?

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More DetailedCapacity Assessment Questions

• Outcomes Focus Does the organization
  effectively manage to business and programmatic
  outcomes?
• Self Examination Does the organization have a
  culture that encourages institutional
  self-examination? What does it do with this
  information?
• Strategic Focus and Direction Does the
  organization effectively think and act
  strategically?

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CASE STUDY DISCUSSION
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Case Study Discussion

• Childrens museum with long-term history of
  serving low-income populations, as well as
  tourist population
• Location is near the heart of downtown tourist
  areas with easy access to mass transit
• Somewhat outdated facility requires significant
  capital investments and on-going maintenance
• Fundraising situation has flattened with
  increased pressure on earned income and corporate
  partnerships
• Finances are tight and last three years have
  ended in a sizeable deficit diminishing reserves
• Increasing competition from other venues who have
  more a state of the art approach
• Programs/displays are solid and appreciated by
  the public school community, but there hasnt
  been much innovation
• Several programs are portable and have the
  potential to be delivered on-site in classrooms
  or other venues
• Organizational structure is in need of revamping
  with many key roles to be both designed and
  filled
• Increasing competition from other venues who have
  more a state of the art approach
• Board experiences very little turnover and tends
  to be somewhat risk adverse
• New Executive Director recently hired with track
  record of turn around successes

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Case Study Questions

• How would you begin assessing the situation? Are
  there any obvious red flags?
• How would you determine and then go about
  prioritizing their capacity needs?
• What learnings can you apply from this workshop
  to the situation?
• What types of assistance would seem to make the
  most sense?
• Other?

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WHATS HAPPENING IN THE FIELD?
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Capacity Building Strategies Used By Funders

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

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

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

Source Thomas Backer, Strengthening Nonprofits
Foundation Initiatives for Nonprofit
Organizations, The Urban Institute, April 2001
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Lessons Learned from Capacity Building Funders

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

Source Connolly and Lukas, Strengthening
Nonprofit Performance A Funders Guide To
Capacity Building, Wilder Publishing, 2002
37
Recommendations for 3rd Party Funders

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

Source Consulting To Nonprofits An Industry
Analysis, Harvard Business School Social
Enterprise Field Study, April 1999
38
Recommendations for 3rd Party Funders

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

Source Consulting To Nonprofits An Industry
Analysis, Harvard Business School Social
Enterprise Field Study, April 1999
39
What Strategies Have You Used To Build Capacity
With Your Grantees? What are your thoughts
moving forward?
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SESSION WRAP-UP
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Session Wrap-Up

• What did we learn today?

• What can we do with this knowledge?

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APPENDIX
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Comparing the Four Tides of Reform

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

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

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

Source Paul Light, Making Nonprofits Work
45
Comparing the Four Tides of Reform

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

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

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

Source Paul Light, Making Nonprofits Work
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Ed Robinson President Capacity Building
Solutions Inc./ TEC Chair Group
663 301/624-5686 robin_ed_at_capacity-building.com
http//www.capacity-building.com