By Dr. Alicia Schatteman
Nonprofit capacity broadly refers to a number of different organizational dimensions related to the processes, practices, and people that the organization draws from to achieve its mission.
Christenson and Gazley 2008
Nonprofit capacity generally refers to the ability of organizations to develop networking and advocacy, financial resources, operations and governance, human resources, programs and planning, marketing, and information technology to carry out their mission (Honadle 1981; Johnson et al 2004; Knox and Wang 2015).
There are several nonprofit capacity frameworks in the literature (Shumate et al. 2017; Allison and Kaye 2005; CARE International 2000; Gupta et al. 2006; McKinsey and Company 2001; Renzi 1996). The Capacity Framework by McKinsey & Company (2001) was refined by Grønbjerg et al. (2007) and Gronbjerg, and McGiverin-Bohan (2010). It includes seven specific organizational capacities (networking and advocacy, financial resources, operations and governance, human resources, programs and planning, marketing, and information technology).
Networking and Advocacy Capacity
Networking and advocacy capacity center on the creation and maintenance of relationships with key policymakers as well as constituents (Glickman & Servon, 1998), issues that will likely become more important given the current economic climate. Past research has concluded that isolated organizations are more likely to fail due to a lack of shared resources and focus on community expectations (De Vita, Fleming, & Trombly, 2001). Furthermore, nonprofits that move toward forming strategic alliances and pooling their resources are more likely to survive an economic downturn (Collins, 2008). A performance measurement system requires accommodation of various stakeholders’ demands (Rivenbark and Menter 2006; Lee and Clerkin 2017).
Financial Resource Capacity
For most nonprofits, the best predictor of success and growth is how much the organization spends financially on fundraising (Light, 2004). Organizations with sufficient financial resources are more likely to focus on strategic decisions (LeRoux and Goerdel 2009). In contrast, nonprofits with scarce financial resources will tend to comply with the performance measurement demands from funders, but they tend to meet the minimum standard of performance measurement instead of adopting performance measurement proactively (Thomson 2011). Financial resources capacity is the most important challenge facing a nonprofit (Gronbjerg et al 2007).
Operations and Governance Capacity
Dimensions of operations and governance capacity include such functions as strategic planning, management skill development, board/staff relations, organizational culture, board training, routine management practices, and managing facilities (Gronbjerg et al 2007). Board members who are sufficiently trained are more engaged in the organization which improves their overall effectiveness (Chait, Holland, & Taylor 1996; LeRoux and Wright 2010; Brown 2005). If they are not well trained, they may rely more heavily on staff for strategic decisions, performance measurement, and financial decisions. Research suggests that while nonprofits report board recruitment problems, populations of people are being neglected and under-represented on nonprofit boards. These groups of people include ethnic and racial minorities and those under the age of 35 (Ostrower, 2008).
Human Resources Capacity
The work of nonprofits is done through the service of others, both volunteers and paid staff. Human resources capacity includes measures of staff and volunteer recruitment, retention, training, and management (Gronbjerg et al., 2007). Professional staff are more likely to use performance information (Moynihan and Ingraham 2004; Miller 1998; Taylor and Sumariwalla 1993).
Programs and Planning Capacity
Nonprofit organizations exist for the sole purpose of fulfilling their mission, which is typically done through the programs they offer. Missions and programs are developed to address a particular need in the community. The nonprofit needs to plan effectively to meet certain objectives. Measurement is required to ensure that the programs meet the mission and therefore attract volunteers, donors, and staff who identify with that vision (De Vita, Fleming, & Twombly, 2001). About 75% of all respondents in Gronbjerg et al.’s (2007) Indiana study perceived that measuring program goals and outcomes was a minor challenge because, as Campbell (1993) and Campbell and Yeung (1991) suggested, staff time spent monitoring and evaluating took time away from day-to-day activities, including program delivery resulting in a negative impact on adoption performance measurement.
Marketing and communication in nonprofits are support functions for everything else but are often under-valued and under-resourced. Marketing in the nonprofit space is particularly challenging since those paying for programs are rarely the actual beneficiaries of these programs. There is often no tangible benefit to donors beyond intrinsic value, or the warm feeling of altruism. Nonprofits may borrow certain marketing methods from the for-profit sector (Dann et al., 2007). Organizations face increasing competition for discretionary time and money, yet marketing is needed to improve the visibility of the nonprofit (Gronbjerg et al 2007).
Information Technology Capacity
In this ever-changing world, information technology is an incredibly important part of organizations. Most nonprofit organizations include some component of technology in their strategic plan (Silverman, Rafter, & Martinez, 2007). To improve technology capacity, organizations need properly trained staff, have an innovative culture and allocate the proper resources to support technology in the organization (Silverman, Rafter, & Martinez, 2007). Staff training is also a challenge (Gronbjerg et al 2007). Lack of investment in technology hinders the development and use of performance measurement systems (Connolly and York 2003, Carman and Fredericks 2010). The capacity for using performance technology is particularly important in performance measurements because measuring performance requires a well-designed system to monitor nonprofits’ day-to-day operations (Medina-Borja and Triantis 2014). Also, data collection, data analysis, and data management require advanced analytic skills (Thomson 2011).
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McKinsey & Company. (2001). Effective capacity building in nonprofit organizations. Venture Philanthropy Partners.