# Iron Triangle SEE ALSO: [[Requisite Variety]], [[Adaequatio (Adequateness)]], [[Affordances]] RELATED FUNCTIONS: [[Governance]], [[Finance]], [[People Operations]], [[Spaces & Systems]] ![[iron_triangle.png]] The "iron triangle" describes the dynamic relationship within any complex nonprofit endeavor between its mission and program, its organizational capacity, and its capital structure. First suggested by Clara Miller (inspired by Adrian Ellis) through her work with the Nonprofit Finance Fund (Miller 2001), the iron triangle suggests that growth or change in any one of these areas will necessarily drive (or demand) change in the other two. Wrote Miller: > "For every nonprofit organization, there is a tension between the pursuit of mission and the maintenance of financial viability. Any plan to change or expand activities needs a parallel capitalization strategy— a holistic approach to growth that looks at how the organization's capital structure should be shaped to support the plan." ## Mission and Program Miller describes mission and program as two related but distinct elements of a nonprofit's work. *Mission* is the larger stated purpose of the enterprise, often encompassing a much larger range of issues than any single organization can address directly. *Program* includes those activities an organization has decided to take in support of its mission. Any organization must determine a subset of all possible programs that work well together, and present the best opportunity to advance the mission given the context of the organization. ## Organizational Capacity Miller describes organizational capacity as "the sum of the resources an organization has at its disposal and the way in which they are organized." This includes development, marketing, and financial management skills, program delivery mechanisms, and staffing. This also includes the capacity of the organization to plan, implement, and evaluate. "In essence," writes Miller, "organizational capacity is the ability of an organization to operate its business." ## Capital Structure Capital structure is the pattern and distribution of an organization’s financial assets and liabilities – the shape, nature, and relationship described by its balance sheet. This includes the size, scope, and relationship of what the enterprise "owns" – fixed assets like buildings or equipment, inventory or other short-term assets, and cash or cash equivalents. This also includes the funding that sources and supports those assets – either liabilities or net assets. With these three definitions, it's clear that any change or growth in one side of the triangle will require related change or growth in the other two sides. If, for example, a nonprofit theater company or museum buys or builds a new facility, the shape and size of its capital structure will change. But so will the demands on organizational capacity (staff, systems, planning, management, etc.). And the organization's program offerings will also change, given the new space and the new capacity to advance its mission. If these three elements *don't* all change, the organization will find itself with a brand new building but insufficient capacity to animate that building or sustain its programs. Miller and the Nonprofit Finance Fund suggest that significant attention has been given to missio and program, and to organizational capacity, but that capital structure has historically been neglected as a core focus by practitioners, funders, and boards. --- ## Sources - Miller, Clara. “Linking Mission and Money: An Introduction to Nonprofit Capitalization.” Nonprofit Finance Fund, 2001. [https://nff.org/report/linking-mission-and-money-introduction-nonprofit-capitalization](https://nff.org/report/linking-mission-and-money-introduction-nonprofit-capitalization). ## Tags (click to view related pages) #frameworks #stories/steppenwolf #functions/people_operations #functions/finance #functions/program_production #functions/spaces_systems #functions/accounting #sapling