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Board members are talented, experienced, and knowledgeable leaders. They know how to be effective. They achieve success by taking on one issue and focusing on it until it is resolved.
Many nonprofit boards try to do too much. Their agendas are cluttered with marketing decisions, programing needs, financial decisions, fundraising challenges plus the usual reports and personnel matters. Planning should be on the agenda but everyone agrees this month’s agenda is full. Each topic receives very little attention due to the time constraints. Effectiveness is very low.
The current process works because each topic only has one choice. It is unnecessary to discuss the issues or take a vote. However, everyone has to wait while the matter is layed out and the vote is called. It is time that could have been used more effectively. Since the only thing being asked of the board members is patience, there is a low level of board engagement.
Your board needs to approach its meetings the same way its members approach their daily activities. They have many topics on their to-do lists but they only work on one item at a time. In addition, they take each item to a logical stopping point then move on to the next item. Boards want to resolve each item before moving on. However, due to time constraints all the boards can do is give each item superficial attention. None of the members achieved professional success by doing things in a superficial way.
Boards need to simplify their agendas to contain only one item. The one item should be the most important item rather than the most urgent item. By their nature, urgent items are always operational or tactical. Tactical items are the domain of the committees. Operational items are the domain of the staff.
When the agenda is sent out to the board it should be accompanied by a description of the item, the options and the pros, cons, features, advantages, benefits, and value of each option. The agenda should identify the decision to be made, the next step, and any context necessary to help the board members better understand the situation. Now the meeting can be devoted to making a highly effective decision after having a well-informed discussion.
If there truly are several important matters that need prompt attention, the board can schedule weekly meetings until all of the matters receive attention. Each week can be focused on one topic. The need for weekly meetings will be rare.
Next Step:
Limit board meetings to one truly important matter
Ensure the agenda and supporting materials provide the board members with the background and detailed information they need about each option
Provide the materials to the members in sufficient time for them to read and digest the materials
Give the members time to deliberate before asking them to vote< Be prepared to postpone the vote
If consensus is elusive, it suggests that there are unexplored issues. It is important to explore those issues. Consensus is important because the matter is important. You have many talented board members with diverse skills and experiences. Their concerns are probably well founded and addressing those concerns will increase your probability of success, the potential to raise the effectiveness of your mission, increase client outcomes, engage donors, and increase sustainability.
Limiting the board meeting to one truly important matter will help to increase board engagement. Board members will leave the meeting feeling like they have helped the mission, helped clients, and increased sustainability. Engaged board members are more likely to be generous donors, recruit other volunteers, and advocate for your mission and clients.
Take It Further:
Ask your stakeholders to help you prioritize your important matters (it helps them feel important and ensures that your nonprofit is responsive to its support network)
Use your list of important matters to inform your board member recruiting (the right talent for the right decisions)
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One of the often-overlooked responsibilities of nonprofit boards is to develop its current and future leaders (volunteer and professional). Another responsibility of a nonprofit board is to lay the foundation for an uncertain future. While it sounds like it is impossible to prepare for something that is vague at best, it is still a necessity. The better prepared the leaders of your nonprofit are, the higher your nonprofit’s sustainability will be. Increasing the sustainability of your nonprofit is also one of your board’s responsibilities.
One of the ways to develop your current leadership is to empower your executive to make more decisions. When the executive asks the board for a decision, ask the executive to make the decision.
Every decision an executive makes falls within one of four categories:
Report – Tell the board the decision was made
Advise – Tell the board the decision is going to be made
Consent – Ask the board for permission to make the decision
Responsibility – Ask the board to take responsibility for the decision
Which decisions fall in which categories will depend on the experience of your executive. Using the above structure provides the board with the opportunity to audit the quality of the decisions, question why X instead of Y, and adjust the guidelines to improve the process. As the board’s confidence in the executive’s judgement grows, the guidelines can be more general.
Over time, the executive will learn several things:
What parameters should be considered before making a finance, fundraising, operational, etc. decision
Which decisions require extra time
How to work collaboratively with the board
What skills and experience are needed by the board members to provide effective guidance
While the executive is learning, the board will become more deliberative and forward looking when confronting issues. If instead of making a decision the board must outline how the decision is to be made, the board must be more intentional about how it will coordinate activities, set priorities, and foresee future needs. All of this will help the new board members better understand their roles. It will also make better use of the talents, experience, and knowledge of board members. The result will be more engaged board members.
If your nonprofit is like most, there is at least one staff member assigned to each board committee. If the committees use the same approach for guiding the development of the staff members, it will prepare the next generation of potential executives.
Next Step:
Delegate most of the board’s decision-making to the executive
Create guidelines to ensure the executive makes high-quality decisions
Establish guidelines for the executive to make decisions independent of the board
When the bulk of the decisions are in the Responsibility category, a nonprofit’s sustainability is low. Boards seledom have the time necessary to make effective detailed-level decisions. Boards should be using the combined knowledge, experience, and expertise of its members to make complex, far reaching, and mission-critical decisions. The result is a nonprofit with a high level of sustainability and a highly effective mission.
The level of trust and confidence the board has in the executive’s judgement will determine how many decisions are in each category. With a high level of trust, most decisions will fall into the Report and Advise categories. The Responsibility category should be reserved for only the biggest and farthest-reaching decisions.
Take It Further:
Recruit boards members with a diversity of knowledge, experience, and expertise to complement the strengths of your staff
Use the decline in the number of Responsibility category decisions as an indicator of the effectiveness of your executive development
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Nonprofit sustainability depends on consistently providing outstanding service for many years. Of course outstanding service depends on a high-performing staff with sufficient resources (high-performing fundraising). However, of greater importance is the performance of the board.
Without great leadership, it is impossible for a team to win. Therefore, all board members must perform well so that the staff, including the executive, has the leadership it needs.
First, the leader must set a direction. Since the clients and donors must receive outstanding service over many years, the set goal must be many years down the road.
Donors want their money spent according to their wishes. Therefore, accountability is important. Accountability is also important to the staff because the staff wants the board to honor its commitments and accept appropriate responsibility.
Donors and the public want transparency. When it is easy to understand what is happening, it is easy to trust the leadership. It is also easier to attract supporters when ‘what you see is what you get’.
Leaders should inspire their followers to reach higher. Reaching higher is necessary if your nonprofit is going to consistently provide outstanding service.
Outstanding service implies service above and beyond what clients and donors can receive anywhere else. That means the board must be constantly learning. It also means that the services are constantly evolving. The board must evolve and it must encourage the staff to innovate and experiment.
The results of the evolution and learning must be an increase in the board’s capabilities and capacity. Only when the board can do more can the staff be expected to do more.
Finally, the board’s culture must be the model for your nonprofit’s culture. For example, if part of the mission is to empower clients to be bold, the board must be bold and willing to empower the staff to be bold so that the clients have a working model to emulate.
Next Step:
Hold your board development committee accountable for developing – in your board and board members – the eleven highlighted attributes in this article
Recruit board members who have the eleven attributes
Recruit board members who are willing to work toward goals that exceed their terms of service
A long history of outstanding service implies a service plan that extends well beyond this year or even five years from now. Therefore, every board member must be committed to working toward goals they may never celebrate. They must have the same commitment to your mission, clients, and the sustainability of your nonprofit. You expect your staff to be fully committed to the long-term success of your clients, providing excellence, supporting the mission, and improving the health of your nonprofit. It is reasonable for the staff to expect to be lead by people who exemplify that commitment.
Take It Further:
Ask your board development committee to annually provide the board with its five-year goals for the board’s development
Be selective when recruiting board members
Evaluate your board and create a plan that will set your board on the path to being the best board in your community
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ZBB originated in the 1970s. Therefore, it is nothing new and when something old becomes popular it is best to be cautious.
ZBB means zeroing out all line items in the budget and justifying every dollar that is added for each line item. There have been several stories recently about large organizations using ZBB to reinvent themselves. The success of some organizations that have used it has caused it to become popular. It is like many other great ideas: when used in the right way, at the right time, and for the right reasons, it can be highly effective.
Here is a good introduction to ZBB and some of the misconceptions that surround it.
If you decide ZBB is right for your nonprofit and now is the right time to implement it, here are some suggestions to guide your implementation:
Mission, Clients, and Growth – Your budgeting should center around your mission, what is best for you clients, and on growing the number of clients you serve. If it is impossible to directly relate the funds for Activity X to advancing one of those three, then allocate zero to Activity X (eliminate Activity X). This will drive your nonprofit to become more mission, client, and growth centric.
Value – If it is impossible to explain how funding Activity Y will create value that is important to your donors, other stakeholders, or community, eliminate Activity Y. This will drive your nonprofit to become more donor and community centric. It will also help to increase the support you receive from all sources. The more value others receive from your activities, the more generous they will be and the more your sustainability will increase.
Sacred Cows – Most organizations have one or more sacred cows. It is hard to eliminate them because of tradition or who loves them. You know an activity is a sacred cow if it has lost its value but people are unwilling to eliminate it. Now is the time to eliminated the cows from your budget. Remember that sometimes eliminating a cow might mean selling or transferring the cow to some other organization. In some cases, you may need to transfer a little initial financial support with the cow just to make it more attractive to the recipient. If it frees up resources and enables your nonprofit to use those resources to better serve clients or make your mission more effective, it will be well worth it. What is important is the increased sustainability of your nonprofit and eliminating the cows.
Alternatives – Look for less expensive and more effective ways to deliver the same or better results. Many things can be automated or will be automated in the near future. Automating activities or changing them to take advantage of new methodologies redirects resources to more important areas and increases sustainability.
ZBB is a budgeting tool. Most of the time it redirects costs to increase effectiveness and efficiency. Sometimes it reduces costs. Be careful that the cost reductions never impare effectiveness. Increasing effectiveness should always be more important than increasing efficiency. Greater effectiveness will increase support, which is a better way to balance the budget than cutting costs.
Next Step:
Think carefully about whether ZBB is right for you nonprofit (timing, culture, etc.)
Focus the decision-making on an objective analysis of the needs of your mission and clients as well as what will create value and drive growth
Eliminate your sacred cows
Our suggestions for implementing ZBB works equally well for the traditional budgeting process. The major risk with the traditional process is that costs are increased automatically in response to inflation and growth. The automatic part of the process limits the amount of objective analysis necessary to find new and better ways. The threat of budget cuts built into ZBB helps to encourage a more thoughtful, objective, and purpose-driven analysis of each expense.
Regardless of how your nonprofit creates its next budget, make sure the process is objective, purpose driven, and mission and client centric.
Take It Further:
Ask your donors, clients, other stakeholders, and community to tell you about the value they receive and the value they want to receive from your nonprofit before starting the budgeting process
Preview your budget decisions with a cross section of stakeholders before approving your next budget
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A while ago a nonprofit was founded on a large piece of ground. The founders hoped the nonprofit would grow and need the land. As the years passed, the nonprofit grew and shrank. Today it is serving very few people and struggling to find a path forward. It has never needed more than the modest corner of the ground that it originally occupied. In an attempt to return the nonprofit to vitality, it is considering using the ground for something that is tangentially related to its mission. Whether the concept is something the community sincerely wants is unknown. The way the plans current stand the nonprofit would completely fund the project. There is very little opportunity to recover any of the costs after completion so the nonprofit must be prepared to pay for ongoing maintenance and operational expenses. It could become a financial burden for this organization that is under stress and feels like it is in crisis. Once completed, there is expected to be minimal interaction between the nonprofit and the community but it will raise the awareness of the users to the presence of the nonprofit.
The proposal, roughly as you have read it, is before the board for consideration. Based upon what you know, would you advise the nonprofit to proceed?
It is easy to understand how the nonprofit arrived at this point. They are struggling. Their current mission or the expression of their mission (mission statement or services offered) has declining perceived relevance to the community. The land is an untapped resource. A cursory review suggests there are limited expenses associated with launching the idea. A few people are enthusiastic about it. Since this is the only idea on the table and none of the leaders are strenuously objecting, it seems like it is better to do something than nothing.
This is the time to pause and take an objective look at the situation. Some questions that might help them make a good decision are:
Is this something the community wants or is it something the nonprofit wants the community to have? Is the community willing to help fund it and pay for its ongoing maintenance?
If it is something the community wants, how can the nonprofit make it mission centric?
Is there something the community wants more that better fits with the nonprofit’s mission, makes better use of the nonprofit’s strengths, and will create a collaborative partnership between the nonprofit and the community?
Will this project have a big enough impact on the community to justify committing scarce resources to it? By committing scarce resources will the nonprofit gain sufficiently to mitigate some of its financial stress?
How will completing the project increase the nonprofit’s sustainability?
Will the project provide the nonprofit with new strengths? How can the project become an investment in the nonprofit’s future?
In the future, if the nonprofit needs the land for its mission, how will it reclaim the land without alienating the community? (What is the exit strategy?)
Would it be best to change the nonprofit’s current programing to meet an unmet or undermet community need, to transform the land to meet a community need, or both?
Everyone associated with the nonprofit wants it to survive and thrive so there is an urge to do something in the hopes it is the right something. The stakeholders’ passion and the limited time are the nonprofit’s greatest strengths and greatest threat. The urgency and passion can stampede it into making a decision that wastes the last of its resources. Doing nothing is an equal threat because the nonprofit has limited time. Therefore, it needs to take a strategic pause, objectively find the right path forward, and harness the passion of its current stakeholders to ensure the path leads to success.
In this case, the strategic pause should only last a few weeks. It should engage the community in a discussion of the needs the community is willing to invest in. Once the nonprofit knows what the community is willing to support that is mission centric, it needs to build a plan, gather community support, and execute the plan.
The nonprofit only has time to make one decision. It must be willing to commit all of its time and resources into making that decision a huge success.
Next Step:
Pause before responding to a crisis
Consult with your community and stakeholders
Create a plan that is mission centric, has community support, and increases your stakeholders’ passion
Go all in!
Every plan is flawed. Therefore, every project stumbles several times during its execution. Early in the execution of a crisis-recovery plan, any setback will cause some stakeholders to declare that the nonprofit is on the wrong path. This is where leadership resolve is critical. Though adjusting the plan is necessary, the commitment to the plan must be unwavering. Stopping, creating a new plan, and going forward with the new plan almost never works because the resources lost on the first plan almost ensure that the new plan will have insufficient resources to be successful – even if it is the plan that should have been adopted in the beginning. That is why an objective assessment of the right path forward is the most critical part of the recovery process.
Take It Further:
Remember, the best crisis avoidance strategy is to ensure your nonprofit has a high level of sustainability, good financial healthy, highly effective programing that is mission centric, growing community support, growing number of clients served, and increasing donor generosity, loyalty, and engagement.
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In many ways, nonprofits are the same as for-profits. They must be. They operate in the same ecosystem. However, a nonprofit’s purpose is to solve a social problem rather than make a profit. The different between the two may disappear in 10 years.
Before the turn of the century, for-profits were only socially or environmentally aware when necessary. In the past few years, consumers, activists, and the for-profit stockholders have been pressing companies to be much more socially, ethically, and environmentally focused. They find they can do what is being asked of them and still be profitable. In fact, some of them are finding they can be more profitable by being better citizens.
The good work that used to be done solely by nonprofits has become trendy for for-profits to offer. For-profits are starting to crowd out nonprofits. That means nonprofits need to evolve to remain relevant.
High-quality childcare is an example. It has become a for-profit employment benefit. Currently, there is still room for a nonprofit to offer childcare to the unemployed and the underemployed. However, if unemployment continues to decline, corporations will reach out to the unemployed and underemployed. They will cut deeper into the nonprofit childcare sector.
When a for-profit is giving away services, it hard to create a compelling reason for someone to donate to a nonprofit offering competitive services.
Is your nonprofit doing enough to differentiate itself from what for-profits are doing, will be doing soon, or could be doing?
Perhaps there is an opportunity to partner with a for-profit to provide the services they need or want. Data is the lifeblood of the for-profit decision-making process. If you want a for-profit as a partner, you need compelling data that your nonprofit has growing sustainability. While it is unnecessary to be as big as your partner, it is important that your nonprofit is as sustainable as your partner. The partnership will never form if the for-profit must wait while the nonprofit collects statistics. For-profits also want reliable partners. A high level of sustainability is a key part of being a reliable partner. Producing consistent, reproducible, and scalable results is also a key part of being reliable.
Since for-profits are under pressure to make a contribution to the social good, you will also need to have data that shows your mission is effectively solving a problem that is important to society. A childcare that is educating children while their parents are at work is doing something necessary. A childcare that is preparing children to be exceptional is doing something that is important and provides its for-profit partner with a competitive advantage when recruiting employees.
Next Step:
Determine when your local for-profits needs to partner with or compete with your nonprofit
Determine how your mission’s promises can offer a for-profit a competitive advantage
Collect the statistics (as well as anecdotes) that prove your nonprofit is and has been an effective force for social change in your community
Let us assume you take those three steps and the for-profits never invade your space. In preparation for the invasion, you have made your nonprofit less vulnerable to competition from another nonprofit, you have a more compelling case for support from your donors and community, you have increased your nonprofit’s sustainability, and you have increased your nonprofit’s value and relevance to your clients and community. Yet again, being proactive makes your nonprofit significantly better off regardless of the future.
Take It Further:
Ask your board to constantly assume there is a threat and devise a strategy to counter the threat
Build the strength of your nonprofit by asking it to do more to increase mission effectiveness and value
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Here are four questions to help you better know your donors, engage your donors, and spot trends in your donor base. Some of the bullets under each question will help you focus your fundraising in ways that increase its effectiveness.
How can supporters engage with your nonprofit?
Volunteer, Donate, Advocate, Refer Clients and Refer Others, Attend Events, etc.
Track how each donor engages and how their engagement changes over time.
What can you do to increase and diversify each donor’s level of engagement?
How does the method of engagement relate to donor retention?
How do demographics affect supporters’ engagement preferences?
What are the trends you have noticed over the past five years?
How do supporters discover your nonprofit?
Publicity, Advertising, Word of Mouth, Friends, Social Media, Recommendation or Referral, Events, Receive Services, Search, etc.
Which pathway provides the most generous donors, the most engaged donors, and the most prospects?
How do demographics affect how supporters become aware?
What are the trends you have noticed over the past five years?
Why does each donor engage with your nonprofit?
Mission, Personal Experience, Friend, Religious Affiliation, Need to Give, Family Tradition, To Fulfill a Service Commitment, etc.
Is there a correlation between retention, engagement, reason for engagement, and generosity?
What are the trends you have noticed over the past five years?
How do demographics affect supports’ reasons for engaging?
What forms of communication and frequency do your supporters prefer?
Direct Mail, Email, Social Media, Newsletter, Blog, Text, Phone Call, In-person, Events, etc.
Which form is the most effective?
How do demographics affect the effectiveness of each form?
How can you raise the effectiveness of the forms?
Is there a correlation between prefered method of engagement and prefered communication method?
Is there a correlation between communication method and generosity or retention of the supporters?
What frequency of communication is prefered by the different demographic groups?
What is the ideal mix of communication methods to optimize generosity, retention, and engagement?
What are the trends you have noticed over the past five years?
Next Step:
Use your supporter-intake process to start the data collection
Use ongoing cultivation meetings and events to gather additional information and to keep your information about each supporter up to date
Optimize your supporters’ experiences and strengthen your nonprofit’s relationships with your supporters by modifying how you attract, engage, retain and communicate with supporters
Historically, small nonprofits have been reluctant to invest in data analysis. Many times it is because the time, tools, and expertise were unaffordable. Today, there are tools that are free or inexpensive that can help and many of the tools will do the analysis, which eliminates the need for expertise. It is probably more efficient to invest in the analysis than spending precious time and resources pursuing inefficient recruiting, retention, communication, or solicitation strategies. Put another way, better analysis ensures better sustainability.
Cultivation and customized engagement and communications send a clear message to your donors and other supporters. When what you do is tailored for their needs and desires it tells your supporters that they are important and valuable. When the mission, clients, and supporters are seen as the primary focus, supporters, and especially donors, are more generous, engaged, and loyal. Clients are more engaged. Sustainability is higher.
Take It Further:
Describe the nonprofit you want to have in ten years and use the data you collect to determine the optimal way to gather the support necessary to ensure your nonprofit reaches its goal
Recruit board members and fundraisers who understand the value of data and are committed to the collection and analysis of data
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Your nonprofit will realize may benefits from collaborating with nonprofits of all types, especially at the board level.
Think about your nonprofit and its fiercest competitor. You probably compete for donors, clients, volunteers, referral sources, staff, and advocates. However, it is doubtful that you compete in other areas such as accounting, HR, policy, and payroll. What you pay your staff, rather than how you pay your staff, makes you competitive.
Look below the surface in all of the areas where you compete and you will find areas of synergy. You can learn many things from each other without divulging any information that changes the competitive balance. However, what you learn will make both of your organizations stronger, more effective, and more efficient.
Making a competitor stronger, more effective, and more efficient seems counterintuitive. However, your competition is based upon the results you produce, the value of your results, and the outcomes promised by your mission statement. If your nonprofit produces more valuable results and your clients have more meaningful, measurable, and durable outcomes, the competitor’s strength, effectiveness, and efficiency will never be a threat. Conversely, imagine a family is considering investing in a Christian education for their children. If all of the faith-based schools in the area have great outcomes, families are likely to associate great outcomes with a Christian education. In this case, helping your competitors to prosper, benefits your school over the long-term.
Every nonprofit is part of a system of nonprofits. If the system appears weak, it is easy for clients, donors, advocates, and referral sources to question whether supporting one member of the system is prudent. In addition, weakness in the system creates an opportunity for other competitors to enter the market or for existing competitors to expand their presence. Being part of a strong ecosystem has more benefits than being the best in a weak system.
Collaborating with non-competitors provides many of the same benefits with less risk. It still important to avoid sharing any information about your competitive advantages.
Exploring areas of cooperation with both competitors and non-competitors makes sense. For instance, combining payroll services may increase the scale of activities and provide a cost savings for all participants.
Next Step:
Look at the elements of your business model and determine which are non-strategic
Seek collaborators who can help you develop new strengths and who can increase your efficiency and effectiveness in non-strategic areas
Ensure every lesson learned from your collaborations helps to increase the effectiveness of your mission, your nonprofit’s sustainability, and the effectiveness of your strategy
Part of being a good steward of donor funds is constantly improving operational effectiveness and efficiency. A growing level of operational effectiveness and efficiency helps to increase donor loyalty, generosity, and engagement as well as your nonprofit’s sustainability.
Your nonprofit’s sustainability also depends on your nonprofit’s strength, mission effectiveness, and the durability of the promises made by your mission statement. When making changes, ensure the changes raise mission effectiveness, benefit your clients, and are aligned with your donors’ priorities.
Take It Further:
Looks for ways to collaborate with government agencies and for-profits
Ask the board to create policies that build and protect the strategic areas of your business model
Ask you board to make the support of your nonprofit’s strategy, mission, client outcomes, and your competitive advantages the priorities when making any decision
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If your nonprofit is at the top of its game – Congratulations! That is great news!
The bad news is that the good news has a limited shelf life. According to one study, the average large organization reorganizes itself every 24 – 36 months. Each reorganization takes about 18 months. It is hard to stay on top in our rapidly changing society and business environment.
Many of the retail and consumer-facing companies are being crowded out by rapidly evolving new entrants into their space. Unfortunately, many of those who are under pressure will be unable to evolve fast enough to survive. One of their frailties is their culture. They need a culture that encourages innovation, rapid change, and risk taking. Their weakness is that they never thought it would be necessary for their organizations to be at or near the leading edge of change.
Most nonprofits are similar to retail and consumer-facing companies. Their boards have used their for-profit cousins as operating and structural templates. They also adopted similar cultures and strategies. It is time for a new template.
Every nonprofit must have a meaningfully unique strategy. Part of the new strategy must be a culture that demands innovation, rapid change, risk taking (experimentation), and a desire to lead the change process in your community. In addition, it is necessary to have committed clients and donors. Committed clients and donors are the only way to combat the speed, price, and convenience offered by large well-funded competitors.
Clients and donors must receive value that trumps what the for-profits and other nonprofits offers of wide selections, low prices, convenience, or almost immediate delivery. To remain competitive, your value must constantly improve and be unique. It must be specifically tailored for each donor and client. The donor or client must find your value compelling. When they do, their loyalty will provide you with a high level of sustainability. Of course, your value must be mission centric so that it increases the relevance of your mission and your nonprofit’s value to your community.
Growth is critical for survival. It is tempting to think that growth requires standardization so that more can be done in less time, with fewer people, and at a lower cost. While efficiency is important, if its standardizes your process or services, it is easily copied and will never provide the unique and compelling value required to have committed donors or clients. Therefore, effectiveness must be your priority over cost, efficiency, and standardization (all elements of the old culture).
Next Step:
Create a new strategy for serving clients and donors
Ensure that your new strategy creates a unique value for your clients and donors
Use the growing commitment of your donors and clients to measure the success of your strategy
Use the growth in donors and clients to measure the change in your community support
If each donor and client receives exactly what they need and in the way they want, it is very difficult for a competitor to copy what you are doing. In addition, the switching costs (time, effort, and expense of changing providers) will be high for the donors and clients with very little potential benefit. If they are receiving what they want from your nonprofit, it is hard for another provider to make a compelling case that switching will be better. As a result, giving your clients and donors what they want will provide you with a growing client base, more donors, and more donor loyalty and generosity. It will also provide greater value for your community, which will increase community support. The increase in committed clients will also help to increase your mission’s relevance. All of that leads to a high level of sustainability.
Take It Further:
Use the disruptions in the retail and consumer services sectors to predict the next disruption that is likely to happen in the nonprofit sector
Change your board member screening to ensure future board members are prepared to support your evolving culture
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At Mission Enablers, we believe the sustainability of a nonprofit is as important as the mission. Without sustainability, the mission will perish. Often, sustainability is given less attention than it deserves because the mission is given too much attention.
Donors rightly demand that a nonprofit be accountable for its impact. Since many nonprofits are unable to provide statistical evidence of their mission’s effectiveness, the donors look at the nonprofit’s financials to determine how much was spent on serving clients. They are using the service expenditures as a proxy for mission effectiveness.
Besides being a weak indicator of effectiveness, looking at financials creates short-term thinking. It places a focus on what is happening this year yet the outcomes the donors want and are paying for usually occur several years in the future. In addition, it causes the nonprofit management and the board to concentrate on how to spend the greatest amount possible on services. The result is uncertain outcomes and a fragile nonprofit with low sustainability.
For the sake of the mission, this needs to change. Generous and loyal support from donors and the community depend on having evidence that proves the mission is effective and the desired outcomes are achieved. Therefore, nonprofits need to gather the statistics necessary to generate the support they require. In part, fundraising must assure donors they will receive more of what they want (evidence of effectiveness) if they support the data gathering. The donors need to understand that without evidence, it is difficult for your nonprofit to continually increase its effectiveness, have a deeper impact on clients’ lives, and provide greater value to your community.
Greater effectiveness depends on your nonprofit’s foundational strengths. This means spending money on staff skills, new equipment and processes, experimenting to find better ways to do things, and seeking advice. In part that is an investment in your infrastructure. It is also an investment in your mission’s effectiveness. Without the constant investment in infrastructure, your nonprofit will become weak and less effective. Keeping the infrastructure strong ensures your nonprofit will have increasing sustainability and will be around as long as it is needed, which is something every donor wants.
Your nonprofit’s resilience is also important to your nonprofit’s sustainability and its ability to serve clients for years to come. In part, resilience is building a reserve so that when an unexpected need or opportunity arises, your nonprofit has the resources to respond. Since your donors would prefer to never receive an urgent call from your nonprofit asking for an immediate donation, they will probably support your desire to build an adequate reserve. Resilience is more than just a cash reserve, it also includes loyal donors.
Next Step:
Allocate funds for collecting data to prove the effectiveness of your mission and to determine ways to increase its effectiveness
Allocate funds to continually improve your nonprofit’s infrastructure
Allocate funds to increase your nonprofit’s resilience.
Talk to your donors about all of the ways their support can be used to impact your clients and community as well as ensure their gifts create a legacy of service for the community by making your nonprofit more effective, stronger, and more sustainable
Rethink your budgeting process
As for how much to spend on data collection, infrastructure, and resilience: We recommend that your board think carefully about the fragility of your nonprofit and whether it has the compelling evidence it needs to convince skeptical donors to increase their support and loyalty. Ensure that your budgeting process always provides funds for improving data collection, building infrastructure, and bolstering resilience.
Take It Further:
Identify the statistics from last year that would have convinced your donors this year that the effectiveness of your mission is increasing then collect those statistics this year so that you will have a more compelling fundraising story next year
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