What is Organizational Capacity, and Why Should You Care?

When we speak of capacity, we are generally referring to organization’s potential to marshal their human, financial and other resources to effect positive change in the communities and clients they serve. Organizational capacity is impacted by a number of factors, including leadership, the organization’s stage of development and changes in the environment, to name a few. Organizations engage in capacity building activities in order to increase their effectiveness in serving their constituencies. Such activities include, but are not limited to, hiring new employees to meet increased demand for services; strategic planning to position themselves for changes in the environment; training board and staff on their roles and responsibilities, or automating financial systems.

Organizational stakeholders, including board members, management and funders, tend to focus on six major components of organizational capacity: board governance and leadership; financial management; fundraising and resource development; program delivery and impact; human resources and networking and strategic partnerships. Organizational assessments are used to determine the extent to which these components work together to enhance organizational performance.

Who Cares?

Funders

The advent of venture philanthropy has, increasingly, led to an environment in which funders are treating their charitable gifts as investments as opposed to donations with very few strings attached. Funders want to get the biggest bang for their buck”, and they typically apply principles from venture capital finance and business management to achieve very specific goals and outcomes that are easily measured.

Funders may use assessment tools to assess organization’s core capabilities; decide whether or not to fund organizations or to determine what types of capacity building is necessary to move the organization towards long-term sustainability.

Board Members

In addition to their fiduciary duties of loyalty and care to the organization, board members are responsible for guiding the strategic direction and monitoring the organization to ensure that the organization meets its mission, goals and objectives in a manner that that is…