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 a solid mix of funding sources so that the organization is not over-reliant on any single source. If your nonprofit is receiving more than 40% of its funding from any single funding stream (grants, corporations, individuals, events, etc.), it is not fiscally sustainable. Such overreliance can swiftly take a turn for the worse, especially in terms of grants and government contracts, with changes in funder administrations and priorities.
The primary role of the nonprofit leader is fundraising. Not just any kind of fundraising…the kind of fundraising that limits risky overreliance and nurtures a varied funding model. Board members always have an active role to play in this area, as well. Not only should board members be making their own financial contributions, but they should also be advocating for additional funding and deliberately facilitating connections for this purpose. As board members, we must understand the words “fiduciary duty” and act accordingly to help strengthen our organizations for the long-term.
Sustainability in the nonprofit sector is something that we all most certainly want. It’s good for the organizations themselves, and better for the communities they serve. It is honorable for us to recognize the important role these organizations play in uplifting our communities. It is even more honorable to take an active role in the nonprofits we get involved in, to ensure that we are doing our part to create the sustainable organizations our communities deserve.