Nonprofit 411: Sink, Swim or Soar – The Choice is Yours

By Sharon J. Danosky, Danosky & AssociatesSharon275

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It has never been easy to run an effective, impactful non-profit organization. There are always budget cuts, economic challenges, staffing shortages, apathy, lack of awareness and more. Yet, amid these perennial challenges there are those organizations that do soar and scale new heights. While others, unfortunately end up closing their doors, leaving many without the protection or vital services they need. Why do some soar and others sink? In our experience we have found three key characteristics that trigger a high or low performing organization.

1) Revenue generation
2) Board engagement
3) A strategy aligned with organizational impact.

Sinking Organizations

1. No diversified revenue base. Reliance on a single source of revenue will always put your non-profit organization at risk. Whether this is a contract from a state or federal funding agency or reliance on grant funding from a few major sources, once that funding is cut, then the organization is immediately at risk. A weak or non-existent fundraising effort compounds the revenue problem.
2. A Board that is not connected and actively engaged in the organization. Spotty and irregular attendance at board meetings is a red flag for an organization. An unengaged Board is passive and misses the critical warning signs that an organization may be in jeopardy.
3. Functioning tactically on a day-to-day basis with no strategy in place to achieve a significant impact. The number of people coming through your program is not a meaningful outcome – it’s a headcount. How someone’s life is changed, even small changes, is an impact.

For an organization that is sinking, systems, structure and reliable funding streams need to be rapidly put into place. This charge should be led by the Chairman of the Board with a strong team that can facilitate a rapid turn-around.

Swimming Organizations

1. Revenue streams that are static or increasing less than 5 percent annually. This financial scenario will not allow an organization to be sustainable over a period of years. Expenses invariably increase and the inevitable unplanned for event will occur. Simply maintaining your status quo means you will eventually fall behind.
2. Perfunctory attendance at Board meetings, with the primary agenda items being reports with minimal discussion. There is limited Board engagement if the meetings focus on hearing reports from staff. Other symptoms are the lack of a Trustee Agreement, no Board self-assessment and a stagnant Board recruitment effort.
3. Outcomes are reported but there is no strategy by which to measure impact. The ultimate goal of any non-profit is to create systemic and meaningful change. Unless you know what that looks like for your organization, you will not know if you are achieving it.

Organizations that are swimming can sustain themselves for many years. It will sometimes take a sentinel event before the organization embarks on a path that will help them either sink or soar, such as a funding crisis, changes in the leadership of the Board or the turnover of key management.

Soaring Organizations

1. Diversified revenue sources and a strong investment in fundraising. Generating revenue means the ability to set your own agenda, take calculated risks and invest in the infra-structure that enables growth and the ability to solve societal issues.
2. The Board is engaged, active and enthusiastic advocates. When Board members set strategy, engage in the fundraising, and advocate on behalf of the organization, an organization is able to soar. And the positive energy keeps the engagement moving forward.
3. Impact and strategy drive the organization at every level. These organizations have a clear vision. Impact is measured, goals are set and stakeholders are engaged and understand how the organization is making a difference.

Creating a culture where you can soar requires both courage and the commitment to tackle difficult issues. It often means having those difficult conversations and taking calculated risks. But nothing great was ever achieved through mediocrity. And nothing less than great is necessary to address the challenges facing our world today.