We increasingly hear about non-profits (NPs) and non-governmental organizations struggling with transformational change to thrive, find relevance and even survive. But instead of advancing, they appear caught in the eddies and whirlpools of practical challenges as they battle to get back into the main stream of mission success and to establish financial viability.
We have witnessed this pattern repeatedly. After years of enthusiasm and success in carrying out its initial mission, an NP faces a changing landscape and decides to diversify and tackle more issues. This transformation is often orchestrated under the leadership of a new, well-meaning Board of Directors or Executive Director, eager to leave their mark on the organization. However, once an organization has over 7 to 10 employees or an operating budget of over $1M per year, it encounters a higher level of turbulence. This aspiration for change demands meaningful stakeholder support, staff build up, and the ability to accomplish previously unachievable goals.
As members of Prometheus Endeavor, retired consultants and executives who almost all serve on the Boards of non-profits, we’ve been struck by the similarities in the transformational management challenges faced by these organizations. While there is no one-size-fits-all formula for success, we believe there are important guidelines and approaches that can help NPs navigate the treacherous rapids of challenges they will encounter. This blog will address three critical first steps before launching into the fray.
It’s not the head of the Charles Regatta:
Many NPs fall into a management and operating pattern that resembles a rowing crew entered in a regatta such as the Head of the Charles in Boston. It is a proven team, knowing their roles, doing what they have practiced over and over, knowing the competition and dealing with relatively predictable calm waters.
But facing the transformation required for growth, thriving, and even survival, the non-profit finds itself in a white-water rapids situation. The team is ill prepared, unsure of its roles, and challenged with the eddies and rocks and constantly dealing with change. This white-water situation demands a fundamental change in how the NP is led, governed and orchestrated.
Guideline 1: A Realistic Appraisal of Non-Profit Context is Critical
Before embarking on the transformational journey, the NP must come to terms with its current realities by performing a robust risk and readiness management assessment. Often, too much emphasis is on the target vision neglecting the practical challenges that underpin the transformation. Just as a river raft entering the Colorado River to run the Grand Canyon must be prepared for the white-water rapids ahead, the NP must be ready to face the obstacles that lie ahead.
Over a decade ago we began working with two non-profits that had acquired multiple buildings over the previous half century without adequately funding annual building support, suddenly finding themselves in the position where they had significant deferred maintenance obligations and limited financial resources. Both these organizations struggled to balance their budgets annually, frequently resorting to excessive withdrawals from their endowments.
Coincidentally, the way forward for both had been to employ an architect-led task force to create a “Campus Master Plan (CMP),” which ultimately resulted in a totally re-envisioned campus. The Boards and senior staff initially believed that these CMPs would breathe new life into the organization, enable new service offerings, and quickly result in successful Capital Campaigns because their stakeholders would love the changes and that they would be powering down the Charles again.
Luckily both organizations floundered in the initial “silent phases” of their campaigns and sought expert help to do risk assessments of their situations. The analysis revealed that these Campus Master Plans were both very high-risk endeavors, prone to being overwhelmed by the weaknesses of their current situations with little chance of success:
Not ready for Class 3 rapids much less Class 5
- The business cases for the Campus Master Plans were back of the envelope or unrealistic.
- There was no plan and focus to remediate the existing foundation of the non-profit before tackling the transformation
- There was no chunking of the CMPs to address a realistic sequence of programs and projects that would enable the non-profit to pay-as-you-go over the 5 to 10 years to fully realize the vision
- There were no experienced in-house fund-raising and data administration professionals to raise the money
- Both organizations were barely breaking-even financially and struggling to raise money for annual operating support
- There was a wide disparity of stakeholder views about the necessity of the CMP
As a result, after investing significant stakeholder time and resources the Campus Master Plans had to be postponed.
Guideline 2: Start with a realistic baseline and program to fix the foundation
Non-profits are prisoners of their inherent precarious financial context. Therefore, a critical step in solidifying their base is to develop and activate:
- A remediation plan to put the asset base and operating situation on firmer ground
- It can’t be one big project, but rather tens of little projects that can each be quickly accomplished, demonstrating success, and pointing the way for
- A realistic multi-year financial/business plan.
Issues such as lack of competent fund-raising professionals, understaffing, and lack of stakeholder commitment will continue until that financial plan is made an underpinning of early transformation.
Guideline 3: Build up missing basic management disciplines
Most non-profits are excellent at executing their mission driven services which is why they are in business. However, what many are not good at is executing other functional requirements for running a viable business as they undergo transformation.
- Since an NP raises capital through Capital Campaigns and grants from donors and balances its operating budget through Annual Giving (from the same donor pool), its ability to raise funds is critical to long term organization viability. Every NP must ensure it has competent philanthropy professionals and processes, that all gifts and grants are properly and promptly acknowledged, and that the Board is totally engaged in “friend-raising. They should achieve a Guidestar Platinum Seal of Transparency.
- Non-profits must be able to move beyond one year budget versus actual financial accounting to understanding activity costs and ability to understand multi-year financial implications of their decisions.
- They must develop strategic plans, goals, measures, and time frames and assign accountability, along with a regular management process for reviewing and updating them.
- They must address their most critical facility maintenance deficiencies and make provisions for this in their financial plan.
- They should establish dashboards to track their key performance indicators and upgrade infrastructure on all software systems. They should develop operations manuals, employee handbooks.
- NP’s need to assess the strengths and weaknesses of their Boards, seek to fill gaps, ensure they have effective committee structures and new Board member orientation programs.
It may take years for non-profits to effectively transform critical foundational deficiencies, but they will be much better prepared to achieve success in handling the rapids ahead for having stopped and undergone a robust risk and readiness assessment and shored up their missing management disciplines.
In our next blog we will provide practical guidelines for reacting to the changing conditions in the rapids.
