A post to Exponent Philanthropy's blog

The Mutual Benefit of Funding Consultant-Led Organizational Assessments

Small funders have limited grantmaking capacity and must think about how to use those funds strategically to help their key nonprofit partners. When a funder can offer a nonprofit partner a fully-sponsored organizational assessment process led by a qualified consultant, it can be an instructive experience for both the grantee and the grantmaker.

Whereas larger nonprofits may routinely commission consultant-led organizational assessments, small and mid-sized nonprofits (with more modest budgets) often rely on internally-led organizational assessment methods. An internally-led organizational assessment is certainly better than no assessment at all, but there is added value when the process is led by a skilled and objective outside evaluator.

Why Regular Organizational Assessment Matters

Over the years, acting as both a provider of nonprofit technical assistance and a grantmaker, I have had the opportunity to conduct nonprofit organizational assessments and learn their value.

Helps Ensure a Nonprofit Remains Responsive to Its Community in an Ever-Changing Environment

The environment in which a nonprofit pursues its mission is never static. New organizations emerge, perhaps bringing additional capacity to address previously underserved needs. Social structures evolve, perhaps resulting in a target community forming a new demographic profile with a different set of issues and needs. Charitable resources flowing through a static organization may no longer have the transformational impact they once did.

A proper strategic planning process will include some organizational assessment work and help bring the nonprofit into better alignment with current conditions, but most organizations only do those every three to five years (if at all). A thoughtfully designed and objectively guided organizational assessment process can be a cost-efficient way for nonprofits to more routinely gather information about how responsive their core mission (and how they execute it) is to those they exist to serve.

Helps Ensure a Nonprofit Is Properly Positioned Financially and Operationally

When a nonprofit organization comes into being, it is often a volunteer-intensive operation. The initial governing board is typically a handful of individuals gathered around the proverbial “kitchen table” who have passion and enthusiasm for the core mission, and the organization’s budget may consist of what monetary and in-kind support the founders can gather from friends and family (and their own pockets).

If the nonprofit persists and becomes more accomplished at fulfilling its core mission, the served community will typically develop expectations of (and perhaps some measure of dependency on) the organization. Consequently, it is important for the nonprofit to regularly check its capacity to meet those expectations. The nonprofit may have evolved beyond the leadership capacity of the initial governing board, and a more strategically built governing board may be required. The nonprofit may have some key programmatic or operational activities that are now beyond the capabilities of a volunteer and must be professionalized. And the nonprofit may not be building a revenue-generation model to ensure continuity of services (and resources for organizational improvement and growth).

Again, a thoughtfully designed and objectively guided organizational assessment administered annually can help the nonprofit identify immediate and emerging capacity issues earlier (and prescribe action steps).

Helps Funders Better Identify Nonprofit Partners’ Capacity-Building Needs

Foundations generally don’t want to cultivate a dependent relationship with nonprofits, where they simply become part of an organization’s annual operating support strategy. The foundation may begin to feel a “sense of obligation” to continue the annual operating support, which encumbers a certain amount of the foundation’s grantmaking capacity each year and limits its ability to support new ideas and innovation.

For the nonprofit, dependent relationships with institutional funders create vulnerability. A foundation’s interests and priorities may change abruptly (particularly if leadership changes), and so relying on grant funding to sustain ongoing programmatic or operational functions is risky.

I recommend that all foundations consider underwriting annual consultant-guided organizational assessments for at least two consecutive years for those nonprofit partners to which they routinely provide general operating support. By the end of the second year, the nonprofit should be in a comparatively stronger condition as a result of the funder partner having a better idea (informed by the assessments) of how to more strategically support the organization to position it for long-term stability and success.

Some Contemporary Organizational Assessment Tools to Consider

During a visit to the San Francisco Area last August, I had a chance to meet with some real experts in organizational effectiveness/assessment at the William and Flora Hewlett Foundation in Menlo Park, CA and the Center for Volunteer and Nonprofit Leadership in San Rafael, CA. I learned about several internet-accessible organizational assessment tools; two are available at no cost and one is fee-based.

  • Leap Ambassadors created the Performance Practice, a set of tools that allow organizations to help drive organizational learning and improvement by self-reflection. The Performance Practice was specifically created for social-sector leaders who seek high performance and for funders who want to invest in their grantee partners’ growth. A complete suite of materials, including a user guide and workbook, is available at no cost.
  • The OCAT (Organizational Capacity Assessment Tool) 2.0 is a free assessment tool provided by McKinsey & Company, the international management consulting firm. It is an in-depth, online survey that allows the board, leadership, and staff of a nonprofit to measure how well their organization performs against best practices.
  • The iCAT (Impact Capacity Assessment Tool) by ALGORHYTHM is a fee-based service that analyzes an organization’s: 1) leadership capacity, 2) planning capacity, 3) learning capacity, 4) managing capacity, 5) oversight (financial and programmatic) capacity, and 6) resource generating capacity. The process yields a robust report that identifies organizational challenges of the nonprofit and offers recommended actions.

Whatever assessment tool is used, the nonprofit will always get added value from the process when a qualified consultant is involved to help guide its administration and interpret the results.

James P. McCrary is a philanthropic consultant operating out of Birmingham, AL and Little Rock, AR. James has over 25 years of professional experience in the nonprofit sector, including eight years with a statewide health foundation, seven years with a statewide organization providing education and technical assistance to nonprofits, and nine years of grantmaking work at the largest community foundation in Alabama.

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