Organizational transformation is a radical rethinking of the overall structures of an organization in order to start afresh with new or modified structures and processes and new energy and commitment that are rooted in the current reality and linked to a sense of renewed purpose for organizational effectiveness and sustainability. Organizational transformation is another way to say organizational reengineering or organizational change through new mind-sets, approaches, strategies, and behaviors. If a nonprofit organization is in decline, or experienced a major crisis or continuing minor crisis or conflicts, the organization must go through some process of transformation. As Figure 24.1 illustrates, a generic organizational transformation process should involve diagnosis, action plan, consensus, implementation, and accountability.


A diagnosis consists of gathering all possible information about a problem in order to determine what is/are the cause(s) of such problem. Without a diagnosis, it is impossible to adequately solve a problem. I said "adequately" because temporary solutions can sometimes be found for a problem without any systematic diagnosis. Obviously, such a solution will not be sustainable. Organizational transformation that does not involve a diagnosis can only be superficial. As a result, I argue that organizational transformation can be superficial, transitional, or transformational.

The transformation is superficial if it addresses only the apparent aspects of decline or crisis, and does not deal with the core issues that may constitute a threat for organizational sustainability or financial sustainability. For example, an organization may experience a negative perception with some internal stakeholders who are not satisfied with core aspects of how programs are being implemented. The leader of the organization may decide to organize a meeting, listen to the staff, make an inspirational speech, give a small raise to the staff, and think that the issue is solved. It will not take too long for the organization to have to deal with the same issue again if the problem is structural.

A transformation is transitional if the process did not take into account all the factors that are sources of decline or chronic crisis for an organization. For example, a process of organizational transformation might involve some minor changes in policies and the service delivery system, but not investigate why these changes were needed, and whether the changes made will be sufficient to prevent this problem from affecting the survival of the organization.

An organizational transformation process is transformational if it starts with a thorough diagnosis of the organization that accounts for the internal and external environment, including the core values, strategic areas, and leadership. Diagnosis is a critical step for organizational transformation.

A proper organizational diagnosis should be conducted by an outsider, an external independent consultant hired with responsibilities to look at aspects of decline, have access to all relevant information, and make recommendations that explore all options, including change in leadership behavior or even leadership personnel. An effective organizational diagnosis is a review of all political, economic, social, and technological (PEST) aspects that directly or indirectly contributed to a decline or crisis. It also includes a SWOT analysis that explores the current strengths, weaknesses, opportunities, and threats related to the organization. Finally, an effective diagnosis analyzes an organization readiness to change.

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