Non-Profits Or Non-Passions?
If it weren’t for nonprofits in our communities, many more people would suffer. I have had the pleasure of serving on and/or advising over 20 nonprofit boards of directors; I have observed very effective ones and some that didn’t deserve to exist. So, in the spirit of “a problem well-stated is half-solved,” I’m sharing some common challenges facing many nonprofits that turn them into “non-passions.” These include the lack of clear purpose, unengaged directors, poor business processes/accountabilities and a lack of impact, the net impact of which is to sap the passion of those engaged with the important tasks in front of them.
Lack of clear purpose
Too often, nonprofits suffer from an acute state of “denoidance” (my term for the ugly combination of denial and avoidance). They stick their heads in the sand instead of looking outside and asking tough questions: Do we really serve an important social or community need, what do we stand for and are our donors still interested in our cause?
To retain purpose, you must guard against becoming too insular and instead focus on the needs of stakeholders in the communities you serve. Be less preoccupied with chasing the next gift and more focused on engaging the emotions that prompted donors to give the first time. Donors want to know what happened to the resources they donated before they consider giving more. Too many nonprofits have failed to establish a compelling public engagement strategy designed to move people from interest to engagement to action—not to be confused with promoting a brand.
Lack of director engagement
Results of a 2014 survey of 924 nonprofit directors conducted by the Stanford Graduate School of Business indicate a lack of director engagement, skills and depth of knowledge needed to help their organizations succeed.
In the survey, over 25 percent of directors did not believe their fellow board members had a solid understanding of the mission and strategy of their organization, almost 33 percent were dissatisfied with the board’s capability to evaluate the organization’s performance and almost 50 percent did not believe that their fellow board members were engaged in the work or understood their obligations very well. That’s a pretty sad commentary, isn’t it?
Based on these findings, it’s clear that most nonprofit boards have some serious challenges. An old Chinese proverb states, “A fish rots from the head down.” In my experience this is true, and it demonstrates the imperative that your board must have the right people with the right skills, resources, generosity, diversity and dedication to purpose. I advise nonprofit board members that they are there to give, to get or to get out. In other words, they shouldn’t be taking up space that someone else—willing to be engaged in the organization’s mission, strategies and fundraising efforts—is willing to take.
Lack of business processes and accountability
I’ve also observed that the business processes and skills that are essential in the for-profit world are not always practiced in the nonprofit world. This is more prevalent in small nonprofits, where executives are pulled in so many different directions that business processes tend to fall by the wayside.
A recent study from the Center on Philanthropy at Indiana University surveyed over 500 nonprofit leaders who managed the finances of their organizations. While about 75 percent said they considered themselves financially knowledgeable, only 36 percent correctly answered three basic questions designed to assess their financial skills.
The good news is that nonprofits do not have to adhere to the requirements of Sarbanes-Oxley Act reporting. But when nonprofits fail to employ business processes and accountabilities, they are taking the “nonprofit” in their titles too literally.
Lack of scale and impact
In the nonprofit world, there is a need for consolidation. The total revenue available is shrinking, with federal and state government grant cutbacks and fewer donations from individuals and corporations. At the same time, the need is growing via an increased number of social needs.
It’s a matter of economics—whether you like it or not, you are either the hunter or the hunted. The sooner leaders of nonprofit organizations realize their current models won’t work, they can join together with others that offer similar services or community needs. Instead of competing against each other for shrinking resources, it’s time to consolidate to create a bigger impact through scale.
I remain enthusiastic about nonprofit organizations and the important role they have in strengthening our community. My intention is to motivate nonprofit leaders to do it better, smarter, bigger and with greater impact and passion. If you don’t, the government will.
Mark W. Sheffert (email@example.com) is founder, chairman and CEO of Manchester Companies, Inc., a Minneapolis-based board and management advisory firm specializing in business recovery, transformation, performance improvement, board governance and litigation support.