Ideas for Nonprofit Leadership | Page 6

New capacity building tool

August 31, 2012 by David Williamson

More than a decade ago, Venture Philanthropy Partners – then as now a leader in social entrepreneurship – commissioned McKinsey & Co. to develop a tool to help nonprofits assess their organizational capacity. The resulting report, Effective Capacity Building in Nonprofit Organizations, has subsequently been used by dozens of NGOs around the world, is cited in courses and textbooks, and still gets downloaded 1,200 times a month.

It is nonetheless long overdue for revision. Since the original analysis was done – back at the height of the internet bubble – so much has changed about the way that nonprofits deliver value and measure results. Partnership has become even more important. The original report did not adequately address the funding model, nor the importance of good marketing and communications. And some of the technology and systems sections sound dated. (Fax machines? Who uses fax machines anymore?)

The good news is that VPP and McKinsey are teaming up again to refresh, revise, and improve on the organizational capacity assessment tool (affectionately, OCAT), a central component of the report. They are actively seeking feedback on a new version of the tool and I would encourage anyone – NGO managers, board members, donors, consultants – to participate. You can learn about version one and take their survey. The more data, the better result, and because of the mission of VPP, results will be available to all on the open-source principle.

In the spirit of full disclosure, I am hardly a disinterested observer here. While on sabbatical from The Nature Conservancy in 2001, I had the privilege of working with Lynn Taliento, Heiner Bauman and the rest of the McKinsey team in drafting the original “Effective Capacity Building in Nonprofit Organizations” report. It was a great collaboration, and all of us have been (pleasantly) surprised by OCAT’s success. Here’s hoping that v2 meets the same tests of longevity and relevance.

Business model blues

August 24, 2012 by David Williamson

In a recent op-ed in The New York Times, a board member of Groton School asks the provocative question: Do private schools charge too little? (This with tuition at independent schools pushing $50,000 per year.) But the author makes a compelling case that the old business model for these institutions is broken and proposes instead “means-based” pricing for education.

I’m not sure if I agree with the solution, but the root problem he identifies is real enough. And it’s not just private schools, but nonprofits of all kinds that are facing existential questions about their business models. Some have grown fast on government funding (in the global health sector, for example) and now find themselves threatened by federal budget cuts. Others have relied for years on foundation support while neglecting individual or corporate donors, and now find themselves scrambling to replace funding as foundations retrench following the the financial crisis. And organizations that charge for services – theatres, museums, and kid’s programs, for instance – are trapped by same pressures that keep driving tuition at private schools and colleges higher and higher.

Faced with a broken business model, the first reaction for most nonprofits is to diversify. They approach this as a revenue problem, and look to increase the percentage contribution from each of the major sources of donations and grants: government, individuals, foundations, corporations, and earned income. And with good reason: it works in the short term. Most high-impact organizations enjoy a diverse base of support. But diversifying revenue is only a temporary fix. The larger truth is that there are still too many organizations chasing too few dollars and having too little impact. In the profit world, many of these would fold, but not so in the nonprofit sector. Until there is more accountability for result – and a more rational allocation of philanthropic capital – it will be difficult indeed for nonprofits to develop a truly sustainable business model.

Are you measuring what matters?

July 2, 2012 by Betsy Garside

More than a decade ago, B&W Managing Director David Williamson authored a piece for McKinsey & Company on measuring what matters in nonprofits. His co-author, the late John Sawhill, was then leading The Nature Conservancy (TNC) — arguably one of the most-respected nonprofits in the conservation field. Yet David and John wrote this article because TNC, like so many other nonprofits, had wrestled mightily with the challenge of effectively measuring progress and impact.

While much has changed in 10 years, it is still challenging for NGOs to identify and measure the right things — and in the current funding environment, even more important. Do you know what progress you’re making towards overall mission, or only whether you’re raising enough money to keep the doors open? Both are important.

We went back and looked at the McKinsey article to see if we’d change anything. We wouldn’t. The only thing we’d do is add more examples and emphasize that multi-level approach to measuring the organization and its impact. See what you think — read the article on McKinsey’s site, or download this PDF.

New capacity building tool

Business model blues

Are you measuring what matters?

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