Top 3 Influences on Nonprofit Sustainability

Nonprofits are an important part of our society. They provide the valuable resources that serve our communities and really make this world a better place. But like other businesses, they have to be sustainable in order to continue their good works. So today, I want to talk about three key influences on nonprofit sustainability. While nonprofit financial strength is definitely one of the most important factors in sustainability, we'll also explore the influence of governance and programs. When you fully understand the role of all  of three indicators, you’ll be better equipped to take practical steps toward your nonprofit’s long-term success. 

Governance

     For the purpose of today's conversation, let’s define governance as the relationship between the nonprofit’s board of directors and the key executive, often called the Executive Director. This relationship is absolutely critical. In fact, this relationship is probably one of the most telling indicators of sustainability. For example, in my local community, there are two nonprofits that are very similar in their mission. One has had the same Executive Director for over 30 years, while the other has not. The first is having a greater impact than the second, which illustrates the critical nature of this relationship. 

     Consider this for a moment: Have you ever had a job in which you had one employer but multiple bosses? That doesn’t sound very functional, does it? Well, we need to keep in mind that in a nonprofit, the Executive Director can feel like they have multiple bosses. Each member of the board can feel like a separate boss with their own unique expectations unless you master this major sustainability issue.

     So what are some ways to solve the “multi-boss” dilemma? First of all, the board needs to function as one. There needs to be a clearly articulated agreement in which the board describes its practical expectations regarding how it will function. This is often called a “Board Policy Mannual,” and it's where those ideas come together in one clearly defined and easily referenced document. Additionally, the board should clearly describe the role of the executive, and specify which duties and decisions stop at the board’s level and which ones fall to the executive’s level. This should also include a list of instances in which the board should be notified by the executive. These are the practical building blocks of good nonprofit governance, which is the first crucial component of sustainability. 

Programs

     Have you ever designed something and experienced a “creep” toward extravagance?  For example, maybe you start off building a simple modest home, and as you progress through the design process,  you discover your innate need for arched doorways, you upsize your budget for some upgraded light fixtures, and you suddenly find standard doorhandles to be entirely substandard. Before you know it, a three-car garage has now become a “must” and you might as well toss that original budget! Well, this “creep” also happens inside of nonprofits, and it’s so easy to add just one more thing when it comes to our programs, but it’s so much harder to stop something. 

     Sustainability is truly mastered when we can evaluate our programs objectively and routinely. So how do you evaluate your programs? Well, let me direct you back to your mission statement. You may also need to revisit your vision and values- those documents that define your purpose for existence- like how you filed to exist as a nonprofit on your Form 10 23. These become the funnel. They help you filter whether or not you do something and whether or not something is really working effectively. That funnel says, “We were created to do ____, ____, and ____. Does that program align with this?” I know it was a great idea and maybe it was meant to serve a purpose that is noble and good, but is it your nonprofit’s purpose? Use that funnel to help you make these programming decisions. 

     Likewise, the results and efficacy of your programs should be put through the same funnel.  Are the results there? Perhaps you started a program with great expectations that it would accomplish  X, Y, and Z… but it just didn’t. This is the time to be honest with yourself and simplify the work you're doing so that you can have greater impact in your effective programs. 

Funding

     Finally, let’s look at funding. The Pareto principle probably applies in most nonprofits. Is 80% of your funding coming from 20% of your sources? Of course, that depends on what kind of funding your nonprofit operates with, but I think these principles apply generally to all types of funding. So what is the composition of your income? Do you know what it is? Do you understand it? Where is it coming from? What variables could impact those sources? What would you do today if that funding was gone? By  looking more closely at those funding sources and fully understanding the risks and opportunities they present, you are taking the next step to grow into a more sustainable nonprofit

     Friends, I want to thank you so much for giving me an opportunity to speak into these important areas of your nonprofit. Every nonprofit really does need to be sustainable in order for its good works to continue. I hope that this resonates with you and is helpful today. To learn even more about these opportunities, visit my website or follow me on LinkedIn.