What Does Nonprofit Sustainability Look Like?
I often hear community leaders and elected officials pontificating about the importance of a “strong, sustainable nonprofit sector” as a way to enhance overall community health. They talk about the business and municipal communities partnering with the nonprofit sector to better address problems and bring a more holistic approach to the collective work. Unfortunately, I have rarely, if ever, heard any of these people exhibiting any true understanding of what a strong, sustainable nonprofit organization actually looks like, or the resources that are needed to accomplish this. So, what does a sustainable nonprofit organization even look like? And, how can we work actively to help the sector be as sustainable as we say we want them to be? In the environmental sphere, sustainability means ensuring that we are using our natural resources wisely and in ways that don’t totally deplete them. The same is true in the business sector – sustainability means ensuring that a company has sufficient resources to survive, maintain, and grow over time. For the nonprofit sector, sustainability can seem more precarious simply because of the nature of their structures and funding sources. But at the end of the day, a nonprofit is a business first, and the same fundamental principles of sustainability apply whether we’re talking about a for-profit or a nonprofit business. So, what are the primary components of nonprofit sustainability that its leaders must be attentive to? And, how can the community leaders, who verbalize their commitments in the most well-meaning of fashions, ensure that these organizations can continue their important roles in our communities for many years to come? Component #1 for Nonprofit Sustainability: The Strategic Plan A strategic plan is the road map for any business’s success. Without a plan that looks ahead 3 to 5 years, a nonprofit is at risk of stagnation, mission creep, and all sorts of other preventable issues. Strategic planning should be a top priority for any nonprofit leader and board member, as it sets the vision and charts a measurable path to accomplish organizational goals. Not only this, a good strategic plan puts accountability in place with clear, measurable objectives and outcomes that can be revisited at the end of each year to determine progress and impact. As a former nonprofit executive director and current, active board member for several organizations, I understand deeply the value of a strategic plan and the importance of keeping it at the forefront of the work. Anyone who gets involved with a nonprofit should read and become familiar with the organization’s strategic plan…and advocate for the creation of a plan if there isn’t one. Also, it’s always best practice to revisit the plan each year to check in on its implementation and make any tweaks that may be needed along the way. Component #2 for Nonprofit Sustainability: Adaptability The most successful and sustainable nonprofits are highly adaptable and attentive to fluctuations and changes in their broader ecosystems. These are the organizations that understood how to “pivot” long before the COVID-19 pandemic popularized the word and forced us all to figure it out (or go bust). Sustainable nonprofits tend to be headed up by fearless, information-driven leaders, people who pay attention to trends and resist the urge to maintain programs or activities strictly due to tradition. Some of these dynamic leaders seem to operate by instinct, but the most thoughtful of this group actually do a lot of homework behind the scenes. Analyzing data, having conversations with peers, staying informed about current or upcoming issues that could impact their organizations. For those who serve on the boards for these nonprofits, it’s imperative to not leave all the adapting to the executive director while board governance stagnates. True partnership between a board and its leadership team requires strong communication. This is the only way to be sure that shifts and pivots are well thought out, that consensus is built, and that implementation occurs organization-wide instead of in silos. Let’s be open to change and adaptation, and deliberate and thoughtful about its implementation! Component #3 for Nonprofit Sustainability: Planned Succession Most nonprofit leaders I know are pretty good at succession planning for their boards of directors. If their bylaws require board turnover via term limits, succession planning gets baked into how the organization functions. However, succession planning for staff and leadership is also super important for building a sustainable nonprofit. Not only should the leader be thinking about the skills and/or representation needed to maintain a healthy board, he/she should also be planning for their own eventual departure from the organization. For every nonprofit I have been involved with, whether as a board member, a staff member, or an executive director, I have operated under the philosophy of “leaving it better than I found it”. In my experience, this means taking the board development and succession planning process seriously, and it also means taking deliberate steps to improve the organization’s structure, operations, programs and staff to prepare for the day when I will no longer be involved. This type of succession planning may seem difficult, especially when there is so much to do on a day-to-day basis. But it’s so important to any nonprofit’s long-term health. We must always operate with a long-range vision for our organizations – whether we are board members or paid staff – and take incremental steps that move our organizations towards greater sustainability while we are involved. Component #4 for Nonprofit Sustainability: Diversified Funding The fourth and final component I’ll share related to nonprofit sustainability is also the most difficult to achieve: a diverse funding model. Building a funding model of any sort in the nonprofit sector is difficult enough but establishing funding diversity is extremely tough…and also extremely important for long-term organizational sustainability. Financial sustainability requires sufficient resources to pay for overhead, staff, and programming. It also requires a build-up of reserves for unforeseen challenges. This should be enough to cover at least 3 months of the operating budget. Lastly, financial sustainability requires
Five New Year’s Resolutions for the Nonprofit Leader
Happy 2023, friends in the nonprofit sector! If you’re anything like me…and pretty much everyone else on the planet…you’re working hard to step into the new year with intention. Whether you’ve resolved to lose a few pounds, or train for a marathon, or finally get your household budget together, please know that we’ve all got something we want to get handled in the new year. Personal goals and resolutions are a great way to start a new year, and it is also true that the personal tends to cross over into the professional for many of us. So, I’m here to offer a gentle reminder that our professional intentions are just as important as those personal resolutions. How we as nonprofit leaders show up at the start of the year can really make or break the type of year our organizations have. I’m talking about how well we care for ourselves, our teams, and our boards. Remember, friends: we can’t fulfill our missions and serve our clients unless the house is in order! Here’s five quick tips to make sure you’re starting the new year with intention: 1. Find (and Protect) Your Balance – of course this is the first thing on every professional’s to-do list, right?! Prioritizing work-life balance is of utmost importance, especially for those who work in the nonprofit sector where there are never enough resources or hours in the day to accomplish all that needs to be done. Just remember, friends, you can’t take care of anyone else unless you are taking care of yourself. One thing I’ve learned in my long nonprofit career is that almost everything can wait until I have had a good night’s sleep. Another thing is that there is no organizational priority that should cost me my health. Period. So, start now: find some boundaries and set them. Say no when no is what needs to be said. Go home at a reasonable hour. Let a few of those emails and to-do lists wait until you’ve had some sleep (and exercise). Just do it. You’ll be better off for it, and so will your productivity. 2. Ask for What You Need – leading a nonprofit organization is a calling. The people who answer this call are among the hardest working, kindest, and most generous people I’ve ever met. They are also the folks who will work themselves to the bone, taking responsibility for everything from managing organizational finances to running programs to scrubbing floors if that’s what needs to be done. But, the fact is that most nonprofit leaders do have resources that can be used – human resources, financial resources, technology resources – we just have to remember how to identify what we need and ask for it. Start the new year resisting the pull of the hero complex, friends! “Doing more with less”, while noble, is also the quickest way to burn out. Figure out where your time is best spent and where you need additional hands and/or expertise. Then, have a conversation with your board and ask for what you need. It sounds simple because, well, it is. 3. Support Your Team – setting your nonprofit up for a successful year should always include investing in your team’s professional development. Speak to your team members about their professional goals and what you can do to support them in the immediate term. Listen to their words and do your part to give them what they are asking for. Do you have a team member with significant growth potential? Maybe they’re ready to take on a new responsibility for the organization. Do you have someone who want to learn a new skill that will help them do their job better? Send them to a conference or hook them up with a mentor who can help them grow. Nobody wants to be stagnant, friends…not you, and certainly not your team. Invest in their growth and you will definitely see results! 4. Nurture Your Board – a new year is an excellent time to revitalize your relationships with your board members. After all, the board of directors is the most important group of volunteers any nonprofit organization has. So, it behooves the nonprofit leader to nurture these relationships to ensure that board members remain engaged and committed to the mission and their important work. Try offering an annual refresher course in board governance. Extend a board meeting by 30 minutes to allow a bit of camaraderie. Connect with each board member personally over coffee or lunch. Ask board members how they’re feeling about their service. Solicit their feedback and ideas. And, always thank them for all they do to support you and the organization. 5. Create (and Follow) Your Plan – in a perfect world, every nonprofit has a robust strategic plan that they follow to a tee. In the real world, most nonprofits are lucky if they have a simple annual roadmap to help focus their work for the year. Whatever form your plan takes, just make sure you have something that will help keep you focused for the whole year. A good annual plan will include at least one organizational and programmatic goal. It will also include a financial goal to help drive fundraising efforts to help accomplish the organizational and programmatic goals. And no plan is complete without the ability to evaluate success, so be sure yours includes responsible parties and measurable outcomes. It’s going to be another fantastic year of nonprofit excellence, friends! Hope these tips are helpful, and please be sure to share your tips in the comments for starting the new year with intention!
Let Your Policies Be Your Guide
Hey there, friends in the nonprofit sector! Today we’re going to talk a bit about your nonprofit board’s role in policy making, and I’ve got a few tips to offer about policies that every nonprofit organization should have. But first, a quick story from the field: A good friend of mine is the executive director of a regional nonprofit organization that works on issues of housing and housing affordability. One of her board members, a real estate agent, is constantly pitching fellow board members about purchasing investment properties or refinancing their homes with him. At her wits end, my friend asked for my advice on how to deal with this board member and encourage him to stop pestering his colleagues for business. I encouraged her to find her Conflict of Interest policy and slam it on the table with authority at her next board meeting. OK, I skipped the table slamming part, but the rest is true. This story illustrates two things in my mind: first, the significance of policies to the overall governance of a nonprofit organization; and second, the importance of board members understanding (and enforcing!) the policies that are in place. Who Needs Policies, Anyway? I can’t tell you how many nonprofit leaders I’ve met who have told me some version of the following: “I have spent so much time creating and growing my programs that I never stopped to think about policies and procedures.” If you share this sentiment, friends, just know that you are not alone. The fact is, nobody sets out to start or grow a nonprofit organization because they’re excited about governance policies. People who get involved in our sector tend to be doers, problem solvers, program implementors….so it’s no surprise when policies get forgotten in the midst of the more exciting (and often more challenging) work of growing programs and services. Whether we think they’re fun or not, governance policies are so important to the long-term sustainability of a nonprofit organization. Not only do they help lay the foundation for how the business will be governed and managed on a daily basis, but they also often serve as a pathway to help navigate tricky situations when they arise. Going back to the story I shared at the beginning of this post, if my friend didn’t have an existing Conflict of Interest policy at her fingertips, who knows how much longer her board member’s inappropriate behavior would have been tolerated. With the policy in hand, she was able to successfully initiate a conversation with her executive committee and the violating board member later resigned. I know…we don’t like losing board members, but some board members simply must go. And in these types of tricky, political situations, written policies keep everyone focused on what’s best for the organization. Nonprofit Governance: The Board’s Policy Role One of the most important roles for a nonprofit board is to oversee compliance and policy issues for their organizations. This includes ensuring that the organization’s governing documents are in order, that federal and state required filings are handled, that the mission and vision statements are clear, and that the appropriate policies are in place to help the Director guide the organization on a daily basis. It’s easier to keep board members focused on policy during an organization’s start-up phase when everything is being built. But, for those well-established nonprofits where policies have been in place for many years, it’s not uncommon for boards to get complacent about this duty…especially when there are more fun and interesting things to pay attention to, like the organization’s programs. Please don’t let your boards get too distracted by the fun stuff, friends. While it’s great for your board members to be curious and excited about the programmatic work, their actual job is governance, not programs. And the key to good governance is good policy. This policy duty, along with strategic planning and fiscal oversight, make up three governance must-haves for your board. Policies…But Which Policies? There are many policies that a nonprofit organization might need to govern itself effectively. Personnel policies, financial policies, operating policies, the list is long. But, for the sake of this post, I’ve pulled out a few of the top policies I look for when working with a nonprofit client: Board Member Duties Policy– documents in writing what is expected of a board member. This policy might address issues like meeting attendance requirements, giving expectations, and committee service, among other things. Conflict of interest Policy– specifies various circumstances that may be considered conflicts of interest and clearly spells out requirements for the disclosure and handling of these issues. This is one of the first policies an organization will create, as it is required even before nonprofit status is granted. Budget Policy– clarifies the budget creation and approval process and puts provisions in place regarding the circumstances under which board approval is required (or not) for spending. Gift Acceptance Policy– specifies the types of contributions that will be accepted by the organization and how. This policy may include gift options like cash, stocks, real estate, etc., and will spell out how these gifts will be handled, and the donor acknowledged. Investment Management Policy– if your organization has enough cash to warrant investment activity, there should be an investment management policy to guide it. This policy will include the types of investments that are acceptable (stocks, bonds, etc.), place limits on the percentage of the portfolio that can be invested in these vehicles, and include accountability measures for outside investment managers, if applicable. Confidentiality Policy– stipulates that board members and staff must maintain the confidentiality of any personal or sensitive information they acquire during their service to the organization. This policy should define what types of information is considered confidential and may also include a formal agreement to be signed by board and staff members. Record Retention Policy– specifies the types of records that will be maintained and for how long. This policy should be created with IRS guidance in
A Gentle Reminder About Governance…
I’ve taken too long of a break from writing, friends! Life and business sure have a way of taking over. I’m excited to be in the middle of launching a new education series for nonprofits with my friends over at the Academy for Grassroots Organizations. This new series will be called the Level Up Nonprofit Education Series. All workshops will be created and facilitated by yours truly, and while we’re targeting small and midsized nonprofits, there will surely be something for everyone. So, stay tuned and get ready for some excellent tips to take your nonprofit’s governance and management to the next level. Preparing these new workshops has forced me to take a fresh look at some of the fundamentals that I and many other nonprofit leaders take for granted. For example, I often notice that the words “governance” and “management” are used interchangeably. Yet, these terms couldn’t be more different in their meanings and applications. So today, I’d like to offer a quick reminder about governance and how it is distinct and separate from nonprofit management. OK, here goes: Governance is defined as: the act or process of governing or overseeing the control and direction of something1. Management is defined as: the judicious use of means to accomplish an end2. Taken at face value, governance and management are easy enough to distinguish. But on a day-to-day basis, when the nonprofit leader is focused on getting things done, often with limited resources, it’s really no surprise when lines get blurry. When it comes to the governance and management of a nonprofit organization, friends, it’s important that these two very different roles be treated as such. Equally importantly, we must ensure that the right people are involved in the roles that are most appropriate for them and encourage everyone to stay in their respective lanes. In short, management is for the executive director; governance is for the board. When we talk about governance in terms of “overseeing the direction of something”, the board of directors should be top of mind. It is the board’s role to create the organization’s vision, oversee the finances, and ensure that the business needs of the nonprofit are in order. Governance includes duties such as strategic & financial planning; policy setting; legal & fiscal oversight; and executive staff oversight. Governance is all about the high-level vision and oversight that a nonprofit needs to be successful. Governance is where the “what” of an organization gets defined and nurtured. It is NOT where programs get developed, nor is it where minor budget expenditures get approved or where volunteer management occurs. Governance is vision and oversight, and the rest – the “how”, the day-to-day, the implementation – is management. More on management another time. Even though board members shouldn’t be involved in the daily management of a nonprofit, their role is just as important to the organization’s overall success as the executive director, program manager, or volunteer. Governance can and should be active. What this means in practice is that board members should prepare for and actively participate in board meetings, understand the organization’s mission, pay attention to the finances, and serve as ambassadors in the broader community. There is a lot involved in nonprofit governance, friends…more than just showing up for the occasional meeting. Over the next several weeks, I’ll dive a little deeper into the main components of nonprofit governance. Check back for a quick refresher and I’ll be sure to share more information about the Level Up Nonprofit Education Series as it becomes available. Take it easy!
Your Board Members Have Got to Go (eventually)…
I was talking to a friend the other day about his involvement with a local nonprofit organization. He proudly noted that he has been on this organization’s board of directors for over 20 years, and was taken aback when my jaw dropped and I exclaimed, “WHY WOULD YOU EVER??” Once I recovered from my shock, I explained to my friend that board service is not intended to be a life sentence, and that he and the organization’s leadership are doing the nonprofit a disservice by allowing board members to stick around that long. I have heard several arguments in support of long-term or even permanent board service. One is that long-term board members are valuable because they bring institutional memory that can help inform current and future decisions. Another is that board member recruitment is so challenging that it’s easier to just hold on to the board members that are willing to stay involved. The most egregious reason I’ve heard is that it’s easier to manage a nonprofit board when there are fewer new personalities to learn and navigate. Seriously, friends. While some reasons may sound better than others, they’re all just excuses for bad nonprofit management behavior. Simple and plain. First of all, it floors me that anyone would want to serve on a nonprofit board for 20 years…heck, I’m amazed that I am able to get some of my board members to serve the six years that are allowed by my organization’s bylaws. Board service is a volunteer duty that should have a fixed start and end point. Board members should know what to expect, what is expected of them, and understand that they are not intended as permanent fixtures in the organization. Next, the nonprofit executive director who allows herself to slip into this sort of comfort zone with her board is failing at one of the most important leadership qualities there is: VISION. It is the executive director’s role to lead the nonprofit, and one of the most important aspects of this role is ensuring that the future of the organization is secure. The expertise your organization needed when it first started 5 or 10 years ago, for example, is not the same expertise it needs today. Nor should it be what you are looking for in a board member 5 or 10 years down the road. Nonprofits change, grow, and develop over their lifespan…and this requires a changing, growing and developing board to govern it. Finally, and most importantly: I have never seen a set of nonprofit bylaws that intentionally allow for permanent board service. Every set of nonprofit bylaws includes language about board member election, terms, and most also include language about term limits. The bylaws are the primary governing document for any nonprofit, and failing to govern the organization according to the provisions therein is a huge problem. Two quick asides: The truth is that most board members do not keep track of their terms and when their service is supposed to expire. They rightfully rely on the organization’s executive director (or whoever the leader is in an all-volunteer organization) to make sure this issue is managed correctly. So, if the leader fails to pay attention or doesn’t prioritize board management, board members can easily be stuck with the organization far longer than they ever intended. And the organization can be equally stuck with them. So friends, please take some time to review your bylaws and see what they say about board member terms. If you’re not following these provisions, figure out how to fix that. Depending on how bad the problem is, you may need to create a phased solution…but ignoring the issue of permanent board members will only create more problems in the future. Nobody wants a stagnant nonprofit organization. Keeping your nonprofit fresh and current involves more than just introducing a new program or initiative every now and then. Preventing stagnation starts with the organization’s governance, ie: the board of directors. New blood creates new ideas and new opportunities. Don’t get so tied to any of your existing board members that you can’t imagine the organization without them. That’s contrary to best practice and harmful to any organization. Good board management is good nonprofit management. Do this part right and everything else in your organization will be better for it. I promise.
Anecdotes are Cute, but They Don’t Prove Success
I will never forget the first face-to-face meeting I had with a program officer at a major national grantmaking foundation. It was 2002 and I had flown to New York City with my boss for a three-day foundation meeting spree. I was brand new to the nonprofit sector and the greenest of green in terms of fundraising. My then boss, while very charming, was also not the best fundraiser (or mentor). We both knew why he had invited me to join him, though neither of us said it out loud – I was there to be the brown employee face to help bring legitimacy to the organization’s racial justice work. At the time, I was all too happy to be the token if it meant a free trip to New York and the opportunity to get some real experience in major grant work. We can talk about racial bias and tokenism in the nonprofit sector another time…but today, friends, I’m here to talk with you about handling your program evaluation business so you can prove your success to your board and funders… So, there I was, young and green, sitting in front of the program officer and shaking like a leaf while she peppered me with questions about the work I was doing, helping people with prior felony convictions regain their voting rights. We talked about the conversations I was having with my state’s legislators, testimony I had given in legislative hearings, research I had conducted about what was happening on this issue in other parts of the country. But when it came to answering questions about the impact of my work, all I had was a few stories to tell. I shared stories of individual successes. I talked about the positive feedback I had received facilitating legislative testimony from people impacted by the criminal justice system. I spoke about letters I received from people who had registered or voted for the first time thanks to the work my organization was doing. And on and on like such with the stories. But what I failed to do was show any actual, scalable strategy or any actual, scalable impact. That’s not to say that what I was doing wasn’t making any impact. But if it was, I had not come prepared to prove it. All I had were stories. And at the end of the day, friends, stories are nothing more than anecdotes. Anecdotes are cute. Anecdotes pull heartstrings. Anecdotes can hit the emotions like nobody’s business. But they can never replace the value of cold hard facts when it comes to proving success and impact. If only I had known then what I know now, I would have arrived in New York prepared with all the data I needed to show the value and impact of my work. I would have had statewide voter data from before the passage of the voter restoration law we had advocated for; I would have had output numbers on how many community forums and voter registration drives we had hosted since the law’s passage; I would have had numeric and demographic information on those we had registered to vote; I would have had even more statewide voter data at 6 months post-passage, 12 months, 18 months, and so on, to demonstrate any positive trends resulting from our network of nonprofit partners who were doing similar work around the state. You get my point, friends. But instead, all I had was a bunch of cute stories. Too many nonprofit leaders rely too heavily on anecdotes when talking about their successes. But when it comes to actual data to back up the anecdotes and show real impact, things tend to get sparce. I cannot stress enough the importance of defining and measuring the impact of your programs and services. Real success must be backed up with data. Period. I have written before about the importance of program evaluation. Process evaluations are helpful for understanding a program’s efficiency, service delivery mechanisms, and overall cost-effectiveness. Process evaluations can help you make internal improvements to enhance the delivery of your services, reduce costs and enhance efficiency. But outcome evaluations are the key to proving your impact and success. Outcome evaluations are all about the numbers…and analyzing the numbers over time to track whether and how your work has created the change you intend it to. So, what sorts of data should the nonprofit leader track for a meaningful outcome evaluation? It really depends on the program, the target population, and the goals. Your programmatic goals will dictate what you should be tracking in order to prove your success. Take a close look at your goals and consider all of the different pieces of information you can collect and analyze over time to show the impact of your work. Please don’t misunderstand me, friends. Stories and anecdotes have their value and can play a significant positive role in your community outreach and fundraising. They can even come in handy when you’re talking to a program officer at a major grantmaking organization. Just remember to keep the anecdotes in their proper place – as examples of the great work you do, but never as proof of your success. Nothing can take the place of proper data collection and tracking when it comes to showing your organization’s actual impact. Period.
Leveraging Your Nonprofit’s Major Milestones for Fundraising
Most small and midsized nonprofit organizations run on shoestring budgets. Their primary fuel comes from the passion, care, and a sense of community service that seems innate in the people who start and work in nonprofit organizations. On a day-to-day basis, nonprofit leaders often wear so many hats that they sometimes forget to slow down and celebrate their successes. But friends, today I want to remind you of two important things: Yep. Here I go again with the fundraising. You know I can’t help myself. Nonprofits can’t operate, sustain, or thrive on passion alone. And anyone who has worked in this industry for any amount of time knows that funding doesn’t simply fall from the sky. Thus, fundraising should always be front of mind for nonprofit leaders and board members. And, I can think of few better fundraising opportunities than those that are associated with celebrating your organization’s successes! Did your nonprofit just hit a major programmatic milestone? For example, one organization I work with just reached the “1,000 clients served” goal that its board envisioned several years ago when they created a new community-based program. Is your organization looking ahead to a major “years in operation” milestone? For example, I’m currently assisting a nonprofit as they plan for their 10-year anniversary milestone later this year. Organizational milestones are subjective and can only be defined by your leadership team. Sure, time and/or program-based milestones are the most obvious, but a major achievement for your nonprofit could be something as ordinary as unveiling a new brand identity. Or celebrating the success of your 5-year strategic plan goals and/or the launch of your new 5-year strategic plan. You get my point, friends. If you can identify the milestone, you’ve got a reason to celebrate it! And what better way to celebrate than with a fundraising campaign?! Seriously! Please keep in mind, a fundraising campaign is so much more (and, trust me, way more impactful) than a fundraising event. You will rarely see me write about fundraising events because, well….they have proven time and time again to be the least efficient and effective fundraising method. But, executed well, a fundraising campaign to celebrate an organizational milestone can energize existing donors, attract new donors, and give your nonprofit a boost of funding and momentum to move towards its next milestone. A few tips to keep in mind as you consider celebrating your nonprofit’s next milestone with a fundraising campaign: Start planning and publicizing early. Obviously, this is easier to do when you’re planning for a time-based milestone. If you know that your organization is hitting its 20-year mark next year, you should start planning right away. It takes at least 6 months to plan and implement a successful milestone campaign. Planning a campaign for a service-based milestone should also start early. While it can be tricky, proper data tracking and forecasting can give the nonprofit leader a sense of when that 1,000th client will be served, for example, and planning can still begin with confidence. Create a goal and stay laser focused. The very first thing to consider when sitting down to plan a milestone celebration campaign is how much you want to raise. I know this seems like an obvious statement, but I’ve seen nonprofit leaders start out with a fuzzy goal or with no numeric goal at all. That is not a good look, friends. If you don’t have a firm goal in place from the beginning, everything else in terms of your planning and execution will struggle. Starting with the end goal in mind will inform everything from who you approach for sponsorships, to how much you ask individual donors to contribute, and how much you spend on getting the word out. You absolutely must begin with a firm goal. Brand your campaign and publicize, publicize, publicize! Is your organization turning 10 years old next year? How about a “$10,000 for Ten Years” campaign? Whatever the milestone, figure out a catchy theme to brand it with. Then, talk about it all the time, to everyone, everywhere. Social media, website, newsletters, public presentations, etc. Lead-up publicity is super important because you need people to know your campaign is coming before it ever begins. You also need to build a publicity plan to highlight the campaign’s progress and additional organizational success stories once you launch and throughout the duration of your campaign. Create your campaign messaging. Once you have a goal in mind and your catchy branding theme, it’s messaging time! Campaign messaging should include your case statement, success stories you’ve gathered along the way to your milestone, and most importantly, stories about where you’re heading in the future. Always remember to look forward more than you look back…people care much less about where you’ve been and will typically give more when you articulate where your organization is going in the future and why it matters. Target, launch, and ask. It’s always smart to spend some time identifying the key donor prospects you want to target during your campaign. Also consider creating a gift range table to give yourself a better picture of the various combinations of gifts and gift amounts that help you meet your goal. Failure to spend this sort of planning time for your campaign will surely result in willy-nilly fundraising and less than optimal results. Once you have all your target data in place, plan your launch and then get out there and start asking! In terms of the asking during your milestone campaign, please try to be as intentional and strategic as possible. Refer to your list of targets and utilize your gift range table to prioritize and solicit your highest level donor prospects. Be clear about who should be asked personally (in person or by phone) and who can be asked more indirectly (via email or mail, for example), and always remember to utilize your website and social media platforms to capture the many small gifts that will help reach your goal (and acquire new supporters in the process). Friends, this
Donors Behaving Badly?
I’ve written before about the importance of avoiding mission creep and other alignment issues when seeking funding for your nonprofit. I know, it is certainly easy to fall into the “any funding is good funding” trap, especially in small and often under-resourced nonprofit organizations. But, as I’ve noted, the pursuit of grant funding can definitely prove problematic if it is misaligned with the overall mission and direction of your organization. Mission alignment is key to ensuring that the funding your organization receives helps you accomplish what is in your strategic plan instead of taking you away from your actual goals. But there’s another type of funding related issue that can be even more detrimental than a misaligned grant award. So detrimental, in fact, that it can cause serious damage to an organization’s reputation or even land it in the headlines. And in the world of nonprofits, the marketing idiom there’s no such thing as bad publicity absolutely does not apply. So, what type of funding can be this problematic? The type that comes from donors who behave badly. I think you know what I mean…we have all seen the headlines: “XYZ Charity Under Immense Pressure to Return Tainted Millions” “ABC Nonprofit Accepted Donations from Criminals” “Corporation Attempts to Clear Bad Reputation through Charity” This issue can manifest itself in many different ways. It might be an individual who has been philanthropic for years but is later found to have engaged in criminal activity. It could also be a major corporate donor who finds itself the subject of a class action discrimination lawsuit. The potential problems are endless. But, it is up to you, the nonprofit leader, to ensure that your funding needs don’t overshadow the due diligence process that should always happen before accepting a major donation. Failing to do so can be costly, both in terms of financial and reputational damage. So, how do nonprofits find themselves in these predicaments? Through a combination of factors, really. It usually starts with leadership that gets a little too excited about a prospective major gift. It is hard not to get excited about an individual or corporate donor offering thousands or even millions to help your organization. And, when leadership is excited everyone gets excited, and it’s easy to miss issues if everyone is blinded by dollar signs. Along the way, there might be a red flag or two that get ignored or minimized. Someone fails to pause, reflect, and ask more questions about the donor. Perhaps no one thinks to take a closer look at the finances and/or history of the corporation, or maybe this donor has been throwing money around all over the place and folks are just pleased to finally be on their giving radar. So, the gift is negotiated, received, and celebrated. And everyone is happy, until a triggering event occurs — like a prominent philanthropist being charged and later convicted of criminal activity — and every organization that ever received charitable donations from this individual, including yours, is immediately under scrutiny. Ugh. It is always a smart practice for nonprofit leaders to conduct their own due diligence in advance of accepting major contributions. This is relevant for any major donor, not just the ones whose questionable reputations precede them. As a nonprofit leader, you want to have as full a picture as possible about the donor, the source of the funds being donated, and any legal or ethical issues that the donor may have dealt with in the past. One of the trickiest parts of the due diligence process is that there is a lot of gray area. What one nonprofit leader views as unethical another may view as capitalism at its finest. And, absent a criminal conviction, so much in these decisions is subjective, and every nonprofit leader has their own comfort level with risk. But the point of due diligence is to have as much information as possible to inform your decision about whether and how your organization should be engaged with the donor in question. I promise I’m not trying to freak you out, nonprofit leaders. My point is simply to remind you to slow down and do your homework before entering into agreements with major individual or corporate donors. Just as you should expect major donors to scrutinize your nonprofit before handing you a giant check, it is your duty to investigate the people and companies who show up with giant checks to give. If your nonprofit doesn’t already have a gift acceptance policy, I strongly encourage you to make it a priority to create one. This policy specifies the types of contributions your organization will accept, the grounds under which it will decline a gift, and can even spell out a process for handling ethical issues after a gift has already been accepted. I also recommend investing in one of the many prospect research software tools that can help with the due diligence process, in addition to identifying new prospective donors. Some organizations even go as far as creating standing ethics committees on their boards of directors that meet regularly to discuss and vet major donors who have been or may be approached for funding. Whatever path you take for your organization, just make sure you’ve got a plan and process in place to deal with donor ethics issues if they ever arise. A little bit of homework now can help your nonprofit avoid major ethical, reputational, and financial issues later.
The Ever-Elusive Unrestricted Dollar
One of the biggest sources of stress and uncertainty in the nonprofit sector is ensuring sufficient funding to cover operational costs. Operational costs, or “overhead”, are all of the costs associated with keeping the doors open and the lights on in an organization: staff, equipment, supplies, rent, etc. The vast majority of nonprofit funding is restricted funding. The term means exactly what it looks like: funding designated for a specific purpose. And in most cases, the purpose is programmatic, not overhead. Donors are keen on supporting the mission of the nonprofits they contribute to, but in most cases this translates into support for the most visible and/or public aspects of the organization that donors see or experience: the programs. What donors, grant funders, and corporate sponsors don’t see – and therefore don’t typically want to support – are all of the other things required to ensure an organization’s programs run smoothly. Yep! The overhead. Restricted funding is wonderful for enabling organizations to accomplish their activities and programs. It is necessary and important, and worth every ounce of energy that goes into raising it. However, restricted funding does absolutely nothing to help a nonprofit stay alive. So, you might ask…how is a nonprofit supposed to sustain its programs if it shuts down because it can’t sustain its operations?? Enter the ever-elusive unrestricted dollar. The absolute most important funding in every nonprofit budget, and the absolute most difficult funding to secure. Unrestricted funding (also referred to as operational funding) is what allows organizations to meet payroll, purchase equipment & supplies, and also build reserves for long-term sustainability. Studies have shown that less than 20% of all funding received by nonprofit organizations is unrestricted. What does this mean? This means that organizations that may be swimming in money for their programs & activities can simultaneously be starving to death because there’s insufficient money available to cover operational costs. The inexperienced nonprofit leader might make the mistake of thinking it’s ok to move money allocated for programs to other purposes. But, don’t even think about it…that would be both unethical and illegal according to nonprofit laws and regulations. So, what is a nonprofit leader to do? How can we manage sustainable organizations with so few unrestricted dollars coming in to support operations? Here’s a few tips from my own experience: Ask For It The first and foremost thing that nonprofit leaders can do to increase unrestricted funding is to ask for it. Don’t get so caught up in raising money for your programs that you neglect the need for operational support. Sure, it’s true that the majority of funders will be most interested in helping your programs thrive, but my rule of thumb is that you’ll never receive unrestricted funding if you never ask for it. So, consider broadening your approach to asking for funding. Whether you’re writing a grant, soliciting a company for sponsorship dollars, or talking to an individual donor prospect, always look for opportunities to bring operational support into the conversation. The fact is it takes a healthy organization to sustain healthy programs, so don’t be afraid to make this case to your funders. Require It For many small or mid-sized nonprofits, the concept of a “gift fee” might be foreign. A gift fee is the portion of a gift or grant that is assessed by a nonprofit to provide unrestricted funding for the organization’s overall operations. Gift fees (or assessments, as they are also referred to) have been around for years, and even though some contributors balk at the idea of “paying” to donate to a nonprofit, these assessments are standard practice in large nonprofits and should be far more common in small nonprofits than they are. Gift fees, which typically range between 3% and 10%, become reliable sources of unrestricted funding by forcing funders to participate in sustaining the organizations whose programs they want to support. But please, before you start carving off slices of grants and calling them gift fees, be sure you’ve established a formal Gift Acceptance Policy that details the types of gift that you will accept and the parameters under which acceptance will occur. Your gift fee should be clearly defined in a Gift Acceptance Policy, and then implemented with confidence and consistency. Budget and Spend Wisely & Transparently One of the primary misconceptions about unrestricted funding in the donor community is that nonprofits use it frivolously. And, I imagine this is true in some nonprofit organizations who may not have a great handle on their budgeting and spending processes. But, for the responsible nonprofit leader who wants to expand overall organizational support, there’s no better way to counteract misconceptions than by being transparent with the external community about how organizational funding is put to use. If your board is not already reviewing and approving an annual operating budget, start now. If you’re not already making financial information available to the public, either by posting your audits & tax returns on your website or by creating and distributing an annual report, make 2021 the year you start doing so. And, if you’re not sharing success stories about organizational improvements that have been made with unrestricted dollars, try it out. The moral of the story is this: YES, unrestricted dollars are the most elusive of all funding for a nonprofit to secure. YES, they are the hardest dollars to raise yet the most needed for overall organizational health and sustainability. YES, some donors and funders are adamantly opposed to anything but restricted support. All of these things are true. But, you know what else is true? You must put a focus on ensuring that unrestricted operational dollars are coming into your organization or simply put, your organization will not survive.
Have You Checked Your Conflict of Interest Policy Lately?
Friends….Can we please talk about conflicts of interest for a few minutes? This won’t take long. We’ve all seen stories in the news about some of the more egregious examples of conflicts of interest. Individuals caught enriching themselves at the expense of one or more organizations they’re involved with (self-dealing). Business leaders making sweet-heart contract deals with friends and family members (nepotism). People using information not available to the general public to profit personally (insider trading). The examples are everywhere, and it seems to happen all the time. It’s no surprise, then, that we can become desensitized to the very real damage that a conflict of interest can do…to an individual’s reputation, to a company’s bottom line, and to an organization’s ability to continue its mission in the community. But let’s not be complacent, friends. This is a serious issue for any business, but particularly for nonprofit organizations. Did you know the IRS can strip your nonprofit status for conflict of interest violations committed by board members? Yep. Sure can. The IRS defines a conflict of interest as follows: A conflict of interest occurs where individuals’ obligation to further the organization’s charitable purposes is at odds with their own financial interests. Pretty simple, right? Unfortunately, the reality is that despite this simple definition, conflicts of interest aren’t always easy to identify. That’s because business and personal interests and relationships are often complex and nuanced. In addition, nonprofit leaders rely on the honesty and ethics of board members to be up-front about disclosing real or potential conflicts before they cause problems. This usually happens, but sometimes it doesn’t. And when a conflict arises, seemingly out of nowhere, the primary tool that a nonprofit leader has to address it is the organization’s written conflict of interest policy. Yes, written policy. It is not enough to talk about conflicts of interest. Nonprofit organizations are required by federal law to have written conflict of interest policies that apply to their boards of directors. Best practice also dictates that these policies apply to staff as well. A written policy is the first line of defense in terms of preventive measures that can mitigate the damage that conflicts of interest can cause. In addition, ensuring that board and staff acknowledge their understanding of the policy, in writing, is equally important. What this typically looks like in practice is an annual conflict of interest disclosure form that gives board and staff members the opportunity to disclose, in writing, any real or potential conflicts of interest and acknowledge that they understand the organization’s policies related to the issue. The annual disclosure and acknowledgment process is an opportunity to remind everyone involved in your organization about the importance of ethics in nonprofit management. So friends, please resist the urge to gloss over the subject when it’s time to complete this annual process. Lead by example…if you as the organization’s leader act like this is an important issue, your board and staff are more likely to treat it as important as well. A related issue that I will write about another time is the utility of having a robust board recruitment process in which potential board members are vetted properly before being asked to join a board of directors. Proper vetting in advance can uncover potential conflicts before board service even begins and help prevent surprises down the road. We all know what conflicts of interest are. We all know how serious the consequences can be when they go undisclosed and unchecked. I’m just here to gently remind you: please don’t be complacent about the issue. Even the perception of a conflict can cause very real and lasting damage to your organization. Take care, friends!