Organizational Development & Measurement Jordan Pallitto , Consultant

Against the Odds:  The Importance of Enhanced Capacity for Non Profits in Difficult Economic Times

Even the most seasoned economic forecasters were surprised by the magnitude of the economic downturn that gained attention in the last quarter of 2008 and continued to have worldwide impact throughout 2009.  Making a bad situation worse in Pennsylvania, a months-long budget impasse eliminated state-level funding streams for so many social service organizations. 

To suggest that small, medium-sized, or even large nonprofit organizations anticipated and proactively prepared for last year’s economic downturn and budget impasse is likely unfounded.  Nevertheless, months from now, as the recession inevitably passes, select nonprofit organizations will remain strong amidst ruins of peer agencies whose grant streams have dried, donor bases have weakened, and missions remain unfulfilled.  The surviving agencies likely will have several characteristics in common including strong governance practices and policies, smart financial management, and a discipline of long-term planning. 

Organizations sharing these characteristics are more likely to prosper during tough economic times for two reasons:   (1) They have high organizational capacity and the flexibility to deal with change, and (2) funding sources (foundations, governments, corporations, and individuals) recognize and reward that high level of capacity with grants and contributions.

The current economic situation may prove once and for all that “high organizational capacity” is much more than a buzz phrase or passing management trend.  The ability of nonprofit organizations to establish well-run infrastructures that efficiently achieve their mission and vision may well differentiate the winners from the losers.  These “high organizational capacity” nonprofits have the structures, policies, and procedures that enable long-term sustainability, through good times and bad. 

Two pivotal questions, then, for nonprofit boards and managers who want their organizations to survive and prosper:  (1) How can you foster a high level of capacity and organizational strength in a tough economy, and (2) how can you communicate your enhanced capacity and strength to potential funders?

Here are some easy tips to jump start your capacity building process:

1.  Start with your board of Directors.  Conduct a board Assessment to make sure you have board members with the competencies necessary to achieve your long-term vision.  Identify existing gaps, articulate your needs, and proactively recruit prospects.

In this climate, a high-capacity agency will be able to rely on its well-designed, highly-capable board of Directors to develop sound investment policies, reign in spending, review and revise complex and ever-changing organizational budgets, and leverage personal and professional networks to raise political and financial capital.

2.  Convene your organization’s strategic planning committee to audit your market assessment procedures.  How accurate (or inaccurate) was your planning team in anticipating economic decline?  A high-capacity agency will continue to employ a discipline of strategic planning and market assessment, revise the scope of strategic initiatives without sacrificing client or community impact, and work with internal and external stakeholders to craft an action plan for post-recession success.

3.  Understand your agency’s present financial constraints and capabilities. Develop timely accounting and bookkeeping practices, pre-developed contingency and risk management plans, analysis of break-even points, and realistic projections for income.

4.  Take this opportunity to truly gauge your organization’s human capital needs.  An increased demand for services with fewer incoming pledges is stressful, but it can promote greater efficiency over the long-term.

5.  Survey or interview your current clients and prospective clients.  Thoroughly understand the needs and desires of your target market.  If organizational budgets must be cut, make sure you remain aligned with mission and provide in-demand programs or services.

6.  Consult your legal counsel.  Make sure your bylaws, handbooks, policies, and procedures are compliant with current laws.

7.  Understand that organizational capacity building is not an overnight process.  Proper capacity building involves a careful assessment of current capacity, prioritization of improvement opportunities, and careful operational and financial planning for enhancement implementation. 

Equally important, you must let current and potential funders know that you are taking steps to ensure high capacity and sustainability.  Here are some tips for marketing your enhanced capacity to potential supporters:

• Ensure that board members are actively promoting the organization in personal and professional networks.  Wallets may be thinner in this economy, but positive, grassroots publicity can go a long way.
  
  
• Update your organization’s website to include information on long-term, strategic plans, public financial information, and a wish list of in-kind goods and services.
  
  
• Create opportunities to celebrate success and invite local individuals, foundations, and public servants to take part.  As organizations are pressured to do more with less, low-cost celebrations are necessary retreats for often-underappreciated staff and volunteers.  Celebrate cautiously however; do not expend an undue amount of precious resources (time and money) on flashy, over-the-top events.  Keep celebrations simple, inexpensive, and meaningful.
  
  
• Understand that doing good work and expecting people to notice is passive and marginally successful at best.  Organizations that invest in high-capacity practices and promote their effectiveness are more likely to be regularly rewarded with investment.
  
  
• If you’re not already, consider engaging in social networking and continue to monitor your social network presence.  Listening to what your clients are saying about you online is critical, but shaping that discussion through proactive engagement is even more important.  This can be a low-cost, high-return way to relay your message to a large group of constituents.
  
  

Organizations without structures, policies, and procedures that enhance capacity run the risk of being reactionary, bogged down by inadequate planning, knee jerk, and ultimately, unsuccessful.  However, success is possible and probable for forward-thinking, well-positioned nonprofit organizations, even in dire economic times.

Inevitably, the recession will end.  Nonprofit organizations that share these high-capacity characteristics will not only have the tools to ride out this recent economic storm, but will have set the foundation to thrive long after the markets have rebounded.

For more information on how The Hill Group can partner with your nonprofit organization to enhance capacity and improve your likelihood of long-term success, visit http://www.hillgroupinc.com/./nonprofit.html or contact Jordan Pallitto, Pennsylvania Association of Nonprofit Organizations (PANO) Standards for Excellence Trained and Approved Consultant, at 412.722.1111 or jpallitto@hillgroupinc.com.

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