Performance Monitoring & Evaluation Tips: Measuring Institutional Capacity

USAID operating units build capacity with a broad spectrum of organizations, including American private voluntary organizations, local and international nongovernmental organizations, community-based membership cooperatives, networks and associations of organizations, political parties, government entities, private sector organizations, and regional institutions. The Agency uses various techniques to build organizational capacity, including providing technical assistance, advisory services, and long-term consultants to help organizations build the skills and experience necessary to contribute to sustainable development. Other techniques include providing direct inputs, such as financial, human, and technological resources, and establishing mentoring relationships, providing opportunities for formal study, and setting up internships or apprenticeships with other organizations. Measuring institutional capacity is essential for USAID managers to understand and improve the performance and viability of partner and customer organizations. It is critical to recognize the difference between assessing capacity for contracting and grant-making decisions versus for a "capacity building" relationship with partner/customer organizations. A USAID manager may want to assess the capacity of an organization to help make decisions about awarding grants or holding grantees accountable for results, or to strengthen the abilities of customer and partner organizations. Within USAID, the former Office of Private and Voluntary Cooperation (PVC) took the lead on building the capacity of nongovernmental organization (NGO) and private voluntary organization (PVO) partners. PVC has defined development objectives and intermediate results aimed specifically at improving the internal capacity of U.S. PVOs and has developed a comprehensive capacity assessment tool called discussion-oriented organizational self-assessment. Institutional capacity can be thought of as a system of related components that work together to achieve an agreed-upon mission. The components of an organization include administrative and support functions, technical/program functions, and structure and culture. Administrative and support functions include administrative procedures and management systems, financial management, human resource management, and management of other resources. Technical/program functions include service delivery system, program planning, program monitoring and evaluation, and use and management of technical knowledge and skills. Structure and culture includes organizational identity and culture, vision and purpose, leadership capacity and style, organizational values, and governance approach. Management issues are critical in measuring institutional capacity, as different tools and methods are available for assessing capacity for contracting and grant-making decisions versus for a "capacity building" relationship with partner/customer organizations. The measurement process is just as important as, if not more important than, the actual measurement of institutional capacity. Some tools use scoring systems, while others do not; some use questionnaires, while others employ focus groups; some use external evaluators, and others use self-assessments. Some tools can be used to measure the same standard across many organizations, while others are organization-specific.