Christine Letts is the Associate Director and Rita E. Hauser Lecturer in the Practice of Philanthropy and Nonprofit Leadership at the Hauser Center for Nonprofit Organizations at Harvard University. She is also one of the co-authors of High Performance Nonprofit Organizations: Managing Upstream for Greater Impact. Professor Letts understands all too well that sometimes even the best nonprofit programs and services do not survive. The question is why? While there are surely many contributing factors, the research conducted by Letts and her colleagues consistently points to these key factors: lack of organizational capacity and an inability to adapt. Letts contends that the sector has a wealth of strong programs, and cautions that ultimately, strong programs need the stewardship and support of strong organizations not only to survive, but to thrive. In this issue of dialogue, AVA spoke with Professor Letts about the importance of developing adaptive capacity in nonprofit organizations, and how it strengthens the sector by focusing an organization�s attention and energy on the management, performance, and measurement of its programs and services.

Survival of the Fittest: Developing Adaptive Capacity

The historical record will no doubt reflect that today�s nonprofits are operating in a truly Darwinian environment. Darwin�s �survival of the fittest� theory, however, actually states that the species with the greatest ability to adapt are the ones possessing the greatest ability to survive. The same concept can be applied to the nonprofit sector. An organization with adaptive capacity is one with the ability and tools to measure its performance and which is able to adjust its behaviors, programs and services accordingly. Specifically, the capacity to adapt in high performance nonprofits is demonstrated in an organization�s sustained ability to rigorously:

Adaptive capacity links mission to outcomes and pushes nonprofits to ask and seek the answers to questions such as:

The ability to address these types of performance-driven questions is a fundamental element of organizational capacity. Letts says you must first, however, �ensure you have the internal capacity to use the data you collect,� and then be able to �learn from it.� Unfortunately, these abilities are largely undeveloped in many organizations and the preceding questions go unasked and/or unanswered more frequently than not, because building adaptive capacity is seldom rewarded or encouraged within the nonprofit sector.

The Investment in Program Capacity

According to Letts and her co-authors, there are two primary avenues that nonprofits can use to build organizational capacity: program capacity and adaptive capacity. Funders have traditionally invested in program capacity, which includes the work of program development and expansion. Because so many funders want to see their dollars allocated to �direct service,� philanthropy unintentionally provides a disincentive for developing adaptive capacity. The result is a nonprofit environment that has developed a disproportionate emphasis on program capacity.

The focus on program services also contributes to a persistent perception that dollars allocated to capacity building, and particularly personnel and other administrative costs are essentially �lost� to direct service. Nonprofit leaders often go through Herculean efforts to reflect that their organizations spend the least amount of funding possible on administrative costs, in order to gain the favor of foundations and other funders. The paradox of developing a strong program in the nonprofit sector is not lost on Letts. �When a program is successful,� she says, �there is a pressure to grow. The problem is you end up with a big body with no head.� Adaptive capacity is the �head� of the organization that allows it to ask, listen, reflect, and adapt.

Measuring Performance & Results

Nonprofit funders increasingly expect grantees to evaluate program outcomes and demonstrate their value. There are limits, though, to what level of measurement and assessment funders can currently demand, and what most nonprofits can currently deliver. Measuring social impact is challenging, even in high performing organizations. Without clear performance indicators, Letts and her colleagues say that nonprofits and their funders are �forced to rely on using inputs and outputs as surrogates for real performance measurement, tracking the amount of service that is provided on the assumption that it is making a difference.� Unless nonprofit leaders and their staffs look at the specific quality and performance processes that drive their outcomes, they can not acquire the learning needed to enable them to improve their performance.

One method of data collection that helps build an organization�s adaptive capacity is measuring quality processes. The data needed to measure quality processes can easily be collected as part of a nonprofit�s current evaluation process. Measuring quality processes are important because they can help nonprofits to:

Another tactic that can help nonprofits improve their performance is benchmarking. Benchmarking helps nonprofits improve their performance through one nonprofit collaborating with another organization to learn about their performance and best practices related to specific processes, policies or programs. Benchmarking begins at home, however, so the first process that nonprofits engaging in benchmarking must perform is assessing the state of their own performance in targeted areas. Letts and her fellow writers advise organizations to think strategically when deciding on benchmarking partners, and what performance areas need improvement that another organization could provide insights and �lessons learned� about. Nonprofits that provide similar services typically provide a solid foundation for benchmarking, but so can nonprofits in different, or dissimilar service categories, depending on the performance areas being compared. For instance, a domestic violence shelter could ask the local nonprofit hospital or museum about their practices and successes in developing a communications strategy to reach their targeted audience. Although benchmarking can be quite an involved process, the ability to measure or compare performance through either of these two strategies is not dependent on a nonprofit�s size or budget�it is dependent on commitment. Admittedly, measuring performance and results will likely add to a nonprofit�s data collection process, but it does not have to be an onerous addition for any organization.

Letts says the nonprofit sector still has a long way to go, however, in tracking actual performance. Funders, nonprofit staff and the general public are all �much better at holding nonprofits accountable for intentions and activities and not for results,� she says. Letts adds, �most funders give money on intentions because they don�t fund long enough to actually stick around to see if the results happen.� That is why nonprofits must lead the charge in developing greater adaptive capacity, and holding themselves accountable for high impact performance.

Volunteer Resources Management Promotes Adaptive Capacity

Strategic human resources is described in Letts� book as a management process where all positions and jobs are strategically designed, and which links the recruiting, retention and motivation of all staff to organizational objectives. Strategic human resources could play a transformative role in building adaptive capacity in the sector. Letts says �quality volunteer resources management can help build adaptive capacity� by creating a workplace where volunteers understand their role, and can see how their contributions support and achieve the organization�s mission.

Volunteer resources management employs the same operating principles as strategic human resources management. Volunteer resources managers are, therefore, in a unique position to assist nonprofit leaders in making the move to strategic human resources management for both paid and volunteer staff as an extension of their current role. Executive directors should be advised, however, that practicing strategic human resources management and building adaptive capacity will require a far greater level of management planning and coordination between the volunteer resources manager, development personnel, accountants, program staff and the executive director than is currently the norm within the sector. It is a norm, though, that provides enormous payoff if established. Building adaptive capacity increases the numbers of �organizationally fit� nonprofits delivering high impact performance to meet the demands of a dynamic environment. The byproducts of that process are highly motivated staff, productive work places, and a healthier nonprofit sector. In other words, the type of results worth working for.