Download - Capacity building in NPOs
Capacity Building in NPOs Needs versus Reality
October 2013 |Presentation
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What is capacity building
How much is invested in capacity building in NPO’s
The Israeli Perspective
Capacity building value
Content
Definitions
Capacity Building- Whatever is needed to bring a
nonprofit to the next level of operational, programmatic,
financial or organizational maturity in order to more
effectively and efficiently fulfill its mission (National
council of nonprofits- ארגון מקביל למנהיגות אזרחית )
When talking about lack of resources for capacity
building, we also talk about lack of investment in
Overhead costs or Managerial infrastructures.
Leadership Capacity Adaptive Capacity
The Core Capacity Assessment Tool (CCAT) is a 146-question online survey that measures a nonprofit organization’s effectiveness in relation to four core capacities—leadership, adaptability, management, and technical capacities—as well as organizational culture.
What an organization needs in order to fulfill its mission?
Management Capacity Technical Capacity CCAT
Leadership Adaptability Program
Capacity Sustainability + + = TCC
Group
Administrative
cost
Fundraising
cost
Special events
cost Overhead cost + + = Bridge
span
Approach A:
Approach B:
The need of developing organizational capacities is translated to overhead costs:
Leadership Capacity The ability to create and sustain the
vision, prioritize, make decisions,
provide direction and innovate
. EXAMPLES: Board and executive leadership development, leadership
transitions, human resources, internal communications
Adaptive Capacity The ability to monitor, assess,
respond to and create internal and
external changes
. EXAMPLES: Community needs assessment, organizational assessment, program evaluation, strategic planning,
collaborations and partnerships
Citations source: Bridgespan (2008), Nonprofit overhead costs
“Because general management positions tend to be viewed as OH, they are the most difficult to justify to stakeholders”
“Due to lower pay in the nonprofit sector, key positions are often filled with junior people with little relevant training or experience”
Leadership and Adaptive capacity are the most important ones
Management Capacity The ability to make effective and
efficient use of organizational
resources
. EXAMPLES: Financial management, service delivery, program evaluation and
replication, outreach and advocacy.
Technical Capacity The ability to implement key
organizational and programmatic
functions.
. EXAMPLES: Marketing and communication, technology, legal skills, fundraising, earned-income generation, accounting, and facilities management
“Our systems are a patchwork job…we are always looking for the lowest cost solution”
“Our lack of investment in technology results in system crashes. If we were a for profit company, our IT budget would be at least 5 times what it is”
“We’ve known for a long time that a COO is vital to our growth but haven’t been able to fund it”
Citations source: Bridgespan (2008)
But management and technical capacities are also crucial
What is capacity building
How much is invested in capacity building in NPO’s
The Israeli perspective
Capacity building value
What is for today
A vicious cycle- why NPO’s don’t invest enough in overhead
Unrealistic funder expectations
Pressure on NPO’s to conform
Spend little on OH /
Underreport their expenditures
Source: Bridgespan (2008)
Funders do not incline to invest in OH
15%
10% 10% 8%
Foundation 1 Foundation 2 Foundation3 Foundation 4
Percent of program grants allocated for indirect costs
Indirect cost allocation may differ by program type within foundations
Over 50% of American adults believe NPO’s should have OH rate of 20% or less Nearly 4 out of 5 believe OH should held under 30% Those surveyed ranked OH ratios and transparency to be more important in determining their willingness to give than demonstrated success of the organization
Source: Better business Bureau’s Wise Giving Alliance Survey (2001)
The public perceives low OH cost as a sign of efficiency
Source: Bridgespan (2008)
Dialogue with social investors is not up front
17%
60%
34%
30%
24%
16%
5%
No dialogue on any of these topics
Program expansion
Facility needs
Developing financial reserves
Working capital needs
Cash flow concerns
Debt burden
My organization can have open dialogue with funders about…
66% of NPO’s have up to 3 months of expenses in their cash flow, 24% have up to 1 month
A dialogue regarding real financial needs is missing
Source: Nonprofit Finance Fund (2013)
Sources of pressure to limit administrative and funding expenses
Source: Center on Nonprofits and Philanthropy at the Urban Institute (2004)
36%
30%
24% 21%
8%
Government agencies Donors Foundations Federated campaigns Charity watchdogs
Do you feel pressure from _____ to limit OH, fundraising and administrative expenses?
NPO’s report less OH than actual spent
21% 22% 21%
13%
32% 35%
26%
17%
Organization 1 Organization 2 Organization 3 Organization 4
Reported Actual
Overhead costs include Development costs and Management & General costs Causes are pressure from social investors and uncertainty regarding IRS’s definitions
Reported VS actual overhead costs in 4 NPO’s
“The 20 percent norm is perpetuated by funders,
individuals and nonprofits themselves. When we
benchmarked our reported financials, we
looked at others and we realized that others misreport as well”
Bridgespan’s client interviewed for the report, Bridgespan (2008)
Source: Bridgespan (2008)
Some foundations invest directly in capacity building: Mostly in the capacity building process
Annenberg Foundation: Provide training. Focus on leadership and boards. Community Foundation of Monterey County: For geographically-based cohorts or networks, offer a series of skill-building workshops. Ford: Create a fund for small grants so that grantees can attend workshops of their choice. Haas Jr. Fund: Design OE grants to enhance leadership and/or offer leadership development programs for grantees. Global Fund for Children: Offer a capacity self-assessment tool that Programs can use with grantees to better assess areas of capacity strength/needs. Hewlett Foundation: Reorganize the OE Program so that it consults to Programs on how best Programs make OE grants. Create an OE Cookbook 2.0 or an OE toolkit for Programs (and for OE). Edna McConnell Clark Foundation: Invest in fewer anchor grantees with a higher level of service over a longer amount of time to impact the field. Co-design with grantees and Program a longer-term capacity building plan per anchor grantee that is aimed to deliver greater Program outcomes.
Source: OE Goldmine research Project (2011)
What is capacity building
How much is invested in capacity building in NPO’s
The Israeli Perspective
Capacity building value
Content
The public perspective
I am Finished with Donations!
The Fat Paycheck of the NPO’s CEOs
In which NPO does one earn 1.53 million shekels per year?
The government policy restricts G&A costs
The Maximum Rate of Administrative and
Overhead as a Percentage of the Total Turnover
Income (NIS)
22%0-10
אוק-18%25
13%25-50
11%50-100
7%100 and up
New voices start being heard
2014 Applied in Grants to Establish Organizational
Effectiveness
What is capacity building
How much is invested in capacity building in NPO’s
The Israeli Perspective
Capacity building value
Content
The Packard Foundation case study
Sine 1997 the David Lucile Packard Foundation has awarded 1391 Organizational Effectiveness grant to over 900 organizations. Most of the OE grans were for hiring a consultant for one year 90% of the grants ranged between $20K and &60K’ with an average of $40K.
The Packard Fundation capacity building grants
New capacity was built and has
sustained itself with significant organizatio
nal wide impact,
53%
New capacity was built and has
sustained itself with
some organizatio
nal wide impact,
30%
No new capacity
was built?, 17%
83% of grantees reported new sustained capacity was built
“At the Packard Foundation, we believe that well-managed and -governed organizations are more likely to achieve their programmatic goals, and we invest in projects aimed at
developing grantee management skills and organizational capacity”
Source: OE Goldmine Research Project (2011)
Packard’s research show that impact of OE on grantees can be determined
3%
8%
23%
47%
19%
No impact on programservices
Some (but no measurable)impact on program services
Some measurable impact onprogram services
Significant measurable impacton program services
Transformational andmeasurable impact on
program services
Impact of OE grant on program services
Over 2/3 reported significant measurable impact
Specific ways that OE grants impacted
programs: • Improved program
quality and reach (35%)
• Becoming more strategic with programing (23%)
• Increased visibility, community support and leadership role in the community (10%)
• Increased program resources (10%)
Source: OE Goldmine research Project (2011)
Where impact was most generated?
18%
21%
25%
27%
42%
Adaptive- OrganizationalLearning
Technical- Fundraising skills
Adaptive- OrganizationalResource sustainability
Leadership- Board Leadership
Adaptive- Decision makingtools
New or long-term results by categories (n=169)
Decision making tools- Developing and using tools to make decisions such as strategic plans, evaluation tools, fundraising plans, etc Organizational resources sustainability- Maintaining financial stability in order to adapt to changing environments Organizational learning- Self- assessing’ using assessment data/ findings to conduct strategic planning and following through on strategic plans
Definitions:
Source: OE Goldmine research Project (2011)
A correlation between R&D investment and organization growth had been proven..
7%
5% 4%
2%
ExhibitingMany R&Dbehaviours
Exhibitingsome R&Dbehaviours
Exhibitingvery few
R&Dbehaviours
Exhibiting noR&D
behaviours
Average annual growth rate 1. Evaluating a program to figure out what works’ rather than deciding if it works
2. Gathering data directly from program recipients to determine how to improve programs
3. Engaging key leaders and staff in interpreting the client- derived data
4. Determining outcome metrics by listening to’ documenting and sharing actual client success stories and results
5. Bringing design leaders together to assess and address the resources needed to deliver programs effectively
6. Leveraging R&D insights to inform the management of program implementation
Source: tcc group (2011), Success by design
45% 25% 25%
R&D Practices (from the Core Capacity Assessment Tool)
% of NPO’s:
5%
…Alongside the impact of an IT investments
0
100
200
300
400
500
600
Annual IT costs Annual IT benefits realized
IT infrastructure costs and estimated benefits for TLT
Source: Bridgespan (2008)
IT FTE’s
IT systems costs
Staff time savings
Staff required to add same
value without IT systems
System cost synergies
$524K
$170K
Estimated benefit of
technology investment = $324K/year
An organization should be ready for an effective capacity building investment
12%
21%
34%
36%
44%
46%
53%
57%
59%
68%
No organizational crisisResources to implement profect follow-up
Ready to look at options openlyTeam readiness/ capacity
Board involevementConsultant fit
Executive director engagementthe right time for the project
Resources to implement the projectOrganizational readiness
Factors contributed most to capacity building success
Source: OE Goldmine research Project (2011)
Capacity building should be held when it is the right time for the organization, stake holders are committed to change and there are
enough resources for project implementation
The responsibility for fostering investment in capacity building is mutual
Social investors
Supporting organizations with general
operating funds
Committing to paying a greater share
of administrative and fundraising
costs in use-restricted grants
Fostering more open discussion
about overhead
NPO’s
Developing a strategy that explicitly
recognizes infrastructure needs
Communicating the logic for
increased overhead investment
through the organization and to the
board
Providing social investors with better
ways to measure performance than
program ratios.
Dialogues about “real” overhead rates can help shift the focus to the real target - outcomes
Bibliography
Bridgespan (Apr 2008), Nonprofit Overhead Costs, http://www.bridgespan.org/Publications-and-Tools/Strategy-Development/Nonprofit-Overhead-Costs-Break-the-Vicious-Cycle.aspx#.UlEO_Ianrkg
The Core Capacity Assessment Tool (CCAT), http://www.tccccat.com/
Nonprofit Finance Fund (2013), State of the Nonprofit Sector Survey Results, http://nonprofitfinancefund.org/files/docs/2013/2013survey_nat_summary.pdf
Better business Bureau’s Wise Giving Alliance Survey (2001), http://www.bbb.org/us/storage/16/documents/WGA%20guides/holiday07.pdf
Center on Nonprofits and Philanthropy at the Urban Institute(2004), Who Feels Pressure to Contain Overhead Costs? TCC group (2011), Success by design, http://www.tccgrp.com/pdfs/7-21_TCC_Briefing_Paper_LR.pdf
OE Goldmine research Project (2011), Executive Summary, http://packard-foundation-oe.wikispaces.com/file/view/Final%20OE%20Goldmine%20Executive%20Summary%20October%2030%202011.pdf/271555728/Final%20OE%20Goldmine%20Executive%20Summary%20October%2030%202011.pdf
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