Capacity-Building Strategies Leaders of Nonprofit Organizations Use to Improve Performance.

Section 1: Foundation of the Study

Background of the Problem

Nonprofit organizations provide valuable services and employment opportunities

in the United States, serving as an essential sector of society. Nonprofit organizations

represent 10.2% of private-sector employment (Bureau of Labor Statistics, 2018). Even

though nonprofit organizations provide needed services and employment opportunities,

many organizations struggle to maintain adequate operational funds and fulfill missions

due to a lack of organizational capacity. Therefore, nonprofit organizations are under

pressure to perform at high operating capacity while not having the proper skills to

achieve outcomes (Carvalho et al., 2016; Walters, 2020).

Nonprofit organizations are required to address issues that are different from

those encountered in the for-profit sector. Over the past 2 decades, the demand placed on

nonprofit leadership positions has increased, even though nonprofit leaders report an

inability to address the increases (Schatteman & Waymire, 2017). In many cases,

nonprofit leaders require different capacity skills to address service needs and achieve

strategic goals (Bish & Becker, 2016; Xiaodong et al., 2017). One option to address

capacity is through the implementation of capacity-building programs. However, there is

not a clear understanding of which capacity-building strategies positively impact

performance (Andersson et al., 2016). By understanding capacity-building strategies,

organizations can learn to adapt to change and expand their ability to innovate and

improve practices for better performance (AbouAssi et al., 2019).

Problem Statement

Many leaders of nonprofit organizations lack effective capacity-building

strategies to meet organizational mission and growth goals (Xiaodong et al., 2017), which

can lead to organizational failure and insolvency (Mitchell & Calabrese, 2019).

According to a 2016 survey of 229 registered U.S. nonprofits, 60% of nonprofit

organizations are experiencing increased service demands, requiring nonprofit

organizations to focus on expanding service capacity to meet the demand (Kim & Peng,

2018). The general business problem was that the lack of capacity-building strategies

negatively affects the ability of nonprofit organizations to grow and remain solvent. The

specific business problem was that some leaders of nonprofit organizations lack strategies

to build capacity to improve growth and funding performance.

Purpose Statement

The purpose of this qualitative multiple case study was to explore capacity-

building strategies used by leaders of nonprofit organizations to improve growth and

funding performance. The target population consisted of four leaders of distinct nonprofit

organizations in Texas, who have implemented successful capacity-building strategies to

improve growth and funding stability. The implications for positive social change include

the potential for nonprofit leaders to implement capacity-building strategies that lead to

sustainable financial solvency. Solvent organizations are better positioned to serve their

communities through improved operational efficiencies in the provision of goods and

services.

Nature of the Study

Three methods of research are available for researchers: qualitative, quantitative,

and mixed. Qualitative studies focus on applied and theoretical findings identified from

field study research, leading to a subjective understanding, meaning, and insights (Fusch

et al., 2018). Therefore, the qualitative method was the best fit for this study because I

could obtain rich data on participants’ experience and evaluate the responses from

interview questions and other types of data to subjectively understand successful

strategies. The quantitative method is appropriate for studies that evaluate relationships

among variables through the gathering and assessment of measurable data, leading to an

objective understanding (Park & Park, 2016). The mixed method includes both

quantitative and qualitative methods, and requires the collection of extensive data and

analysis, making it very time-consuming. Neither quantitative nor the quantitative

portions of mixed methods were appropriate for this study because I did not intend to

examine the relationships among variables related to the capacity-building strategies of

nonprofit leaders.

The qualitative designs I considered for the study were case study, ethnographic,

and phenomenological. A qualitative case study design is applicable to explore

experiences and scenarios bounded by time and place by gleaning information through

interviews, written reports, and published sources (Runfola et al., 2017), and when

focusing on “what,” “how,” and “why” questions (Yates & Leggett, 2016). Furthermore,

a multiple case study offers a greater quality of data to assess information through

contrast and comparison (Yin, 2014). The ethnographic design is conducted in situ and,

in business populations, is used to explore organizational culture, targeting a specific and

delocalized phenomenon (Smets et al., 2014). An ethnographic study was not applicable,

as I did not seek to explore organizational culture. Phenomenological researchers focus

on identifying and exploring the personal meanings of lived experiences and perceptions

of participants (van Manen & van Manen, 2021). A phenomenological design was not

fitting as I did not focus on specific perceptions or the meanings of participants’ lived

experiences. Instead, the most appropriate method to obtain rich data on participants’

experiences was to focus on “what,” “how,” and “why” questions through the use of a

multiple case study.

Research Question

What capacity-building strategies do leaders of nonprofit organizations use to

improve growth and funding performance?

Interview Questions

1. What strategies do you use to improve growth and funding performance

within your organization?

2. How do you implement and communicate capacity-building strategies to

support long-range plans?

3. How does your organization measure the effectiveness of each strategy?

4. What were the key barriers to implementing capacity-building strategies?

5. How did your organization address the key barriers to implementing capacity-

building strategies?

6. How have capacity-building strategies benefitted your organization’s ability to

focus on growth and secure funding sources?

7. What other processes, knowledge, skills, or additional information do you use

to support the success of your organization’s strategies?

Conceptual Framework

Strategic agility (SA) is the conceptual framework for my study. SA was

introduced by Doz and Kosonen (2008) based on the tenets of resource-based theory and

dynamic-capabilities theory (Reed, 2021). SA represents a combination of management

practices and the ability of organizations to address future needs in a flexible manner

(Doz & Kosonen, 2008). In general, as a management theory, SA may be used to assess

means or strategies to increase responsiveness and knowledge management within an

organization (Arokodare et al., 2019).

SA consists of three metacapabilities: strategic sensitivity, leadership unity, and

resource fluidity. Strategic sensitivity involves robust internal and external processes that

facilitate sense-making and, in turn, enable awareness and attention. Leadership unity

entails how an organization’s leaders act swiftly and make concrete decisions without

being hindered by politics or personal insecurities. Resource fluidity includes an

organization’s internal ability to change and redeploy systems and resources to address

current and changing needs (Morton et al., 2018). To instill SA, an organization must

ensure all metacapabilities are present and active within the organization and must be in

balance for SA to improve organizational performance (Doz & Kosonen, 2008). I applied

the SA conceptual framework to facilitate my understanding of how leaders develop and

implement capacity-building strategies to improve growth and funding performance.

Operational Definitions

Capacity-building: A strategy to build organizational capacity to improve

performance, develop internal processes and structure, and efficiently and effectively

provide services (Despard, 2017; Lee, 2020).

Nonprofit capacity: Includes the activities, processes, practices, and persons that

nonprofit organizations use to achieve missions and goals, representing the organization’s

overall ability to perform (Bingle, 2019; Bryan, 2019; Shumate et al., 2017).

Organizational learning: A process of change at individual and collective levels

of an organization regarding thought and action, linking cognition and behavior

(Megheirkouni, 2017).

Strategic agility: The ability of an organization to source and react to internal and

external threats and opportunities in an agile manner, while increasing organizational

value (Doz & Kosonen, 2010; Lungu, 2018).

Third sector: Entails the vast number of charities, community groups, voluntary

organizations, cooperatives, and social enterprises (Bach-Mortensen & Montgomery,

2018).

Assumptions, Limitations, and Delimitations

In this section, I present the assumptions, limitations, and delimitations that

impacted this study. Through an established research process, researchers can gain and

apply perspective and boundaries to overall development and analysis (Reddy &

Bhadauria, 2019). It is also essential for the reader to understand the perspective of the

researcher when reviewing the study.

Assumptions

Through the process of research, assumptions are necessary by the researcher to

draw reasonable conclusions for an adequate study. Assumptions are beliefs and

presumptions that a researcher considers as fact even though they may not be verified,

(Leedy et al., 2019). I first assumed that the open-ended interview questions were

designed in a manner to best garner the knowledge and experience of participants.

Second, I assumed that the participants had the knowledge to answer all of the questions

appropriately and honestly. Lastly, I assumed that the methods to gather, document, and

analyze the interviews were adequate and would lead to data saturation to address the

research question. Data saturation was achieved.

Limitations

Limitations are inherent weaknesses that are present within all studies.

Limitations are constraints or influences beyond the control of the researcher (Swank &

Lambie, 2016). Limitation issues may be related to underlying theories, study design,

replication/generalizability potential, data collection issues and shortcomings in

questionnaire design, study setting, population or sample issues, ethical parameters, result

interpretations, and overall conclusions (Theofanidis & Fountouki, 2018). The first

limitation of this study was the use of a qualitative research method, as the small sample

size of qualitative studies may limit the transferability of the research findings. The

interviews included five leaders of nonprofit organizations, limiting the information

available for this research study. If I interviewed additional leaders, I would have had

access to more extensive information, and I would been able to present the findings with

added perspectives. The second limitation was the focus on nonprofit trade associations

as the population sample. Nonprofit trade associations may operate differently than other

nonprofit organizations, limiting the transferability of the findings. The third limitation

relates to the geographical area being limited to the state of Texas. The geographic area is

a limitation because the results may not be transferable to nonprofit organizations in other

areas, and the managerial styles, governance requirements, and operational and financial

assistance may differ. Overall, the results of this study may not apply to all leaders of

nonprofit organizations or those outside the state of Texas.

Delimitations

Delimitations are the bounds and limits of a study, based on how the researcher

defines the scope (Locke et al., 2014). In addition, delimitation issues entail the

challenges in addressing limitations, such as acknowledging research shortcomings

(Theofanidis & Fountouki, 2018). The first delimitation of the study was that participants

were constrained to distinct nonprofit leaders in the state of Texas. The second

delimitation was that the study was limited to those serving in a director-level role. Based

on these two delimitations, the research findings presented may further exclude

information from others who may have organizational or industry knowledge on the

topic.

Significance of the Study

Nonprofit organizations are a vital part of society and economic development

(Mpanza & Mashau, 2019) and are essential in meeting the demands of public needs

(Mitchell & Calabrese, 2019). Nearly 80% of nonprofit leaders struggle with basic

leadership and management skills to guide nonprofit organizations to efficiency (Meehan

& Jonker, 2017). Therefore, it is important to identify successful nonprofit leaders to

implement capacity-building strategies that enable leaders of nonprofit organizations to

improve growth and funding stability for meeting their stakeholders’ needs.

Contribution to Business Practices

The potential findings of this study may highlight effective capacity-building

strategies of nonprofit organizations to include improved growth and funding stability,

which has a direct effect on the organization remaining solvent and relevant.

Contributions from this study may facilitate developing information to benefit nonprofit

leaders and other internal and external stakeholders related to structure, processes, and

relationships. Overall, the findings may facilitate the effective practice of business by

identifying examples of strategies for improving nonprofit management, thereby

improving how nonprofit organizations could remain sustainable.

Implications for Social Change

The implications for positive social change include the potential for nonprofit

leaders to implement capacity-building strategies that lead to sustainable growth and

funding performance. Increased knowledge of management strategies can improve

nonprofit organizations’ performance and enable them to fulfill organizational missions

and goals that positively benefit society (Dobrai & Farkas, 2016). Nonprofit

organizations’ ability to meet their mission ultimately benefits communities by enabling

the organization to provide services not met by for-profit businesses or government

agencies. Therefore, this study may help leaders of nonprofit organizations benefit

communities through improved operational efficiencies that can increase the capacity to

provide services to meet the established mission and goals for benefiting communities.

A Review of the Professional and Academic Literature

The purpose of this qualitative multiple case study was to explore capacity-

building strategies used by leaders of nonprofit organizations to improve performance. In

the review of literature, I focused on professional and academic literature, using peer-

reviewed sources published within the past 5 years, with a smaller number of articles that

were older than 5 years or scholarly but not peer-reviewed. I located literature using the

following keyword search terms: capacity-building, nonprofit organizations, nonprofit

management/leadership, nonprofit financial management, nonprofit growth, nonprofit

performance, nonprofit development, nonprofit diversification, nonprofit strategic

planning, organizational capability, organizational change, organizational culture,

engagement, and organizational learning. The initial search started with the Walden

University Library and Google Scholar and continued using academic databases, such as

ProQuest, EBSCOhost, and Sage Journals. Through the review, I focused on a cross-

section of existing literature relating to current trends, opinions, and findings on capacity-

building strategies within nonprofit organizations to improve performance. The literature

review consisted of 90 peer-reviewed articles published between 2018 and 2022 and 29

published in 2017 or earlier. The percentage of peer-reviewed articles included in the

literature review published within 5 years of my anticipated graduation in 2022 was 76%.

The relative statistics for the entire study are 226 peer-reviewed articles (95% of total)

and 166 published between 2018 and 2022 (69% of total).

In this review, I provide an overview of the chosen conceptual framework, SA. I

also discuss other conceptual frameworks considered for application within this study,

including systems theory, dynamic capability, human capital theory, and contingency

theory. Following the exploration of theories, I present information on the characteristics

of nonprofit organizations, including organizational capacity, leadership characteristics to

build capacity, the impact of organizational culture on building capacity, and

organizational learning, as well as nonprofit organizational performance and

sustainability-related to growth and funding.

Conceptual Framework – SA

SA is a combination of strategic management practices and processes, focusing on

an organization’s ability to address future needs. In general, SA represents an

organization’s capacity to swiftly, rapidly, and systematically manage or handle strategic

core needs to create value and survive (Doz & Kosonen, 2008). A distinction of SA from

other strategic management theories is that SA involves an organization’s capacity to

develop a flexible strategic process for redirecting or reinventing an organization, often in

a volatile environment, without impeding forward progress (Cunha et al., 2020).

Furthermore, SA is adopted to implement well-grounded changes as quickly as needed

within an organization (Khaddam, 2020). Therefore, even though SA is similar to other

strategic management practices, it differs as it relates to an organization’s ability to

change while maintaining its strategic core.

SA is critical to an organization’s survival, as an agile organization can boost its

innovation, increase its competitive advantage, and endure change. Organizations may

identify key agility strengths specific to their organization that may assist them in

developing SA to take action to improve performance (Lungu, 2018; Nejatian et al.,

2019). Specifically, to enhance SA, organizations must focus on their ability to gain and

use knowledge, mitigate negative influence, and proactively transform (Bigley, 2018;

Kale et al., 2019). Additionally, SA may be used to assess an organization’s means or

strategies to increase responsiveness in times of distress, stagnation, and transition, as

well as address knowledge management within an organization (Arokodare et al., 2019).

The impact of an organization’s ability to proactively respond to change is shown in

Figure 1, indicating that an agile organization must be able to implement complex

systems in reaction to change quickly. Overall, SA is a set of capacities used by

organizations to navigate change due to internal and external factors.

Doz and Kosonen (2008) introduced the current interpretation of SA based on the

tenets of resource-based theory and dynamic-capabilities theory (Reed, 2021). SA has

been discussed for more than 20 years, addressing the vagueness of other strategic

managerial practices, to include strategic planning, resource-based view, and

sustainability competitive advantage. There is no single agreed-upon definition of SA

(Morton et al., 2018); however, SA comprises flexible capacities, including an

Figure 1

Organization’s Response to Change Through the Use of Strategic Agility

Note. Depiction of how an organization can alter traditional practices and capacities to

achieve strategic agility. Adapted from “Impact of Personnel Creativity on Achieving

Strategic Agility: The Mediating Role of Knowledge Sharing,” by A. A. Khaddam, 2020,

Management Science Letters, 10(10), p. 2295 (https://doi.org/10.5267/j.msl.2020.3.006).

organization’s processes, actions, structure, culture, characteristics, skills, and

relationships (Ivory & Brooks, 2018). SA entails the theoretical domains of strategic

change and renewal (Xing et al., 2020). As the concept of SA continues to develop,

researchers continue to clarify and interpret SA based on established capacities.

The key to developing SA is to provide opportunities to evaluate and develop

organizational capacity. However, it is an ongoing challenge for an organization to

achieve SA. Organizations must continually focus on a particular set of capabilities,

specific to their organization, that enables them always to be prepared and responsive

(Morton et al., 2018). Six organizational factors can improve and foster improvisation

and flexibility capacities, thereby positively affecting SA. These six key factors of SA are

as follows:

• define a purpose that coordinates and liberates,

• develop structures that empower actors and spur accountability,

• nourish teams that protect and challenge team members through collaboration

and integration,

• build self-confidence and humility,

• develop a focal and peripheral vision, and

• cultivate comfort with spontaneity and an organizational environment of good

rules (Cunha et al., 2020; Doz, 2020).

Three fundamental principles comprise SA and encompass the above factors,

known as metacapabilities. The metacapabilities of SA are strategic sensitivity,

leadership unity, and resource fluidity, as shown in Figure 2 (Doz, 2020; Nejatian et al.,

2019). To instill SA, an organization must ensure all metacapabilities are present and

active within the organization and must balance SA to improve organizational

performance and survivability (Ghezzi & Cavallo, 2020; Halalmeh, 2021). If an

organization does not develop all three metacapabilities in tandem, they risk constraining

its ability to perform. The metacapabilities, shown in Figure 2 and addressed below,

represent core competencies and operations of how an organization addresses internal

weaknesses and external opportunities and threats to achieve SA.

Strategic Sensitivity

Strategic sensitivity is about organizational sense-making relating to strategic

development. Specifically, it is the ability to gain knowledge and then apply that

knowledge to make judgments, identify the direction, and proceed with a set of decisions

(Doz & Kosonen, 2008; Ivory & Brooks, 2018). To achieve strategic sensitivity,

leadership must have in-depth knowledge of the organizational infrastructure while

staying apart from daily activities to reflect and sense knowledge (Arbussa et al., 2017;

Ivory & Brooks, 2018). Moreover, to accelerate strategic sensitivity, an organization

must sharpen foresight through anticipation, gain insight through experimentation, gain

perspective through distancing, gain generality by abstracting, and see the need by

reframing (Doz & Kosonen, 2010). Ultimately, strategic sensitivity entails an

organization’s ability to remove itself from a situation and openly assess options before

proceeding. In many cases, the strategic sensitivity metacapability is limited. There is a

limitation because organizations lack staff and specialists to address strategic

development needs (Arbussa et al., 2017). Furthermore, access to a broad knowledge

Figure 2

Strategic Agility Metacapabilities

Note. The three metacapabilities of strategic agility. Reprinted from “Fostering Strategic

Agility: How Individual Executives and Human Resource Practices Contribute,” by Y.

Doz, 2020, Human Resource Management Review, 30(1), p. 2

with permission from Elsevier, license number 5043400997473 (see Appendix A).

base, due to limited personnel competencies, also leads to limited abilities to develop

foresight related to strategic sensitivity (Liang et al., 2018). Therefore, nonprofit

organizations must instill and encourage the development of processes, as well as a

culture of resiliency and reflection that allows for sense-making. These actions increase

innovative and adaptive capacities within organizations (Doz, 2020). To increase

strategic sensitivity metacapability, nonprofit organizations must be aware of and address

any potential limitations related to building strategic sensitivity, such as communication

strategies.

Communication is an essential factor in building an organization’s strategic

sensitivity. In particular, innovative actions’ underlying capabilities can help ease change

with more efficient communication channels, specifically in smaller organizations that

tend to share mental models (Arbussa et al., 2017). However, many nonprofit

organizations lack the skill to develop internal communication channels because their

strengths involve developing external communications to provide services, not internal

processes (Liang et al., 2018). Key steps to building strategic sensitivity through

communication include

• allowing open conversations to encourage strategic discussions,

• increasing strategic alertness to foster business development, and

• ensuring internal connectivity and collaboration through quality dialog

(Morton et al., 2018).

By applying the above key steps, organizations should develop intertwined

processes of internal and external communication channels to enable the leader’s ability

to anticipate, abstract, experiment, and reframe appropriate knowledge (Arbussa et al.,

2017). Through a developed communication channel, leaders can then share gained

knowledge, increasing the overall organization’s sharpness of perception and ability to

make judgments (Ivory & Brooks, 2018; Morton et al., 2018). Ultimately, clear and

transparent communication can enable strategic sensitivity if leaders can anticipate and

then do something with the gained knowledge while not losing sight of the organizational

goals and mission.

If not maintained, there are potential negative side effects of strategic sensitivity.

In particular, the negative side effects related to strategic sensitivity are (a) tunnel vision,

(b) strategic myopia, (c) dominance mindset, and (d) active inertia. These side effects are

due to the desire to control, short-term orientation, focus on the unit or self, and too much

emphasis on the strategic core (Morton et al., 2018). To avoid negative side effects,

organizations should be aware of them and proactively address any issues.

Leadership Unity

Leadership unity entails the influence of leaders to increase a shared engagement

or understanding within an organization for the purpose of acting swiftly and together in

times of change. Also known as collective commitment, leadership unity is accomplished

through the ability of leaders to create and harness common interests and trust amongst

members while downplaying personal insecurities (Doz, & Kosonen, 2008; Ivory &

Brooks, 2018; Morton et al., 2018; Nejatian et al., 2019). Another attribute of the

application of leadership unity is leadership that is willing to take risks with the

consideration of intuition and learned experiences (Lungu, 2018). It is a relevant

metacapability because through unity, a team-like culture is established that prepares and

motivates the organization while mitigating win-lose politics at the leadership level

(Arbussa et al., 2017; Morton et al., 2018). Furthermore, leaders can maintain a focus on

opportunities through leadership unity instead of being concerned with internal strife

(Ivory & Brooks, 2018). Leadership unity is critical to make quick and strategic decisions

without distractions collectively.

The development of a team mindset is imperative for building leadership unity.

Developing collective understanding and mindsets amongst leaders will lead to a more

inclusive and collaborative work environment, easing the adoption of change (Morton et

al., 2018). Not only should leadership develop a team mindset internally, but leaders also

need to facilitate meaningful external partnerships and relationships (Arbussa et al.,

2017). By increasing the leadership unity metacapability, leaders can quickly focus on

issues at hand and collectively make decisions that positively impact the organization and

align with the overall mission and goals.

However, unity within nonprofit organizations does not always enable effective or

effortless change. Specifically, organizations led by a governing board tend to be hesitant

to change because of associated risks related to innovation, such as fear of failure,

reduced impact, or resistance to steer from established services, no matter the benefits or

collective commitment (Liang et al., 2018; Miller, 2018). Therefore, critical steps to

building leadership unity and avoiding risks of change include

• establishing a mutual dependency and responsibility to mitigate political or

personal insecurities within leadership through integration;

• developing teams and enable collective, strategic, and efficient decision

making through dialog and reveling motives and aspirations; and

• instilling an inclusive and collaborative leadership style to foster unity

amongst leadership, focusing on shared interest and caring (Doz & Kosonen,

2010; Morton et al., 2018).

By applying these key steps to building leadership unity and adopting change,

organizations can increase their innovative capacity, instill a team mindset, and positively

define the control and trust of leadership over others (Arbussa et al., 2017; Doz &

Kosonen, 2008). Overall, by developing a team mindset, leaders can build leadership

unity to engage in change collectively.

Potential adverse side effects exist if leadership unity is not maintained.

Specifically, the negative side effects related to leadership unity are (a) management

divergence, (b) self-importance of management, (c) rigidity of expertise, and (d)

emotional apathy. These side effects are due to the desire to address individual agendas

instead of a collective agenda, inflated egos, using leaders who are experts that limit

decision-makers, and using tenured leaders with the same ideas (Morton et al., 2018). To

achieve SA fully, organizations should maintain an appropriate level of leadership unity.

Resource Fluidity

Resource fluidity entails the ability of an organization to modify operations and

processes to meet needs rapidly. Specifically, it is an organization’s internal ability to

reconfigure and redeploy resources rapidly, such as core business operations, to enable

the systems to perform faster and easier for the purpose of capitalizing on opportunities

(Arbussa et al., 2017; Doz & Kosonen, 2008; Ivory & Brooks, 2018; Nejatian et al.,

2019). Given varying sizes and types of organizations, the attributes of resource fluidity

must be scaled to be representative of the particular organization’s available resources

(Arbussa et al., 2017). In the case of board-driven organizations, budgeting rules may

hinder an organization’s ability to rapidly reconfigure resources (Liang et al., 2018).

However, resource fluidity is not limited to financial resources, as it also applies to

human resource management, operations and asset allocation, and innovative means for

collaboration (Ivory & Brooks, 2018). Therefore, organizations should consider

allowable processes in place to act rapidly, as well as resource availability.

Coordination and improvisation are essential factors in achieving resource

fluidity, as leaders may be better suited to remain flexible. Coordination entails the use of

fluid processes to support rapid change (Ivory & Brooks, 2018), while improvisation

entails leadership competencies to build new operational processes in pressing situations

(Cunha et al., 2020). An example of resource fluidity may include an organization’s

ability to reassign positions to effectively use resources (Lungu, 2018). Key steps to

strengthening an organization’s resource fluidity include

• dissociating strategy from the structure for available and rapid deployment of

resources with a focus on decoupling and flexibility,

• relying on people to achieve goals,

• implementing modularizing processes that include incentives for

collaboration,

• dissociating resource responsibility from ownership, and

• allowing multiple business models through switching or grafting (Doz &

Kosonen, 2010; Morton et al., 2018).

Applying these key steps to building resource fluidity, organizations can avoid getting

comfortable and not rely on predictable circumstances, as circumstances can always

change (Doz & Kosonen, 2008). Therefore, by focusing on coordinative and

reconfiguring capacities, leaders can improve their ability to achieve resource fluidity.

If not addressed, there are potential negative side effects of the inability to achieve

resource fluidity. In particular, the negative side effects related to resource fluidity are (a)

resource imprisonment, (b) business system stagnation, (c) restricted strategic freedom,

and (d) management mediocrity and competence gaps. These side effects are due to

leadership autonomy and knowledge retention, too many specialized activities, processes,

inability to expand select relationship base, and the realization of shortcomings by

increased learning (Morton et al., 2018). In order to avoid negative side effects, leaders

should focus on appropriate capacities and be aware of potential effects.

To ensure success, the metacapabilities must balance. By balancing the

importance and focus of each metacapability, organizations can ensure each is used to its

fullest potential, as the lack of one metacapability can impact the others (Arbussa et al.,

2017; Liang et al., 2018). Even though the metacapabilities are supposed to be balanced

to achieve SA, they are not as equally important. When in balance, the three

metacapabilities enable leaders to develop a certain level of resourcefulness, enabling

them to apply innovative and solving mindsets, leverage strengths, and the ability to

economize resources to address limitations, in line with the specific type and size of the

organization (Arbussa et al., 2017). Therefore, leaders must implement SA as a

comprehensive means to address key issues within an organization.

SA and Performance

SA directly impacts organizational performance, leading to successful

transformation and the development of competitive advantage. This impact is due to an

organization’s capacity to address foresight towards change and act on strategic insight,

which can better position an organization to be responsive and adaptive (Arokodare et al.,

2019; Shin et al., 2015) and achieve appropriate transformation (Lungu, 2020b).

Furthermore, SA is a mediator between an organization’s absorptive capacity and

performance (Lungu, 2020a). An organization can learn new information, realize the

value of learning new information, and apply the new information to the organization

(Chan & Muthuveloo, 2020; Kale et al., 2019; Widjajani & Nurjaman, 2020). Overall, an

organization must recognize the need to learn new information, be responsive, and apply

it to transform the organization, leading to performance improvement.

There are four influencing factors of SA related to performance: (a) technology

capability, (b) collaborative innovation, (c) organizational learning, and (d) internal

business alignments, as shown in Figure 3 (Lungu, 2018; Shin et al., 2015). By focusing

on these four factors, SA increases firm performance by positively impacting operations

and creating a competitive advantage (Kale et al., 2019). Specifically, technology is often

the platform for quick response to rapidly address needs, enabling operational

responsiveness. Collaborative innovation allows an organization to address performance

to meet stakeholders’ diverse needs and improve internal and external processes,

addressing different organizational layers (Lungu, 2020a). Also, along with SA,

innovation can improve an organization’s level of resilience (Olaleye et al., 2020).

Organizational learning is imperative to organizational performance because

organizations create, adapt, and replicate knowledge within the organization over time.

Finally, internal alignment refers to a collective mindset and effort, as well as congruent

goals, objectives, needs, and structure (Shin et al., 2015). Each factor influences the three

metacapabilities of SA, contributing to an idealistic state where unity exists between

leaders and sub-ordinates so that overall implementation of operations and the need for

responsiveness is fluid and strategic, positively impacting performance.

Figure 3

Strategic Agility Scheme

Note. This depiction is a derivative of the four influencing factors of strategic agility.

Adapted from “Strategic Agility of Korean Small and Medium Enterprises and its

Influence on Operational and Firm Performance,” by H. Shin, J. N. Lee, D. Kim, and H.

Rhim, 2015, International Journal of Production Economics, 168(1), p. 185

permission from Elsevier, license number 5043410141022 (see Appendix B).

SA and Nonprofit Organizations

Nonprofit organizations are frequently challenged to meet ever-changing service

demands within their respective fields. SA is imperative for nonprofit organizations, as

leaders can flexibly address operational needs while considering overall governance and

relationships. Doz (2020) recommends that organizations foster SA by

• implementing thoughtful and purposive developmental mobility,

• carefully transitioning from operating managers to systemic adaptive

managers,

• being collaborative and integrative, and using flexible negotiating skills,

• being flexible in job roles and project management methods, and

• being self-confident and forbearing.

Furthermore, SA is a versatile concept that may be applied to various business fields,

including nonprofit organizations (Lungu, 2018). However, in many circumstances,

nonprofit organizations act under board governance rigidity, which hampers innovation

(Lungu, 2018). Through SA, an organization’s dynamics change to encourage sharing

knowledge, leading to improved, innovative capacity (Debellis et al., 2021). These

actions enable nonprofits to address needs better.

Alternative Conceptual Frameworks

I considered various theories for use as the conceptual framework for this study.

The alternative conceptual frameworks include systems theory, dynamic capability,

human capital theory, and contingency theory.

Systems Theory

Systems theory was proposed by Ludwig von Bertalanffy (1951) on the premise

that all systems share organizing principles (von Bertalanffy, 1972). The concept

originally emerged in the 1930s (Baecker, 2019; Jung & Vakharia, 2019) with the goal of

unifying science; however, the theory did not come to fruition until the late 1950s and

early 1960s (Teece, 2018). Although systems theory was developed within the realm of

natural sciences, it is used within management theory. Specifically, this theory represents

a complex set of interdependent factors and interrelated with how leaders act and react

internally and externally to the organization. Open systems involve the concept that all

organizations are affected by the environment based on processes and structure. Systems

theory is a respected management theory when examining performance management and

organizational effectiveness, as it attempts to clarify the whole, its parts, and the

relationships between members of the organization (Iwu et al., 2016). Systems theory is

also explained as a holistic approach to understanding a system where an organization is

seen as a social system of sub-units that interact to improve organizational effectiveness.

The limitations of this theory for management applications include the theory’s origin in

the field of biology, the lack of design and inclusion of the human element, and the

restriction to the internal stability or similar system control (Teece, 2018). Systems theory

entails a holistic focus on the interaction of internal operational elements and the

outcomes from the interactions.

The main elements of a system are inputs, processes, outputs, feedback, and

organization subsystems. More specifically, systems theory outlines productive methods,

energizes processes, enables processes, and develops processes to help the researcher

understand the overall structure and develop mapping to enhance comprehension

(Schweiger et al., 2018). Systems theory entails mapping and linking practices to

underlying inputs and outputs and processes in-between (Kumar et al., 2015). Overall, the

elements of this theory help define struggling and impactful relationships and processes

within an organization.

Dynamic Capability

Hamel originally introduced dynamic capability in 1989 (Čiutienė & Thattakath,

2014). However, dynamic capabilities have also been presented as an extension of

systems theory to address the limitations of systems theory (Arokodare et al., 2019;

Teece, 2018). Dynamic capability is a more integrated or holistic approach towards

business systems, with a focus on adapting an organization’s resource base (Arokodare et

al., 2019; Chan & Muthuveloo, 2020). A business system is identified as a complex

system with non-simple interactions, which are addressed as critical aspects in the

dynamic capability theory (Teece, 2018). Specifically, dynamic capability is an

organization’s ability to rapidly reconfigure competencies in ever-changing environments

(Arokodare et al., 2019). Dynamic capability is a holistic management theory of adaptive

systems to improve organizational effectiveness.

The goal of dynamic capability is to address long-term efficiency through

evolution and opportunities. The theory’s components include skills, strategy, firm

resources, and external firms and institutions (Teece, 2018). The theory categorizes

operational capabilities from dynamic capabilities, where operational capabilities are

related to the efficient use of resources, while dynamic capabilities include those used to

address change (Uhl-Bien & Arena, 2018). Dynamic capability involves strategically

taking advantage of opportunities to address change through the appropriate use of

resources.

Human Capital Theory

Shultz presented the human capital theory in 1961 to recognize the value of

human knowledge, skills, education, and training on firm performance (Hickman, 2021;

Marginson, 2019). Larger organizations can benefit and leverage internal human capital,

whereas smaller organizations may need to rely on collaboration and consolidation

efforts to garner human capital to improve performance. The level of required human

capital within an organization depends on task complexity (Teodoro & Switzer, 2016).

Essentially, human capital involves capitalizing on worker education to invest in

knowledge-building skills to gain positive returns.

Within the framework of human capital theory, the main elements are represented

by the forms of investment a firm partakes in to increase the knowledge and skills of its

workforce. The elements include funding allocated for education, training, medical

assistance, adequate revenues, and incomes earned through labor (Minica, 2011). The

main principles of the theory center around the claims that (a) education and training are

imperative to improve economic power, (b) education leads to an increase in production,

and (c) investment in educating a firm’s workforce correlates with the organization’s

production and earnings (Tan, 2014). The human capital theory focuses on the human

element within an organization to improve performance and overall effectiveness.

Contingency Theory

Fiedler introduced contingency theory in the late 1960s as a theory that asserts

leadership behavior in ever-changing situations influences organizational behavior,

effectiveness, and success (Fiedler, 1971). Furthermore, the theory enables researchers to

realize how leadership can impact an organization within set boundaries (Prasad & Junni,

2017). The theory is useful in organizational operations as it acknowledges that

organizations are ever-changing, and to be effective, firms must be able to react under

different circumstances (Chelliah et al., 2016). The theory also entails that organizations

develop structures contingent on the operational environment (Eva et al., 2018), which

are created by leadership. Contingency theory is contingent upon the type of leadership

styles and how different situations are addressed.

The main elements of contingency theory are leadership styles in different

situations. Leadership situation is defined by situational factors, such as relationships, and

entails leader/employee relationship, the structure of employee’s task, and leader’s

position of power. Overall, eight different leadership situations are presented through

contingency theory based on whether or not the relationship situations are favorable

(Popp & Hadwich, 2018). The leader/employee relationship can be applied to other

associations within organizations, such as leader/stakeholder (Chelliah et al., 2016). The

model contends that task-oriented leaders perform well in favorable and unfavorable

situations, whereas relationship-oriented leaders are useful in intermediate favorableness

areas (Fiedler, 1971). Ultimately, contingency theory is dependent upon how leaders lead

and react to different situations.

Characteristics of Nonprofit Organizations

Nonprofit organizations deliver essential services to the society-at-large, which

for-profit organizations do not provide. Nonprofit organizations also serve as innovative

organizations pursuing ideological transformation. However, the nonprofit sector has

become turbulent due to an increased demand for services, changing funding availability,

and an alteration in institutional structures (Langer & LeRoux, 2017). The combination of

these issues has led to the need for nonprofit leaders to focus on improving effectiveness.

The management of nonprofit organizations is different from for-profit

organizations. Nonprofit management is more qualitative and not monetary-based, unlike

for-profit organizations (Moura et al., 2019; Park et al., 2018). Human resource

management and accountability in nonprofit organizations are more complex than for-

profit organizations (France & Tang, 2018; Reinhardt & Enke, 2020). Since profit is not

the primary goal of nonprofits, it is also more difficult to measure organizational

effectiveness. In addition, leaders of nonprofit organizations answer to various

stakeholders, who each have their own concerns and demands. Furthermore, nonprofit

stakeholders, including internal (professional staff and volunteers) and external

(government, donors, and the public) persons or groups who have an interest in the

organization hold the nonprofit organization accountable for their actions and expect

some level of reporting on performance (France & Tang, 2018), and act with an

organization-centered mindset, as opposed to a customer- or product- mindset (Perić et

al., 2020). Due to these differences, leaders must understand the operational implications

when managing a nonprofit organization.

When addressing a nonprofit organization’s operational efficiencies, it is essential

to note the general characteristics that impact effectiveness. According to do Adro and

Leitão (2020), these characteristics include the following:

• nonprofits are made up of unique people with different characteristics,

• nonprofits are part of a community,

• internal and external factors impact nonprofits,

• nonprofits need the ability to adapt to social-economic changes, and

• nonprofits benefit from an adaptive capacity approach, which can be used to

enable innovation and sustainability.

Leaders must consider these characteristics as the leader will need to modify how they

address capacity development to address sustainable growth and funding.

Nonprofit Organizational Capacity

Researchers have attempted to define capacity as it relates to nonprofit

organizations. However, in existing literature, capacity is not always addressed directly or

clearly defined (Svensson et al., 2020; Vllasaj, 2021). The varying definitions’ common

theme focuses on how an organization effectively achieves its mission (Bryan, 2019; Sun

& Asencio, 2019). Bingle (2019) compiled the varying definitions of nonprofit capacity-

building as the programs, offerings, and efforts that strengthen an organization’s ability to

achieve its mission. Furthermore, nonprofit organizational capacity may be defined as the

ability of an organization to use its resources (individual, organization, and systems) first

to identify the mission, then meaningfully, tangibly, and intangibly realize the mission,

efficiently deploy internal and external resources, and get the work completed

appropriately and sustainably (Nenobais et al., 2017; Svensson et al., 2017). As found in

existing literature, the capacity of nonprofit organizations involves six different

dimensions:

• human resources,

• leadership,

• financial management,

• internal structures and processes,

• external and board relationships, and

• organizational culture.

These capacity dimensions greatly vary but collectively and individually impact how well

an organization serves the community (Andersson et al., 2016; Despard, 2017; Millar &

Doherty, 2018; Nenobais et al., 2017; Svensson et al., 2018). Although there is no

consensus amongst the literature on a specific definition of capacity, these dimensions

represent the most frequently used dimensions of capacity within the existing literature.

Each dimension is a critical success factor for developing capacity within

nonprofit organizations. First, the human resources dimension, or human capital, entails

the skills, knowledge, and abilities of the paid staff, contractors, volunteers, and leaders

(Brown et al., 2016). Additionally, the engagement and recruitment efforts of the

organization are also crucial in developing organizational capacity. Regarding nonprofit

capacity, human resources are related to an organization’s ability to quickly and

appropriately mobilize in times of need (Svensson et al., 2017). Human resources are

critical when managing a nonprofit organization, as people are the primary resource.

The second dimension listed is leadership. Leadership is the influence a leader

asserts in a situation of power between subordinates, superiors, colleagues, customers,

and suppliers by using attributes such as charisma that establish the overall organizational

emotions (Wang & Zeng, 2017). According to Andersson et al. (2016), all capacity

development areas should be addressed in different life stages, except leadership. This

assertion indicates that organizations may not need to invest in leadership development as

long as the leaders are competent or gain capacity in the other areas (Andersson et al.,

2016). In support, Svensson et al. (2017) noted that nonprofit organizations’ leadership

capacity is substantial, indicating that organizations should focus more on other

capacities when seeking to improve operations and efficiencies.

The capacity dimension of financial management is imperative for nonprofit

organizations. Financial management entails the monetary resources an organization uses

to act on opportunities and address threats (Svensson et al., 2017). Nonprofits rely on

external funding to meet financial needs, which makes the resource unreliable as it is

under the control of external partnerships (Brown et al., 2016; Svensson et al., 2017).

Furthermore, financial management impacts all aspects of an organization, including

other capacity dimensions, making it critical to fulfilling the mission (Potluka & Svecova,

2019). Since financial management is unreliable, nonprofit managers must understand the

volatile capacity and its impact on external partnerships.

Fourth, nonprofit organizations are subject to internal and external factors. The

internal structures and processes developed by leaders, also known as organizational

infrastructure, enable organizations to use resources effectively to meet goals and provide

value on a daily basis (Bae et al., 2020; Brown et al., 2016; Svensson et al., 2017). There

is underinvestment in developing organizational infrastructure due to human resource and

financial constraints, even though the capacity to plan and implement plans is critical for

development (Svensson et al., 2017). A lack of capacity to develop strategic plans

towards organizational development also exists, further hindering the ability of nonprofit

organizations (Gratton, 2018). Furthermore, capacity-building initiatives require planning

to ensure each dimension is developed to the maximum ability (Miller, 2018). Also,

internal structures and processes can directly impact other capacity dimensions (Svensson

et al., 2017). Therefore, nonprofit organization leaders need to implement and maintain

effective systems to improve overall capacity and performance.

Additionally, external factors impact nonprofit organizations. External and board

relationships entail how leaders engage with external stakeholders and the board to

positively impact performance (Brown et al., 2016; Haber & Schryver, 2019). The

purpose of developing relationships is to enhance cross-organizational services. The

relationships should be developed over time and as personal connections (Svensson et al.,

2017). Leaders may develop external and board relationships by focusing on balanced

relationships, mission alignment, and partnership management, which may be difficult to

establish (Svensson et al., 2017). These relationships also impact an organization’s

accountability, as external support and board involvement can help to legitimize the

organization and define expectations (Langer & LeRoux, 2017). Furthermore, Park and

Mosley (2017) indicated that the degree of investment in external and board relationships

could determine an organization’s success.

Finally, organizational culture is a significant facilitator of capacity.

Organizational culture is the mindset or core business expectations leaders instill in an

organization over time, developing a common assumption, a pattern of perceiving,

thinking, feeling, and behaving that provides for meaning, stability, process, objective,

and comfort throughout the organization (Nakov & Ivanovski, 2018; Wang & Zeng,

2017). An organizational culture may take on different forms; however, one of

development that leads to adaptation of practices and innovation, which can lead to

improved performance (Bach-Mortensen et al., 2018; Langer & LeRoux, 2017). Leaders

can address capacity through a development or innovative culture.

Earlier research has indicated a correlation between capacity and success,

precisely a cause-and-effect relationship. In particular, capacity-building strategies that

focus on the listed dimensions can lead to success (Millar & Doherty, 2018; Wang &

Zeng, 2017). However, focusing on all dimensions is problematic within nonprofit

organizations because it is easier to invest in some more than others, and many nonprofit

organizations underinvest in capacity-building activities (Andersson et al., 2016;

Svensson et al., 2017). Ultimately, underinvestment poses a problem for organizations

when trying to meet their mission, impacting performance.

Although the dimensions of capacity are all equally important, an organization

may prioritize the above dimensions by addressing and expanding its breadth to make the

most impact and not underinvest. Investment in capacity-building initiatives must be

balanced across an organization to achieve desired performance levels (Millar & Doherty,

2018; Svensson et al., 2017). A balanced capacity-building strategy requires proper

development, understanding, and evaluation of the plan execution that enables adaption

to change and expands the ability to innovate (AbouAssi et al., 2019; Despard, 2017).

Therefore, organizations must consider the appropriate or most impactful dimensions to

invest in to achieve success while maintaining balance.

First, organizations should ensure human resource capacity. To address the human

resource capacity, nonprofit organizations may focus on (a) employing paid staff, (b)

increasing engagement, (c) talent recruitment, (d) revenue generation, and (e) controlling

expenses. These focus areas may be limited by financial resources (Svensson et al.,

2017). Furthermore, paid staff increases capacity but is limited by financial resources

(Potluka & Svecova, 2019). A focus on human resource capacity establishes a solid

foundation for an organization to develop the capacity of all listed dimensions.

Financial capacity is considered the second most crucial dimension of capacity. It

includes revenue generation, expenses, and financial management (Svensson et al.,

2017). Even though financial capacity is essential, most nonprofit organizations find it

challenging to establish financial systems for good financial health, which can negatively

impact other areas making it challenging to expand overall capacity (Andersson, 2019;

Walters, 2020). Therefore, no matter the life stage, all nonprofit organizations can benefit

from capacity development in establishing fund development, human resources, and

general financial processes (Andersson et al., 2016). However, organizations that need

the most assistance do not always have the capacity to manage the funding, leading to

continued reliance and dependence on external aid (Potluka & Svecova, 2019). Optimal

financial capacity entails the development of sound financial management enabling

nonprofit leaders to improve the capacity of all dimensions.

Finally, when discussing an organization’s capacity, researchers also address

operational capacity as an essential dimension. Operational capacity entails internal

attributes, such as internal processes that direct employees (Shumate et al., 2017),

strategic building activities established for guidance (Strang, 2018), and methods to

overcome organizational challenges through collaboration (Fu et al., 2021). Addressing

operational capacity is imperative because an organization can outline the relationships

between all listed dimensions, establishing the structure for a collective capacity and

shared purpose (Hinck, 2017). Overall, an organization’s operational capacity can enable

a nonprofit to garner needed funding and earn an acceptable public and donor reputation,

leading to greater organizational effectiveness (Kim et al., 2021). Consequently,

operational capacity is crucial to establishing the other dimensions and achieving success.

There are several ways to measure a nonprofit organization’s capacity.

Measurements on capacity mainly pertain to an organization’s efficiency or effectiveness

(AbouAssi et al., 2019). Historically, organizational effectiveness has been measured

based on an overhead ratio. However, this is not an appropriate measure for nonprofit

organizations, as there needs to be a consideration for more subjective criteria, such as

goal attainment, as well as inputs and outputs used to meet the mission (Coupet &

Berrett, 2019). As a result, nonprofit organizations cannot measure capacity solely on

financial performance but must include qualitative measurements to assess capacity.

According to nonprofit leaders, a select number of critical attributes measure a

nonprofit organization’s overall effective capacity. These attributes include instantiation

of sound principles, grassroots approach, larger organizational size and resources, being

collaborative, singleness of focus, campaigning abilities, funding and fundraising

prowess, global scope, and quality people (Mitchell, 2015). Also, given the diversity of

the nonprofit industry, it is difficult to define one set way to measure effectiveness

objectively, but capacity remains a factor to show value creation (Moura et al., 2019).

Although common attributes to measure effective capacity exist, nonprofit organizations

must develop their own means to measure capacity, realizing the importance of

establishing balanced dimensions relevant to their organization.

Nonprofit organizations that focus on developing their capacity tend to perform

more diverse activities and achieve broader mission goals. Capacity development in

human resources, financial resources, and strategic planning significantly impact

performance. Ultimately, organizations that do not focus on capacity-building activities,

but are focused on building performance, may not remain stable and find it difficult to

function and fulfill their mission. Therefore, organizations should balance their capacity-

building activities to enhance their scope of work while maintaining a generalist approach

(AbouAssi et al., 2019). Finally, when capacity-building initiatives are implemented, an

organization can increase accountability and trust (Bryan, 2019). Miller (2018) also

found that development in organizational capacity leads to improved internal decision

processes, organizational strategizing, strategic perspective building, and human resource

development. In conclusion, through the implementation of capacity-building strategies,

nonprofit organizations can improve performance and their competitive advantage.

Nonprofit Organizational Leadership Characteristics to Build Capacity

There is a correlation between organization success, capacity, and leadership

characteristics. Improving nonprofit capacity to seize the opportunity and adopt change

can help organizations achieve their mission and are dependent on leadership styles

(Shumate et al., 2017). According to existing literature, nonprofit leadership

characteristics impact organizational capacity based on how leaders employ regulatory

processes and structures to meet the mission and goals (Bryan, 2019). The characteristics

of nonprofit leaders can directly impact the organization’s effectiveness, explicitly acting

as the voice of the organization and providing guidance (Tran, 2020). In addition,

Megheirkouni (2017) asserted that transactional and transformational leaders who

support employees tend to ensure the highest level of organizational capacity and achieve

success. Leadership characteristics are an imperative consideration in a nonprofit

organization’s capacity, specifically transformational and transactional leadership styles.

Numerous attributes contribute to the characteristics of an effective

transformational or transactional leader. Specifically, leaders with integrity and passion

have a more significant impact on an organization’s success, indicating that

complementary leadership styles and associated characteristics are essential (Afsar et al.,

2017). Leaders can impact an organization’s ability to succeed through task- and

relationship-oriented behaviors or styles (Henkel et al., 2019). Both styles’ have similar

leadership characteristics, including positivity, long-term outlook, mission-focused,

engaging, supportive of partnering organizations, strengthens and adheres to operational

capacity, collaborative, and strategic (Mitchell, 2015). More specifically,

transformational leadership entails developing meaningful relationships between leaders

and followers, with a focus on organizational goals and visions (Bush, 2018).

Transformational leadership has multiple factors: charisma, inspirational motivation or

communication, intellectual stimulation, individualized consideration or support, and

vision (Hetland et al., 2018; Rupcic, 2019). Transformational leadership is important for

nonprofit organizations during times of growth (Nenobais et al., 2017). Transactional

leadership entails a beneficial give-and-take situation for the leader and followers. The

three factors of transactional leadership are contingent reward, management by exception,

and laissez-faire (Adeniji et al., 2020). Transformational and transactional leadership are

ideal styles for nonprofit organizations because there is the flexibility to apply either

style, as needed, depending on the organization or situation.

Many transformational and transactional leadership characteristics overlap with

those related to SA. The important common characteristics of transformational and

transactional leadership styles can enable a leader to encourage proactive and innovative

capabilities (Afsar et al., 2017). These characteristics are also directly related to the

perception of a nonprofit’s effectiveness (Mitchell, 2015; Shumate et al., 2017). In most

circumstances, leaders should use both leadership styles to have the most positive impact

(Aboramadan & Dahleez, 2020). As a result, leaders should develop a means to execute

both transformational and transactional leadership styles to best adapt to organizational

needs.

Strategic leadership for organizational adaptability entails enabling innovative and

adaptive processes through engagement. Strategic leaders must be aware of their

disposition, managerial cognition, charisma, power and motivation tactics, managerial

knowledge, skills, and abilities that impact an organization (Samimi et al., 2019). In

particular, leadership involvement greatly impacts the type of learning and development

opportunities implemented within an organization, including how organizations receive

and adapt to change (Coban et al., 2019). Furthermore, Uhl-Bien and Arena (2018)

asserted the need to identify organizational adaptability as a management framework,

emphasizing the importance of enabling leadership. It is also important to understand and

embrace the tension or conflict between innovation and the need to produce improved

systems (Uhl-Bien & Arena, 2018). Organizational adaptability is contingent on the type

of leadership style instilled within a nonprofit organization.

Nonprofit Organizational Culture’s Impact on Capacity-Building

Within nonprofit organizations, culture is critical to address expectations, trust,

and the organization’s overall mindset. Organizational culture is a model of the

assumptions and beliefs shared amongst an organization, impacting the overall workplace

environment (Nugroho, 2018), and is a factor of capacity (Svensson et al., 2017).

Organizational culture must be balanced with organizational systems. Furthermore,

organizational culture is one of the most significant facilitators of implementing

evidence-based practices to intervene in organizational operations. Some organizational

culture factors include the ability to adapt practices to fit the organization’s needs (Bach-

Mortensen et al., 2018). There are several factors to consider when discussing

organizational culture, which may further an organization’s effectiveness.

First, leaders should establish a culture of trust and integrity. An organizational

culture of integrity is imperative because it can strengthen an organization’s ethics and

professionalism while decreasing the opportunity for mismanagement, misuse of power,

and conflict of interests (Atan et al., 2017). Nonprofits encounter challenges when

addressing accountability due to varying levels of interests and objectives with

stakeholders (Slettli et al., 2018); however, there is a realization that a focus on ethics and

accountability can increase an organization’s transparency (Ito & Slatten, 2020).

Therefore, it is essential to establish a culture of integrity that increases accountability

within an organization leading to a culture of commitment.

Second, organizations must focus on a culture of development and innovation.

Developmental culture is a mindset to encourage growth, enhance financial performance,

and establish a sense of organizational legitimacy (Langer & LeRoux., 2017). Innovation

occurs because of the use of new knowledge that leads to change. An organization’s

ability to apply innovation can signify its effectiveness in improving management

practices and governance. With a culture of development and innovation, organizations

can also enhance their ability to solve problems (Glińska & Karwacki, 2018). It is

important to note that an organization’s collective actions and individuals promote

efficiency and adaptability while also improving communication (Akhavan &

Philsoophian, 2018; Lee, 2020; Uhl-Bien & Arena, 2018). Thus, a culture of

development and innovation is critical to enabling adaptability collectively.

Finally, organizational culture is a learned endeavor where an individual must

understand and embrace its mindset at large. In particular, leadership involvement greatly

impacts the type of learning and development opportunities implemented within an

organization, including how organizations receive and adapt to change (Coban et al.,

2019). Therefore, organizational culture can positively impact organizational capacity,

improving effectiveness and performance.

Organizational Learning

Organizational capacity represents the individual capacities of those within an

organization. Those individuals’ knowledge also impacts the individual capacities to

achieve goals (Wang & Zeng, 2017), which is directly influenced by an organization’s

focus on organizational learning at the individual level. Organizational learning is an

organization’s ability to absorb and instill routines and guide behaviors in an interactive

process to modify human actions (Umar & Hassan, 2019) by learning from internal and

external opportunities and experiences (Nugroho, 2018). By applying organizational

learning, nonprofit organizations can improve capacity.

Leaders of nonprofit organizations use different forms of learning to improve

performance. Organizational learning enables leaders to enhance organizational

innovation and heightens the use of knowledge management and responsiveness during

times of change (Wang & Zeng, 2017). Furthermore, it is positively impacted by open,

collaborative cultures, which can allow leaders to encourage knowledge sharing within

nonprofit organizations (Nugroho, 2018), which can increase innovation within an

organization (Fait & Sakka, 2020; Gil et al., 2018; Naqshbandi & Tabche, 2018). In

addition, through organizational learning, nonprofits can overcome early problems; by

evaluating and establishing organizational structures that enable the resolution of

challenges (Andersson, 2019), increase nonprofit governance, and improve overall

organizational effectiveness (Mason & Kim, 2020). Nonprofit organizations use

onboarding to allow for organizational learning. Onboarding can help ease anxiety,

indoctrinating members into the organization’s culture and defining performance and

social expectations (Chillakuri, 2020). Organizations can create value and ensure survival

through organizational learning, increasing capacity, and remaining competitive.

Nonprofit Organizational Performance and Sustainability

Historically, research has been conducted to define success within a nonprofit

organization. For-profit organizations measure success by profit; however, nonprofits use

more qualitative, subjective, and socially determined metrics when discussing levels of

success. There are varying yet similar definitions of nonprofit organization success. The

common theme in defining success centers around an organization’s ability to achieve its

mission (AbouAssi et al., 2019; Bryan, 2019) and affirms its overall effectiveness

(Shumate et al., 2017). It is important to note that some literature asserts that the success

of a nonprofit organization is based on the perspective of those doing the measuring and

is directly tied to the organizational leadership, skills, and organizational procedures

(Millesen & Carman, 2019; Shumate et al., 2017). Although success is generally

measured by an organization’s ability to meet its mission, a discrepancy amongst existing

literature revolves around how to measure the means to meet the mission.

Nonprofit organizations must establish a justifiable means to measure success.

Active nonprofit measurement programs can improve nonprofit performance (Munik et

al., 2021). There are different methods to evaluate nonprofit success, including goal

attainment, system resources, and multiple constituencies (Bryan, 2019; Strang, 2018).

Goal attainment is the most popular means to measure nonprofit success, but if the goals

are ill-defined, conflicting, or ambiguous, the ability to measure is complicated and

skewed (Bryan, 2019; Strang, 2018). System resource focuses on inputs, deliverables,

and outcomes, emphasizing an organization’s ability to connect with the external

environment and acquire resources. Concern for this form of measurement is the focus on

financial effectiveness instead of mission achievement as the success indicator. Many

nonprofit organizations do not focus on financial metrics, as there is a need for more

transparency and a need to explain the opportunistic and economic activities of

organizations more clearly (Perić et al., 2020). Harris and Neely (2021) found that

organizations that are more transparent garner more future contributions; therefore,

transparency adds value when considering financial growth. Finally, multiple

contingencies measure success based on socially accepted norms, specifically

organization reputation and legitimacy (Bryan, 2019). The need for effective best

practices in the areas of being ethical, accountable, and transparent is imperative to

achieving success (Harris & Neely, 2021). To measure nonprofits’ success, organizations

must consider the quantitative and qualitative outcomes of the mission and goals.

Sustainable Growth

Nonprofit organization growth is imperative to remain relevant and functioning.

Organizational growth is the result of value, expertise, and competence to acquire more

resources to improve performance and specialization while developing a competitive

advantage (Nenobais et al., 2017). The main differences between growing organizations

and declining organizations are scope of services and the degree of investment in external

affairs, and performance measurement. Organizations that invest in and focus on a

flexible mission logic can respond and open the organization up to opportunities (Berlan,

2018). Furthermore, diversification of funds did not impact whether an organization grew

or declined (Park & Mosley, 2017); however, it can positively impact performance

(Mendoza-Abarca & Gras, 2019). Nonprofit organizations can sustain growth by

addressing capacity issues that encourage growth.

To encourage growth, nonprofit organizations should apply transformational

leadership, simple organizational structures, and improvement in the role the board plays

during times of growth to ensure capacity. As addressed above in capacity dimensions,

the development of better strategies to extend programs and processes, address human

resources management, and ensure organizational financial sustainability positively

impacts growth. During times of growth, nonprofit organizations must consider external

components to include collaboration among other nonprofits, local government, the

private sector, business activities, political participation, and public relations is important

(Andersson et al., 2016; Nenobais et al., 2017). In addition, while addressing capacity-

building strategies during growth, nonprofit organizations must also address internal

components, as depicted in Figure 4 (Nenobais et al., 2017). Therefore, nonprofit

organizations must consider internal and external components that impact growth.

Figure 4

Capacity Development of Nonprofit Organizations in the Growth Phase

Note. Depiction of internal components to address capacity development. Adapted from

“The Capacity Building of Nonprofit Organizations in the Growth Stage at Papus Pesat

Foundation (An action research based on the SSM),” by H. Nenobais, A. Kasim, and I. R.

by Jurnal Kebijakan Dan Administrasi Publik. CC BY-SA 4.0.

There is no single way to measure nonprofit growth, given the varying types of

nonprofit organizations and the different ways in which organizations measure and tell

different stories. Sustainable growth depends on collaborative governance among

nonprofits, private donors, and government agencies, which means effective management

is crucial (Kim & Kim, 2018) and that organizations will benefit from a variety of

performance measures for growth (Pennerstorfer & Rutherford, 2019). However,

organizations should use different measures to account for growth, as appropriate for

their organization, including measurements indicative of nonprofit organization activity,

such as employment, membership levels, volunteering, income/expenditures, number of

organizations, and assets (Pennerstorfer & Rutherford, 2019). Therefore, the

measurement of growth must be appropriate for the organization, and the reasoning for

the measurement must be clear and justifiable.

Sustainable Funding

Funding is imperative for nonprofit organizations because, without adequate

funding, organizations do not have the means to provide services and achieve the

mission. Nonprofits’ operating environment is increasingly challenging, complicating

how organizations advance their missions due to funding (Lu et al., 2020; Munik et al.,

2021), as most nonprofit organizations rely on external funding resources (Perić et al.,

2020). The main topics related to nonprofit finance are funding levels, profit, giving,

government, accounting, service, performance, and management (Schatteman &

Waymire, 2017). Nonprofit financial performance and professionalization are associated

with the types of revenue sources available. To develop a positive strategy, nonprofit

organizations should diversify funding sources to decrease financial vulnerability and

rely on self-generated income (Denison et al., 2019; Lu et al., 2020; Shon et al., 2019).

The implementation of strategic plans reduces an organization’s financial vulnerability.

Sustainable funding entails the ability to establish diversified and stable funding sources.

The effectiveness of nonprofit funding may be measured through various means.

Standard accounting ratios are acceptable but do not adequately provide information on

nonprofit organizations’ funding sustainability (Amagtome & Alnajjar, 2020). It is also

imperative to determine and understand how the leadership and the governing board’s

strategic interactions may impact the nature and mix of organizational resources (Denison

et al., 2019). Nonprofit organizations that are more self-reliant, depending on program

revenues or dues, experience less volatility. However, revenue growth tends to be slower

within self-reliant organizations (Denison et al., 2019). As with other areas of

performance measurement, nonprofit organizations should assess quantitative and

qualitative measures to ensure sustainable funding.

Transition

In Section 1, I outlined an overall foundation for the research, highlighting the

background of the problem and the business problem. I further provided the purpose

statement, nature of the study, developed research questions, interview questions,

conceptual framework, and significance of the study. I included operating definitions that

may be unfamiliar to the reader and followed that by identifying assumptions, limitations,

and delimitations of the study. In the literature review, I explained SA as the conceptual

framework and presented how this framework best aligns with the research question of

this study. In closing, I provided a review of how nonprofit organizations are managed

and operate. I specifically addressed the general capacity of nonprofit organizations,

success and performance implications, and the impact of organizational culture and

leadership on an organization’s capacity to adapt and improve growth and funding

performance.

In Section 2, I discuss the study’s overall methodology and present a robust and

rigorous research plan. Section 2 includes an overview of my role as the researcher, the

research method and design, the data collection and analysis, and provide the methods to

ensure data reliability and validity. In Section 3, I present a study overview, findings,

implications for social change, application for professional practice, recommendations for

action, suggestions for further research, and an overall conclusion of the research study.

Section 2: The Project