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Conference of Southwest Foundations Workshop Document

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					The Conference of Southwest Foundations 55th Annual Conference

Capacity Building: A National Perspective
September 24, 2003
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“Just as a city‟s 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 breakdown—and 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 can‟t 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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A Climate That Pressures Nonprofits to Reform
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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 3

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The Four Tides of Reform
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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 4

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The (Proposed) $100 + Billion Opportunity In The Nonprofit Sector
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Reduce Funding Costs = $25B Distribute Holdings Faster = $30B Reduce Program Service Costs = $55B Trim Administrative Costs = $7B Improve Sector Effectiveness = Unknown

Source: Bradley, Jansen and Silverman, The Nonprofit Sectors $100 Billion Opportunity, Harvard Business review, May 2003 5

What Is Capacity Building?

The ability of nonprofit organizations to fulfill their missions in an effective manner.
(John S. and James L. Knight Foundation)

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What Nonprofits Need…
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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, 7

Seven Elements Of Organizational Capacity
The higher-level elements of capacity define the organization’s ultimate purpose and translate that purpose into a concrete set of goals, programs and required skills The foundational elements of capacity allow an organization to build/achieve its organizational skills, strategy and mission/vision

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Aspirations

Strategies

Organizational skills

Human Resources

Systems and infrastructure

Organizational structure

Culture

Source: Effective Capacity Building In Nonprofit Organizations, Venture Philanthropy Partners & McKinsey & Company, 2001 8

Measuring Organizational Effectiveness: The Competing Values Framework
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.

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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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5 Areas Where Most Leaders Could Use Some Help
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Making Better Decisions Personal Accountability for Results Professional and Personal Growth  Dealing with Isolation Managing and Adapting to Change
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Source: The Executive Committee (TEC); http://www.teconline.com

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Organizational Capacity Building Subjects
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Accountability/Ownership of Results Board Development Business Planning Change Management Communications Financial Management Fundraising Human Resource Management Knowledge Management Leadership Development
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Organizational Capacity Building Subjects (Cont’d)
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Management Development Marketing Management Operations Management Organizational Structure/Decision Making Outcomes Management/Measurement Strategic Planning Team Development/Group Problem Solving Technology Management

Note: This list of categories excludes program/service specific capacity building topics which are equally important, but certainly vary by sector, community and level of need
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Some Areas Where Communities May Need To Improve
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Building community-wide consensus on critical issues Citizen participation Community studies and trend analysis Community visioning and planning Convening citizens, community leaders, and policy makers Determining the assets and needs of the community Leadership development Public education Racial tensions Resource development Service delivery systems Technology and communications systems Volunteer recruitment
Source: Connolly and Lukas, Strengthening Nonprofit Performance: A Funders Guide To Capacity Building, Wilder Publishing, 2002 13

Core Components of An Effective Foundation Capacity Building Initiative
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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 shouldn’t 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 – it’s 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 14

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Capacity Building Strategies Used By Funders
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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 15

Segmenting NPOs by Their Access To and Use of Consultants
Large Size & Resources

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Less Market Discipline: Primarily contributed income. Less business competition

Well-Known Charities

Hospitals

Local Social Service Agency

Local Community Development Corp.

More Market Discipline: Primarily earned income. More business competition

Small Size & Resources
Source: Consulting To Nonprofits: An Industry Analysis, Harvard Business School Social Enterprise Field Study, April 1999 16

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How the Market Is Responding: Segmentations and Potential Pairings
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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 17

Lessons Learned from Capacity Building Funders
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Follow other’s promising practices Do no harm Develop clear expectations regarding confidentiality and communication Build on nonprofit’s 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
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Source: Connolly and Lukas, Strengthening Nonprofit Performance: A Funders Guide To Capacity Building, Wilder Publishing, 2002

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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 19

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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 don’t 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 20

Appendix

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Comparing the Four Tides of Reform
Scientific Management
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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
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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
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Comparing the Four Tides of Reform
Liberation Management
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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
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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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Capacity Building Lessons Learned from the Paving Pathways To Sustainability Project
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It is very difficult yet crucial for the leader to maintain some objectivity when assessing the capacity of their organization. Assessments that identify capacity gaps may end up amplifying those gaps, if not careful. If done properly, capacity work should “raise the bar” organizationally, which may make some people uncomfortable; staff may leave the organization as a result of an enhanced focus on capacity issues and this isn’t necessarily a bad thing. It can be difficult to find the right talent to meet an organization’s capacity needs; finding the right people takes time and may involve making some mistakes along the way. Be wary of deficit consulting: only identifying things that are broken that need to be fixed. When it comes to organizational capacity building work, there isn’t a finite end. It is an on-going process of improvement.
http://www.pavingpathways.org
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General Lessons Learned from the Paving Pathways To Sustainability Project
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Any significant change initiative takes time, and it’s easy to loose momentum. Don’t assume that the skills, resources or time needed exist inhouse to make the changes needed. Risk is a very personal issue and needs to be carefully examined before moving forward. The level of risk tolerance will vary by organization and may also vary by issue. If an organization tries to do too much too quickly, it will affect its ability to make significant progress on any one issue. Often times an organization’s peers may have experienced something that it can leverage to its benefit; don’t feel the need to recreate the wheel or operate in a vacuum. It is often difficult to translate theory into practice, and this is particularly true if there is confusion over or resistance to the theory; have more than one solution or tool at your disposal.
http://www.pavingpathways.org
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General Lessons Learned from the Paving Pathways To Sustainability Project
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The challenge of any change initiative is communicating the message(s) down below senior levels; staff will inevitably resist what they don’t know or understand. Project goals and objectives needs to be integrated into everyday organizational language, otherwise it will get lost in the translation. The best ideas don’t always come from the top; solicit feedback from all levels of the organization. Things won’t always work out as envisioned, often times for good reason; be prepared to be flexible. The project team must do what it says it is going to do; management credibility will be under a microscope. Don’t underestimate the need for the board to feel involved in the communication loop, especially as the organization moves closer to making decisions.
http://www.pavingpathways.org
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Ed Robinson President Capacity Building Solutions Inc./ TEC Chair Group #663 301/774-0383 robin_ed@capacity-building.com
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