The term organizational capacity refers to a number of factors specific to an organization:
- The quality and quantity of the resources (e.g. personnel, financial resources, infrastructure) that an organization has at its disposal
- The way in which an organization utilizes these resources while carrying out its activities.
Organizational capacity is a prerequisite for working successfully towards the organization´s mission, its goals and objectives.
The level of capacity determines how effective and efficient the organization operates.
Graphic 1: Key components on organizational capacity
More information about key components of organizational capacity can be found here:
- Risk Management
- Compliance Management
- Strategic planning
- Performance Management
- Financial Management
- Grant Management
- Self Financing: Selling products and services
Consequences of insufficient capacity
Insufficient organizational capacity increases the probability that an organization will:
- Not pass a Pre-grant assessment or similar types of assessments conducted before providing funding
- Not be able to pay its bills, keep income and expenses in balance and make its sources of funding more reliable and diverse
- Lose its relevance to beneficiaries and other stakeholders as it cannot deliver the promised outcomes and impacts.
- Not deal adequately with uncertainty and risk which might lead to a serious crisis that threatens its survival.
- Be non-compliant with laws, regulations, contracts or internal policies and procedures.
- Fail expectations concerning governance and accountability.
Positive influences on organizational capacity
- Staff that has the required knowledge, management skills and special skills as mentioned in graphic 1.
- Leadership that inspires employees, provides direction and decides
- A strategic framework (vision, mission, goals and objectives, strategies) that guides the organization.
- Good internal communication processes.
- An external environment that provides resources of the right quality in a reliable way.
- Good relationships with key stakeholders
- The willingness to learn from others inside and outside the organization
- Shares values and beliefs
Important types of knowledge and skills
a) General Management skills
- Leading and guiding
b) Developing an organization
- Organizational assessment
- Strategic planning
- Capacity building
- Change Management
c) Managing risks and a crisis situation
- Operational / strategic risks
- Internal / external risks
- Crisis planning
d) Managing financial resources
- Financial planning
- Managing costs
- Managing cash
e) Managing sources of funding
- Income diversification
- Selling products and services
f) Managing Performance
g) Managing Human Resources
- Human resources planning
- Human resources development
- Marketing research
- Marketing planning
i) Mission related knowledge and skills
Knowledge and skills required will be NGO specific. They could be about
- General health issues or specific diseases
- Educational issues
- Agricultural issues
- Environmental issues
- Solar energy
j) Special skills on office level
You will need numerous special skills to carry out a specific job function or task on office level. This is also the case for those employees who work with beneficiaries and customers.
You could outsource some of these functions or tasks if you cannot find the right people on the labor market.
Sources / Guide to further reading (available online)
A.Fowler, Participatory self-assessment of NGO Capacity, INTRAC Occasional Papers Series No.10, 1995, at: http://www.intrac.org/data/files/resources/131/OPS-10-Participatory-Self-Assessment-of-NGO-Capacity.pdf
- The author discusses in detail different factors determining organizational capacity
Venture Philanthropy Partners, Effective Capacity Building in Nonprofit Organization, 2001, at: http://venturephilanthropypartners.org/learning/reports/capacity/full_rpt.pdf
- The capacity assessment tool looks at seven elements of organizational capacity and breaks them down further into components.
C.McNamara, Skills and Practices in Organizational Management, at: http://www.managementhelp.org/mgmnt/skills.htm#anchor165831
- An overview of skills needs within an organization
USAID, Fundamentals of NGO Financial Sustainability, no publishing date, at : http://www.pathfind.org/site/DocServer/Fundamentals_of_NGO_Financial_Sustainability.pdf?docID=12001
- The manual provides detailed information about subjects that employees should understand when they want to contribute to the long term survival of their organization.