FreeForm Paper

An Integrated Framework of Organizational Capacity in Small Nonprofits

Katie Misener University of Waterloo

W. Clayton Rowe World Vision Canada

Hugh T. Brewster World Vision Canada

July 2015

July 2015

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Nonprofit and voluntary sector literature pro-vides solid evidence of the unique challeng-es faced by nonprofits in evaluating their ef-

fectiveness, building their capacity, and planning for change in a competitive environment, amidst other challenges related to achieving their individual man-dates (e.g., Cornforth & Mordaunt, 2011; Hall et al., 2003; Wing, 2004). Effective and innovative respons-es to these challenges are required in order to ensure that the sector remains sustainable and socially sig-nificant (Cornforth, 2012). While research has shown that use of performance measures in nonprofit orga-nizations is linked to effectiveness at strategic deci-sion making (LeRoux and Wright, 2010), nonprofits often struggle with identifying appropriate perfor-mance standards and using these ‘benchmarks’ to inform strategy, ultimately impacting their ability to build their organizational capacity (Wing, 2004). Given this struggle, effective capacity building tools are needed to increase accountability to funders and build sustainable programs and services (Millesen, Carman, & Bies, 2010; Minzner, Klerman, Markovitz, & Fink, 2014).

Organizational capacity is a multidimensional con-cept that involves resources, structures, processes, and strategies (Christensen & Gazley, 2008). Mack-ay, Horton, Dupleich, and Andersen (2002) state that “capacity refers to both the organizational arrange-ments and the technical capabilities that permit or-ganizations to carry out their primary functions and thereby accomplish their development goals” (p. 122). Capacity-based inquiries allow organizations

to self-define the attributes that are most critical to their individual mandates rather than being defined by externally imposed standards (e.g., membership growth, amount of philanthropic support, etc). Sig-nificant advancements have been made in the non-profit capacity literature, and various frameworks and processes have been proposed (e.g., Connolly & York, 2002; De Vita, Fleming, & Twombly, 2001; Glickman & Servon, 1998; Hall et al., 2003; McKinsey & Compa-ny, 2001; Lusthaus, Adrien, & Pertinger, 1999; Schuh & Leviton, 2006; Sowa, Selden, & Sandfort, 2004). They have identified several common dimensions of capacity including leadership, infrastructure, strate-gy, human and financial resources, and interorgani-zational relationships (Doherty, Misener, & Cuskelly, 2014). However, despite these common themes, the capacity assessment process and resulting link to ca-pacity building appear to vary extensively and as a result, there may be tension as organizations recon-cile the purported dimensions of capacity with their own particular values, resources, and methods of as-sessment. This is not surprising given that relatively few capacity frameworks have distinguished between capacity attributes of particular types and/or sizes of organizations and are generally more descriptive than action-oriented. Eisinger (2002), Doherty et al. (2014), and Anderson et al. (2008) are exceptions, which outline specific capacity considerations for food banks, community sport clubs, and regional health authorities respectively. These few studies provide evidence of unique capacity strengths and challenges that emerge when context-specific investigations and frameworks are advanced.

AbstractSmall nonprofit organizations offer a wide scope of vital activities in the community yet there is a relative absence of discussion in the nonprofit sector literature about how best to understand their capacity. In this article, we pres-ent a new framework of organizational capacity assessment developed to reflect a more nuanced understanding of small nonprofits and the integration between capacity attributes and the capacity building processes. The paper includes four main sections: an overview of the existing literature and theoretical foundations related to defining and assessing capacity; a review and profile of small nonprofit organizations and their unique capacity attributes; a new framework to assess organizational capacity in small nonprofit organizations with a comparative analysis of existing nonprofit literature, and several recommendations for further empirical analysis. The paper also highlights the utility of a participatory approach to capacity assessment.

An Integrated Framework of Organizational Capacity in Small Nonprofits4

Understanding the organizational capacity of small nonprofit organizations is critical to the health of the sector-at-large given the wide scope of activities and opportunities they offer such as involvement in places of worship, sport and recreation, environmental pro-tection, and social services (Gumulka, Hay, & Lasby, 2006). Small nonprofits, with up to four full-time em-ployees (Gumulka et al., 2006), make up the vast ma-jority of nonprofit organizations and engage the major-ity of the sector’s volunteers (Roberts, 2001; Trzcinski & Sobeck, 2008). In a large Canadian study, Gumulka et al. (2006) note that small nonprofits “touch virtu-ally every aspect of Canadian life and engage millions of Canadians in the work of building stronger com-munities” (p. 1). Despite their prevalence and touted importance, small, community-based organizations that employ few or no staff have been neglected or unobserved within the nonprofit research landscape (Roberts, 2001; Smith, 2000). These organizations would benefit from research and initiatives focused on capacity building strategies that address their unique challenges rather than those derived from sec-tor-wide data (Cornforth & Mordaunt, 2011). This is particularly critical given their vulnerability to external influences due to the degree of scarce resources and resulting lack of infrastructure they face (Schneider, 2003; Scott, 2003). Further, given that capacity assess-ment and resulting capacity building requires signifi-cant investment of time and resources and a “one size fits all” approach is insufficient, new and refined mod-els of capacity are needed that reflect more nuanced understandings of the integration between capacity attributes and capacity building processes.

The purpose of the following conceptual paper is to present a new framework of organizational capacity assessment developed within and for the grassroots level of the nonprofit sector. In order to contextualize the model’s potential contribution, the paper includes four main sections: First, we provide an overview of the existing literature and theoretical foundations re-lated to defining and assessing capacity; second, we provide a review and profile of small nonprofit orga-nizations and their unique capacity attributes; third,

we propose a new framework to assess organizational capacity in small nonprofit organizations with a com-parative analysis of existing nonprofit literature. This section also highlights the particular utility of a par-ticipatory approach to capacity assessment involving multiple stakeholders. Lastly, we provide several di-rections for future empirical analysis and recommen-dations for using the FreeForm model in practice.

Theoretical FoundationsORGANIZATIONAL CAPACITY Organizational capacity is a dynamic term broadly reflecting the ability of an organization to draw on various assets and resources to achieve its mandate and goals (Doherty et al., 2014). As such, capacity is a nonprofit organization’s ability to deploy various forms of capital including physical resources, intel-lectual capital, and other intangible assets (e.g., in-fluence and reputation), and translate these into an outcome related to the organization’s mission (Hall et al., 2003). Capacity is also defined by how it can be built or developed through an organizational learn-ing process that focuses on assessing a situation, planning a response, and monitoring and evaluating implementation, in order to help maintain organiza-tional viability and improve operations (Mackay et al., 2002). In other words, capacity building acts as a tool to identify goals and ways of achieving those goals (Hall et al., 2003). Crisp, Swerissen, & Duckett (2000) identified that capacity building often occurs in four ways: (i) a top-down organizational approach (e.g., changing organizational policy); (ii) a bottom-up approach (e.g., training staff); (iii) a partnerships ap-proach (e.g., building relationships between commu-nity organizations); and (iv) a community organizing approach (e.g., merging existing organizations or cre-ating new ones in order to meet community needs) (p. 100). While not the focus of this review, the vari-ety of capacity frameworks proposed in the nonprof-it literature can be mapped according to these ap-proaches, each with merit and distinguishing features related to the particular focus and philosophy of the framework (e.g., Connolly & York, 2002; De Vita et al., 2001; Glickman & Servon, 1998; Hall et al., 2003;

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McKinsey & Company, 2001; Lusthaus et al., 1999; Schuh & Leviton, 2006; Sowa et al., 2004).

Some definitions of organizational capacity have fo-cused on equating capacity with effectiveness, as they are both organizational-level measures. This is problematic given the lack of a clear definition of ef-fectiveness in the nonprofit sector (Kapucu, Healy, & Arslan, 2007; Lecy, Schmitz, & Swedlund, 2011). This paper considers a distinction between these concepts as the notion of capacity includes the temporal ele-ment of sustainability, where the time horizon select-ed for achieving and sustaining a particular goal will influence the types of capacity building approaches and indicators of success that can be used (De Vita et al., 2001). Eisinger (2002) further clarifies that be-cause capacity attributes are latent until mobilized, an effective organization is one which has a broad array of capacity attributes and is able to actually use that capacity to fulfill its mission.

FACTORS THAT INFLUENCE ORGANIZATIONAL CAPACITYIn addition to particular models and requirements for building capacity, specific external and internal fac-tors that can influence organizational capacity have also been identified. These include flexibility through responsiveness (e.g., changing according to environ-ment), and resilience (e.g., continuing to pursue a mandate after a setback) (Borris, 2001; Glickman and Servon; 1998; Joffres et al., 2004; Robertson, 2005). An organization’s ability to be responsive also relies heavily on the relationships the organization has with the community through partnerships, shared vision, and civic engagement opportunities (Robertson, 2005). Further, community realities, such as assets, notable issues, history, and diversity, will strongly in-fluence the relevance of the organization and its work in the community (Robertson, 2005). Social capital, or the “features of social organization such as networks, norms, and social trust that facilitate coordination and cooperation for mutual benefit” (Putnam, 1995; p. 67) may also have an important influence on organiza-tional capacity. As Schneider (2009) notes, “relation-ships based in patterns of enforceable trust [enable]

people and institutions to gain access to resources like social services, volunteers, or funding” (p. 644).

Creativity and innovation can also have an important positive impact on capacity (DiLiello, & Houghton, 2006; Jaskyte, Byerly, Bryant, & Koksarova, 2010). Cre-ativity can help organizations come up with strategies to help maximize resources, which is an area in which many nonprofits struggle (Jaskyte et al., 2010). Simi-larly, a well-articulated and motivating organizational mission can encourage a culture of innovation in an organization (McDonald, 2007). Thomas et al. (2005) claim that in order to be innovative, an organization must have clear structure and governance, employees must be encouraged to learn at all levels of the orga-nization, leadership must be participative and carried out by different levels of employees, the timing must be right for an organization to make change, and im-plementation should be done by external facilitators that give space for learning and reflection.

In contrast to the factors that may influence and en-hance capacity, barriers to capacity building also exist such as political reform and decreasing community support (Joffres et al., 2004). The interrelationship between nonprofits, government, and business may also act as a barrier to capacity building due to diffi-culty negotiating economic/market conditions, socio-economic and demographic factors, values and social norms, and political factors (De Vita et al., 2001).

ORGANIZATIONAL CAPACITY ASSESSMENTDefinitions of organizational capacity are intricately linked with explanations of how organizational ca-pacity can be measured or assessed. Hall et al. (2003) notes that “assessments of capacity are primarily as-sessments of the ability of organizations to undertake their work and of the factors that serve to constrain or impair the ability of organizations to fulfill their mis-sions” (p. 3). Further, the relationship between assess-ment and capacity building is central, as assessment is an information gathering process that determines specific attributes and requirements often based on a given model of capacity, that will influence a larger ca-pacity building process. Specific capacity dimensions


or areas must be assessed independently, while rec-ognizing their impact and interdependence with oth-er dimensions (Hall et al., 2003; Misener & Doherty, 2009). Measurement of particular outcomes linked to a given dimension forms the basis for the majority of capacity assessments. For example, Selden and Sowa (2004) use indicators of program capacity such as di-versity of services, education of leaders, and quality of facilities to predict performance-related outcomes. Sobeck and Agius (2007) proposed that nonprofits can benefit from a longitudinal assessment strategy using both internal and external stakeholders. It is through such a process of assessment that organiza-tions may accrue the following benefits: clarified roles and responsibilities, recognizing the importance of planning, enhancing management and administrative skills, identifying gaps in the organization, and learn-ing about resources (Sobeck & Agius, 2007). Recently, Minzner et al. (2014) demonstrated the impact of ca-pacity building in federally funded programs on five capacity areas (organizational development, program development, revenue development, leadership de-velopment, and community engagement). Their ran-domized assessment of capacity showed significant improvements in each capacity area for those orga-nizations engaged in the capacity-building program vs. the control group. Their study provides important evidence of the effectiveness of capacity-building pro-grams within the sector more broadly. Further, analy-sis based on organizational size revealed differences on some measures but no identifiable pattern, which may reflect a lack of differentiation within their mea-surement tool for desirable capacity attributes among different organizational sizes (Minzner et al., 2014). This highlights the need for a capacity assessment in-strument developed to specifically reflect the nature and nuance of small nonprofit capacity.

Organizational Capacity and Small NonprofitsWhile the International Classification of Nonprofit Or-ganizations provides categorization based on type of organizational activity, no agreed upon definition of “small” nonprofits exists within the sector and data is

often difficult to compare given that these organiza-tions may fall under any of the three structural forms of nonprofit organizations: unincorporated, incorpo-rated, or charitable status (Roberts, 2001). Human and financial resources are central attributes of dif-ferentiation between varying sizes of nonprofits that, when considered together, provide a clearer picture of the characteristics of this particular sub-sector. One report based on the NSNVO in Canada (Nation-al Survey of Nonprofit and Voluntary Organizations) notes that organizations with less than 100 employ-ees represent 98.6% of all charitable and non-profit organizations in Canada (Gumulka et al., 2006). Orga-nizations with no paid staff account for 54% of all or-ganizations, and those with 1-20 employees represent 39% of organizations (Gumulka et al., 2006). This lat-ter group represents an important sub-group within the sector as they face many of the same challeng-es as ‘grassroots organizations’ (Smith, 2000), in that they are often locally based and rely extensively on volunteers, yet they differ from grassroots organiza-tions that are essentially membership-based groups that use the “associational form of organization and, thus, have exclusive memberships of volunteers who perform most, and often all, of the work/activity done in and by these nonprofits” (Smith, 2000, p. 1). The term ‘small nonprofits’ is therefore a broader term that may encompass grassroots organizations but may also include other structures such as nonprofit agencies with ongoing infrastructure costs (Roberts, 2001). While discrepancy in revenue ranges exists, for the purpose of this paper, small nonprofits with 1-20 employees may have corresponding revenue of up to one million dollars. These organizations typically rely on earned income from private donors and nongov-ernmental agencies as well as grants, membership, and other fees (Hall et al., 2005).

While larger nonprofit organizations may be able to utilize organizational capacity models from the busi-ness and consulting arenas, smaller nonprofits may lack the infrastructure to assess and implement these models (Mara, 2000; Schneider, 2003; Smith, 2000; Wing, 2004), thus requiring a tailored approach that

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recognizes these limitations and builds on the exist-ing resources and capacity within each organization (Mara, 2000). It is therefore important to identify the characteristics of small nonprofits in order to contex-tualize an organization development process such as capacity assessment within the structural confines of this sub-sector and ensure appropriate uptake.

One characteristic of smaller nonprofit organizations is that they are affected by short term funding to a greater extent than larger organizations (Scott, 2003). This translates into a focus on immediate needs rath-er than considering the organization’s overall objec-tives and long- term vision. In addition, smaller or-ganizations often require collaborations with other community partners in order to achieve their goals (Misener & Doherty, 2013). However, despite the need to collaborate, research has shown that more mature organizations with greater access to resourc-es are more likely to have the capacity to actually develop formal types of collaborative activities than smaller organizations who may have ‘less to share’ and be less appealing as partners (Foster & Mein-hard, 2002; Guo & Acar, 2005). Small nonprofits also have distinctive challenges in developing and main-taining effective Boards of Directors (Roberts, 2001) as these organizations often emerge to fulfill needs in the community, resulting in less formalized governing structures and greater reliance on overworked vol-unteers (Hall et al., 2003; Misener & Doherty, 2009; Trzcinski & Sobeck, 2008). Informal, voluntary struc-tures may limit organizational growth as self-interest and personal agendas can compromise effective lead-ership (Misener, Harman, & Doherty, 2013).

Smaller nonprofits also possess several unique strengths that can be leveraged into further capacity development. For example, passion and dedication of volunteers is a defining characteristic of these orga-nizations (Doherty et al., 2014). Small nonprofits also have the ability to be more responsive to specific local needs rather than providing generic services (Roberts, 2001). The result of a focus on local needs is a strong commitment to service provision and resulting repu-tation for acting as a safety net in communities that lack resources and power (Eisinger, 2002; Trzcinski & Sobeck, 2008). They may also be more flexible and adaptable due to their lack of bureaucracy, enabling them to respond quickly in a crisis (Roberts, 2001). Smaller organizations may also have a significant con-centration of staff or volunteers with experience and expertise on the ‘frontline’ (i.e., participant-facing), thus characterizing these organizations as ‘pitch-in’ environments where capacity building is optimized through a transparent and accessible framework, with significant stakeholder buy-in, and mutually desirable outcomes.

The article now turns to an overview of a specific ca-pacity framework developed with and for small non-profits and provides an overview of the background, philosophy, and elements that serve as a foundation for the framework. The process-based framework provides a new contribution to the literature as it is uniquely positioned to support small nonprofits in measuring and building their capacity, which has not been articulated to date in the nonprofit research. The following section also outlines the utility of a par-ticipatory approach for capacity-based assessments.


FreeForm Capacity ModelThe life of a non-profit organization is built on the teamwork, listening, learning, and leading that is also required to play great jazz. Both are journeys of the heart that start with a spark of inspiration that moves you to take action. Truly soulful sound emerges from the combination of improvization (freedom) and sound theory (form).

BACKGROUND AND PHILOSOPHYThe FreeForm model was created through a partner-ship between World Vision Canada (WVC) and over 90 small nonprofits since 2005, in five major cities across Canada. Organizational capacity is a central theme within WVC as it invests in urban nonprofits in order to design, implement, monitor, and evaluate projects and organizations that support the well-be-ing of children in communities limited by poverty. Di-rectors of nonprofit organizations that partner with WVC in providing front-line services in these commu-nities were invited to contribute to the development of workshops to enhance their organization’s ability to achieve its mandate. Over the past 10 years, these nonprofit leaders have worked alongside WVC staff to refine the model based on their own experienc-es of nonprofit capacity and consultation with other models identified in the nonprofit capacity literature (e.g., Hall et al., 2003; McKinsey & Company, 2001). Further partnerships with nonprofit scholars have also aided in the critical refinement of the frame-work, representing another perspective in the frame-work-building process.

The name “FreeForm” is a metaphor that reflects the combination of improvisation (freedom) and sound theory (form) for nonprofit organizational capacity development. This metaphor acts as an entry point for nonprofit practitioners in the capacity assessment process as they continually improvize by responding to changing community contexts in which they serve, creating innovative solutions to complex challenges, and meeting increasing demand for support in neigh-borhoods across Canada. Yet, true improvisation isn’t just responding ‘in the moment’; instead, the ability

to improvise effectively requires a significant amount of structure, form, and practice to support a success-ful ‘performance’ and guide decision-making. Just as a jazz trio’s improvisation can be enhanced through a deeper understanding of music theory, the nonprof-it practitioner must use capacity building tools such as tested models, best practices, policies, and part-nership arrangements for fluid improvisation. The FreeForm philosophy seeks to honour both freedom and form.

FreeForm defines capacity as the ability to assess the situation, design the response, implement and moni-tor the plan, and to evaluate the results. This approach builds on other process-based models of capacity that determine the needs and assets of the community, identify infrastructure that can help build capacity, select appropriate capacity-building strategies, and encourage ongoing evaluation (cf. De Vita et al., 2001; Preskill & Boyle, 2008).

FREEFORM FRAMEWORKFigure 1 provides a diagram of the FreeForm model in-cluding the capacity areas and stages of organization-al development described in the following sections.

CAPACITYMODEL

Replicate · Advocate · Re-vision

Demonstrate · Accountable · Interdepen

dent

Write · Endorse · Align

Assess · Explore · Discern

Responsive · Intuitive · Innova

tive

INFLUENCE

PERFORM

ARTICULATEREFLECT

IMPROVISE

LEADERSHIP TEAM

FINANCIAL

HUM

AN R

ESO

UR

CE

RESO

URC

E DEVELO

PMENT

PRO

GRA

M STRATEGY

Fig 1. FreeForm Capacity Model

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Table 1. Foundations of FreeForm Capacity Areas and Comparative Literature

Human Resources CapacityThe ability to plan and coach staff, volunteer and board contributions.

Alignment with Nonprofit Capacity-based Literature FreeForm Foundations and Core Competencies

Human Resources Capacity (Doherty et al., 2014; Hall et al., 2003; McKinsey & Company, 2001)

Management capacity (Selden & Sowa, 2004)

This capacity area has been well established in the nonprofit literature as central to all other aspects of organizational capacity and generally reflects the deployment of human capital in the form of volunteers, paid staff, and board members. Hall et al. (2003) note that access to human resources (i.e., having the right number and appropriately skilled individuals) are central issues, which demand focus on recruitment, retention, and training. Similarly, McKinsey et al. (2001) note the centrality and difficulty of attracting and managing talent, and the tendency to undervalue human resources, despite their central role as the lifeblood of nonprofit organizations. In addition, Doherty et al. (2014) found that the enthusiasm, common focus, and succession of volunteerss are also imperative. Selden and Sowa (2004) further include perceptual measures of training, feedback, and satisfaction with salary as important components of human resources capacity.

Small nonprofits face challenges in recruiting and retaining qualified and experienced paid staff, as remuneration lags significantly behind larger nonprofits as well as the for-profit sector. In addition, small nonprofits often place emphasis upon recruiting and coaching volunteers to fulfill key roles in the organization. Given the complexity of volunteer turnover and shifting organizational priorities, human resource development and planning is imperative, as it is generally accepted that ‘people’ are the greatest asset of small nonprofits.

Core Competencies of Human Resource Capacity:• Staff Recruitment & Performance• Staff Compensation and Benefits• Volunteer Management• Human Resource Development Planning

Capacity areasThe FreeForm assessment captures current organiza-tional development in six capacity areas: Leadership team capacity, strategic capacity, human resource capacity, financial capacity, resource development capacity, and program capacity. It is an asset-based developmental model, documenting organizational strengths and pointing toward areas of growth. Table 1 provides an overview of the capacity areas and their defining characteristics with comparative literature. Core competencies within each area are also noted using language that is intentionally accessible to non-profit leaders.


Leadership Team CapacityThe ability to collaborate, as organizational leaders, to maximize results.


Organizational leadership capacity (DiLiello & Houghton, 2006)

Leadership capacity (Anderson et al., 2008; Connolly & York, 2003; De Vita et al., 2001)

Management capacity (Selden & Sowa, 2004)

This capacity area has been well-established in the literature noting that a strong foundation of leadership is critical to an organization’s ability to achieve it’s full potential or mission (Anderson et al., 2008; De Vita et al., 2001). Leadership capacity commonly includes visioning, decision making, directing, and modeling (Connolly & York, 2003) and is intricately linked with human resources capacity given the important link between the competencies and attitudes of those in leadership positions and the ability to set mission, vision, systems, and policies to accomplish organizational objectives (Anderson et al., 2008; Selden & Sowa, 2004). DiLiello and Houghton (2006) also suggest that self-leadership is essential for organizational leadership capacity and resulting creativity.

While passionate and skilled individuals are imperative within any nonprofit, the FreeForm Model points to the importance of shared leadership among a team in a small nonprofit in addition to human resource-based capacities related to specific individual traits. Staff, board members, and key volunteers may not have formal expertise in nonprofit management, and thus, a team approach enables greater collaboration and accountability in decision-making and intra-team communication. Further, a team approach mitigates the loss of expertise and influence when key staff, board members, and volunteers transition from the organization. FreeForm also emphasizes the critical role of leadership team meeting culture in leveraging the contributions of human resources and overall goal attainment and sustainability.

Core Competencies of Leadership Team Capacity:• Leadership Team Accountability• Implementation of Decisions• Leadership Team Meetings

Strategy CapacityThe ability to align organizational performance with the shared mandate (values, mission, and vision).


Strategic planning (Freeland, 2002)

Structural capacity (Hall et al., 2003)

Vision and mission (De Vita et al., 2001)

Aspirations and strategy (McKinsey et al., 2001)

Planning and development capacity (Doherty et al., 2014)

This capacity area builds on Freeland (2002) who notes that defining objectives and exposing needs through strategic planning is central to effectively pursuing an organizational vision. Hall et al. (2003) also embed strategy within a broader notion of structural capacity that also includes relationship and network, policy, and planning capacities. De Vita et al.’s (2001) centre their framework for capacity building around vision and mission as pivotal elements of long-range strategy. McKinsey et al. (2001) also claim that aspirations are the basis of strategy, and drive all efforts for social impact. Doherty et al. (2014) position strategic planning as one aspect of broader planning and development, which considers creativity and implementation of both short and long-term plans.

A primary focus of small nonprofits is to articulate a clear expression of organizational mandate. Once this is established, the roles of the Board and Executive Director are often dynamic. Board members have operational as well as strategic planning responsibilities that are navigated and renegotiated as the nonprofit grows. The strategy dimension of the FreeForm framework goes beyond the documentation of objectives and plans and includes effective harnessing of partnerships to accomplish their strategies, in alignment with their mandate.

Core Competencies of Strategy Capacity:• Shared Mandate: Values, Mission and Vision• Strategic Planning• Board Governance• Partnership Development and Management

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Financial CapacityThe ability to steward resources for short and long term sustainability.


Financial capacity (Bowman, 2011; Chikoto & Neely, 2014; Doherty et al., 2014; Hall et al., 2003)

Financial management (McAlpine & Temple, 2011)

This dimension builds on Bowman’s (2011) conceptualization of financial capacity as resources that give an organization the ability to seize opportunities and respond to threats and involves both long and short-term considerations. It also includes stable revenues and expenses, and fiscal responsibility (Doherty et al., 2014; Hall et al., 2003). The difficulty of short term and project funding for infrastructure, administration, and other organizational supports has also been noted (Hall et al., 2003). Challenges related to financial management capacity and sustainability through standards, processes, transparency, and training have also been noted (McAlpine & Temple, 2011). Overall, this dimension is consistently challenging across the sector (Hall et al., 2003)

A particular challenge for small nonprofits it navigating increasing public and regulatory demand for transparency in finances generally, and expenditure allocation in particular. Small nonprofits require clear financial systems and procedures to ensure that stakeholders access accurate information. Pecuniary interests are one, but important focus within a nonprofit’s overall risk management approach is also critical.

Core Competencies of Financial Capacity:• Financial Management• Financial Transparency• Risk Management• Expenditure Allocation

Resource Development CapacityThe ability to fundraise in support of the organization’s strategy.


Resource capacity (De Vita et al., 2001; Glickman & Servon, 1998)

Revenue Generation (McAlpine & Temple, 2011)

Financial capacity (Chikoto & Neely, 2014)

In the FreeForm model, this dimension is consistent with Glickman & Servon’s (1998) definition of resource capacity as attracting, managing, and maintaining funding. Similarly, De Vita et al. (2001) consider finances as primary “resources”, but they emphasize that organizations need to use what they have and further develop their resources in order to demonstrate capacity in this area. McAlpine and Temple (2011) suggest that generating new revenue through social enterprise may present new opportunities for resource development. The research provides mixed evidence on the impact of revenue diversification as Hall et al. (2003) and Doherty et al. (2014) found that having alternate sources of revenue was deemed a positive attribute of capacity, while Chikoto and Neely (2014) found that implementing a revenue concentration strategy was beneficial for growth in a nonprofit’s total revenue.

Small nonprofits are often heavily reliant on single revenue sources (e.g. government grant, major donor, membership fees), which can impact the overall health and sustainability of the nonprofit when donor priorities, membership numbers, or government requirements shift. While expanding their dominant revenue source is important, expanding and diversifying a donor base is also critical and requires intentional planning. For small organizations, resource development effort often centres upon implementing signature fundraising events as a way of increasing community profile and meeting program financial commitments.

Core Competencies of Resource Development Capacity:

• Resource Development Planning• Fund Diversification• Fundraising Events


Program CapacityThe ability to work in the community in support of the organization’s mission.


Program capacity (Selden & Sowa, 2004)

Programmatic capacity (Glickman & Servon, 1998)

Management and program capacity (Hetling & Botein, 2010; Packard, 2010)

Technical capacity (Connolly & York, 2003)

The core idea of program capacity is well documented within the non-profit capacity literature as a multi-faceted dimension reflecting operational and technical attributes of an organization’s ability to develop, support, and deliver programs and services (Connolly & York, 2003). Glickman and Servon (1998) further outline a skill-based concept related to the program area (e.g., housing, commercial development, economic development) and skills that apply across all programs (e.g., responsiveness to changing community concerns). In modeling organizational performance, Selden and Sowa (2004) note the importance of measuring perceptions of program/service quality. Similarly, Hetling and Botein (2010) discuss how programs are developed and refined in a circular way through interactions with those directly in the programs or communities that are served. Packard (2010) includes service intensity or ‘dosage’, yet also includes a vast array of other resources within program capacity rather than distinguishing these into separate capacity domains.

Programming is at the core of how small nonprofits live out their mission in the community. Without intentional effort to establish and measure program (and specific project) outcomes, stakeholder reporting and program planning is often superficially engaged. This is exacerbated when pressing budget constraints impact retention of staff members with design, monitoring, and evaluation experience. Overall accountability of program impact to the community and to donors may be difficult to assess and communicate, thus appropriate and attainable mechanisms are required to ensure ongoing involvement of community members and insightful reporting and evaluation.

Core Competencies of Program Capacity:• Program and Project Design, Monitoring,

Evaluation• Community Participation• Program and Project Reporting• Program and Project Planning

Stages of organizational developmentThe FreeForm framework and capacity assessment tool is unique as it enables organizations to evaluate their capacity in each area and work towards growth by progressing through five stages of organizational development (improvise, reflect, articulate, perform, influence). Within each capacity area (e.g., leadership team capacity), indicators are provided in the form of asset-based statements that correspond with each stage of development. This approach to assessment is consistent with Christensen and Gazley’s (2008) ob-servation that in order to understand capacity, schol-ars and practitioners must not only “identify those

measures most appropriate for a particular context but also frequently create objective measures from subjective data” (p. 266). Through a participatory pro-cess of assessment described below, an organization’s stakeholders come to a consensus about their organi-zation’s current stage of development in each capacity area. Clarity about current capacity supports effective planning for future capacity growth. The indicators are fluid and intra-dependent as each stage builds on the previous stage. For example, indicators that rep-resent the stages of development within Human Re-source Capacity are outlined in Table 2.

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Table 2. Progressive Indicators of Human Resource Capacity

4.1 Staff Recruitment & PerformanceImprovise We hire whoever is capable and provide on-the-job trainingReflect We seek to connect each staff member to a position that reflects his/her skills and passionArticulate We create written staff development plans as part of an annual performance reviewPerform We invest in our staff’s development, providing them with new opportunities for growth as well as

positioning our organization for the futureInfluence We can point to innovative examples of our staff coaching and mentoring others in our sector

4.2 Staff Compensation and BenefitsImprovise Staff salaries are based on availability of fundsReflect We assess the impact of our salary and benefit scale on meeting our program goalsArticulate We have a written staff salary and benefit policy that is aligned with the values of our organizationPerform We formally ensure that our salary and benefit grid is competitive with organizations of comparable

size in our sectorInfluence Our salary grid serves as a benchmark for others in our sector

4.3 Volunteer ManagementImprovise We recruit people we personally know as volunteersReflect We have a volunteer recruitment checklist and policies for the selection and training of volunteersArticulate Our volunteer manual outlines our policies and procedures including recruitment, screening, orien-

tation, training, performance evaluation and recognition of volunteersPerform Our volunteer coordinator (part-time or full-time) manages our volunteer strategy and documents

compliance with our policies and procedures Influence We share our innovative approaches to volunteer management with other organizations in our

sector

4.4 Human Resource Development PlanningImprovise We address our human resource requirements as opportunities ariseReflect We have a volunteer recruitment checklist and policies for the selection and training of volunteersArticulate We have a written, Board-endorsed 2-3 year ‘ human resource development’ plan which supports

our organizational strategyPerform We have met our human resource development goals for the past 3 or more yearsInfluence We research non-profit human resource management trends and legal developments to advocate

for others in our sector

IMPROVISEThis descriptor represents the first stage where lead-ers of small nonprofits (whether staff, volunteers, or board members) intuitively implement a variety of responses to new or recurring situations. At this stage, individuals join with a passionate leader to re-spond to an immediate community need. This is gen-erally a ‘pitch-in’ environment where team members intuitively meet needs through innovation. For exam-

ple, a donor requests a report on the impact of their support, but no reporting template exists. Another common example is a staff person requesting a raise while the organization has yet to establish a salary grid. Key challenges of this phase include staff and volunteer burnout, questioning of the organization’s overall purpose, coordinating activities, managing the risks of new initiatives, and meeting day-to-day resource challenges.


REFLECTAt this stage, small nonprofits move toward consensus about “where we should go” and “how things should be done”. Leaders initiate a process of stepping-back to assess the current situation, explore next steps, and discern how to focus the organization’s direction. For example, a common folder of reporting to donors is created and leaders identify what is working and what is not, or a committee researches the salary grid of similar small nonprofits and interviews the Execu-tive Director about the impact of their current remu-neration practices. The key challenges of this stage include balancing available resources with desired impact, deciding appropriate leadership responsi-bilities, evaluating competing ideas, and carving out time for reflection.

ARTICULATELeaders of small nonprofits (Board and Senior Staff) establish, align, and endorse the organization’s writ-ten mandate, strategy, policies and procedures. The organization crafts a written mandate that includes the mission, vision and values of the organization and is owned and endorsed by the governing Board. Se-nior Staff assure the alignment of organizational strat-egies and operations under this mandate. For exam-ple, specific expectations (e.g. templates, timelines, and follow-up procedures) in response to donations are clearly articulated and disseminated, or the Board of Directors endorses a new salary grid and allocates budget accordingly. Notable challenges of this stage include keeping staff invested in the ‘articulation’ pro-cess, ceasing non-aligned activities, re-equipping and transitioning staff, and engaging the Board.

PERFORMDuring the fourth stage, small nonprofits are ac-countable for the successful implementation of their mandate, strategy, policies and procedures. Staff, volunteers, and board members collaborate in demonstrating organizational results. The orga-nization demonstrates efficient processes toward achieving measurable results and all are account-able for working interdependently in accomplishing the mission, pursuing the vision and living out the

values of the organization. At this stage, an organiza-tion might produce quarterly reports on the impact of their donor reporting products, and all staff re-muneration is aligned with the requirements of the approved organizational salary grid. Key challeng-es include ensuring the organization has the right structure, the right team, and the right skill-sets to achieve its targeted goals, capturing data and ‘tell-ing the story’ of results to stakeholders and address-ing examples of a ‘silo’ mentality, balancing the de-mands of organizational growth.

INFLUENCEAt the final stage, the performance of exceptional small nonprofits serves as a benchmark within their sectors. They anticipate and respond to emerging trends, and their leaders shape dialogue and policies at a city-wide level or beyond. The organization is a benchmark for others and pursues replication of its program models. It is a prophetic voice, advocating for systemic change and re-visioning strategies to help prepare its community for the future. Examples of capacity at this stage could include a comprehen-sive donor survey that reveals “very high” levels of satisfaction with new reporting practises, or the or-ganization’s remuneration conclusively supports their human resource goals and becomes a benchmark for others. Key challenges include managing the per-ceived threat that replication can pose to an organiza-tion’s core mission, discerning how to effectively and responsibly advocate, re-visioning of organization’s mandate, engaging in strategic risk and innovation.

Participatory Assessment ProcessThe FreeForm model draws on a participatory process approach to capacity development which builds on the strengths and existing investment of those with-in a given community or organization (cf. Angeles & Gurstein, 2000; Lusthaus et al., 1999). This approach goes beyond a diagnostic checklist or “report card” by bringing together staff, board members, and key volunteers at different levels of the organization, a variety of other key stakeholders, and trained exter-nal facilitators. The facilitator’s role is to offer the

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FreeForm Capacity Model as a framework and to act as a resource for the learning journey. The ensuing di-alogue enables the skills and abilities of the organiza-tion to emerge and empowers participants to assess current (baseline) capacity and create a development plan. The role of the external facilitator is thus sup-portive rather than formative in the creation of the plan for action. Others have recognized the value of co-learning in the capacity building context whereby facilitators have been shown to play an important role in helping uncover issues and actively supporting the implementation of change (Cornforth & Mordaunt, 2011; Kapucu et al., 2011). This approach also pro-vides value for organizations beyond survey-based measures of capacity through the intentional integra-tion between the capacity areas and the assessment process. For example, staff, volunteers, board mem-bers, and other stakeholders are empowered to come together ‘in person’ at multiple stages to assess ca-pacity through ongoing dialogue, consensus building, and discernment of next steps. This intimate process further enhances the organization’s human resource, leadership team, and strategy capacities. Lastly, the dedication of time and financial resources to the pro-cess can be viewed as a sign of organizational support, which has been shown to be the strongest facilitator of organizational change (Flaman, Nykiforuk, Plot-nikoff, & Raine, 2010). A participatory process is crit-ical for small nonprofits in particular, who may have greater difficulty than larger nonprofits in accurately assessing their current capacity in various domains given their tendency to rely on informal processes and

less documentation (Trzcinkski & Sobeck, 2008). Thus, having multiple stakeholders contribute to the assess-ment increases accuracy and personal investment in the process.

Future DirectionsThe FreeForm model provides a unique tool for small nonprofits to ground their ongoing capacity develop-ment journeys and closes the research-practice gap within the sector by building on insights and revisions grounded in over 10 years of use with small nonprof-its, as well as the developments within the academ-ic and theoretical domains related to organizational capacity. As such, the model offers a unique spring-board for future empirical analysis of the utility of the framework and any potential gaps. Future research could pursue specific examination of the interaction between capacity elements in order enhance under-standing of the most salient aspects of the model and their relationship with specific outcomes. Other research could examine the impact of a participatory approach to capacity-building by developing specific measures of the inputs and outcomes that may be as-sociated with this type of approach. Lastly, it would be advantageous to examine the longer-term effects of using the FreeForm model for capacity building on service delivery and mission-specific outcomes. This may be germaine to addressing the evidence-gap related to the impact of nonprofit capacity-building investments articulated by Minzner et al. (2014) and encouraging sustainable development amongst this important sub-set of nonprofit organizations.


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