Unfortunately, most of the 1.5 million nonprofits in the U.S. live a hard life and struggle just to keep their doors open. There is a proven, practical solution to this.
Yes, staff suffer from low pay, high stress, and burnout; technology is underutilized; and board members and other volunteers are disengaged, misaligned, and besieged with emails from fundraising staff to “please fill your table at the auction!” Even for larger organizations, programs are often under-resourced, pay isn’t competitive, and fundraising is onerous, expensive, and unpredictable.
The good news is that symptoms of distress like these are fixable. It’s not easy, but the pathway is known. But it is only for those truly committed to an unusually disciplined and focused type of board governance. Following the pathway described here, if the board can pull together as a team and take these steps, dramatic improvements in organizational performance and impact can occur in as few as 12 to 18 months. And yes, it takes some money to do this work, but we’ll get to that in a bit.
- Change your own mind and behaviors.
Start by taking ownership. Board members must first confront a hard truth: Your organization is functioning exactly as you design it. The first step on the path to a high-performing organization is to accept that you and the other board members are directly responsible for working with the CEO to create a plan of action — a world-class, investment-grade business plan — that works.
- Identify the one thing you do better, faster, or cheaper than anyone else.
Startups call these “value propositions” — the one thing they do better, faster, or cheaper than anyone else. For nonprofits, the effort to define a core value proposition is immensely valuable. “At what are we GREAT? What do we do that is SPECIAL and IMPORTANT and only WE can do?” If you can’t answer these questions, what does that say?
- Set a BHAG — a Big, Hairy, Audacious Goal.
The next step is to translate your traditional “mission, vision values” framework into a more actionable set of directives. What problem are we solving? Why are we the best to solve it? What does success look like? Successful answers are crisp, concise, and compelling, defined with numbers and a BHAG — a “Big, Hairy, Audacious Goal” focuses the entire organization on a highly aspirational level of social impact. To the cries of “What if we fail and look bad?” there should be more who answer “We will look worse if we don’t try.” There’s often a massive amount of personal and cultural alignment necessary to align boards and teams behind a BHAG, but all great business plans start with one.
Because of the many fears around “looking bad” or “failing,” far too many organizations set vague or tepid goals and fill plans with feel-good language and pretty pictures but with few specifics and little accountability. The resulting document, one that substitutes rhetoric for risk, will fail to excite and engage critically minded funders and partners.
- Articulate a credible strategy for accomplishing your BHAG.
Setting a BHAG also demands that the directors articulate a credible strategy for getting there. Now we need to stop for a moment and discuss a much abused word: strategy. What is your nonprofit’s strategy? In other words, how are you going to get to your goal? Every board member should be able to express the strategy of even a large and complex organization in a few few simple, clear sentences. Try this: Pass around post-it notes at your next board meeting and ask the other members to describe the strategy. In three minutes, you should get a set of short, clear bulleted statements that, together, describe in plain, concrete language how your organization plans to achieve its vision of success.
However varied the responses, it’s a good exercise. You are on your way to diagnosing restraining issues, or the root causes of organizational malaise or malfunction. Organizational performance challenges with fundraising, squishy data, low pay, slow decision making, stress, turnover, etc. are usually all presenting issues, meaning that these are the challenges and pain points which are relatively easy to see and identify. But try and fix a presenting issue without an understanding of what’s causing it, and you’ll quickly find yourself playing a game of organizational whack-a-mole. Start by focusing on what your organization does better than anyone else, what your brilliant future looks like vis a vis a BHAG, and what’s the strategy to get you there.
It’s okay if you don’t know what strategy really means. Most people don’t. Even experienced business leaders. You can read all about it in the Harvard Business Review: Your Strategic Plans Probably Aren’t Strategic or Even Plans, or, even better, Many Strategies Fail Because They Aren’t Actually Strategies. So, if you are going to own the design of your organization, take responsibility for aligning your board on goals and strategy. If you fail the post-it note test, and most will, you have the choice of making the disciplined decision to focus your board on goals and strategy, or you can play whack-a-mole.
- Task the chief executive with developing an actionable business plan.
There are still more peaks to scale. The ED/CEO must now translate these board-led conversations into an actionable business plan. He or she must break the goal down into phased milestones, describing what may be a long-term journey with measurable, timed segments that describe how the organization is going to change and adapt. Not only do we need annual or quarterly milestones, we need proof we are getting there — often in the form of key performance indicators (KPIs). Disciplined, focused organizations have no more than three to five of these KPIs. They have taken the time to measure the few supremely important things that provide valid performance feedback. Is our strategy working? Well, what do our KPIs tell us?
- Go after the money.
The mountain range continues. All this impact is going to require money. For nonprofits that are struggling to keep their doors open, it likely seems impossible to imagine a future where the organization is growing enough to deliver all the impact necessary to achieve a BHAG. And the responsibility for this lands again at the feet of the board members. Despite being tasked with ensuring their organization’s financial health, most nonprofit board members, even successful business leaders, don’t understand the basics of effective strategy and execution around capturing and sustaining the different types of revenue available to a nonprofit. There are charitable contributions from individuals, foundations, and corporations; earned income; grants from local, state or national public agencies; and impact capital (which needs its own article to describe, but it is primarily risk- and rate-adjusted debt) — that’s a lot.
Each of these distinct revenue domains demands a unique strategy and execution. Furthermore, within each domain, there are various sub-types that are also unique. Making matters even more difficult is the simple truth that very few positive examples of nonprofit revenue strategy exist. Outside of the major universities, hospitals, and a tiny handful of positive outliers, most nonprofits are stuck pursuing subsistence-level gifts and grants, grinding out onerous transactional fundraising events, and writing appeal letters with a probable response rate of less than 1 percent. But far better strategies exist, and the best nonprofits use them to achieve revenue gains of 25-50 percent annually, supporting well-compensated teams and making deep investments in technology, infrastructure, and quality assurance. (My next BoardSource article will unpack each of these revenue domains and how the very best nonprofit organizations pursue them.)
- Invest heavily in marketing.
It’s essential to attract key partners, funders, stakeholders, and those you propose to serve.
- Craft a detailed financial projection going out at least three years.
It should provide a line-item level view of where all the money will come from, where it will go, and how the organization will maintain adequate financial reserves.
- Develop a good organizational chart.
Project how staffing and volunteers will grow. It’s helpful to have just one fully built-out organizational chart with color coding to described how staff will grow from year to year.
- Brag about your board members.
Include a list of your board members with short bios that immediately give us confidence the organization is governed by people thoroughly experienced with the difficulty of overseeing high-performing teams.
- Boil it down to a very short document and presentation.
If you think this is all too difficult, there’s the remaining task of getting all of this into a very short document — no longer than 10 pages — with plenty of white space. Then, everything should be boiled down into a pitch-deck style presentation, reducing the organization’s goal, strategy, KPIs, and other pieces into bullet points that are easy to remember and repeat.
For reference, here’s a one-page outline of the entire architecture.
Is this so difficult that it’s impossible? Of course not. What makes this all possible is the good old 80/20 rule. Get your business plan to 80 percent completion, stamp it with the word “DRAFT” in all caps, and start sharing it with people who truly know what a good business plan looks like — those who have started, grown, and run successful organizations. Once you have a credible document that passes the smell test from an experienced investors and executives, you must map your stakeholder groups and share it with key representatives from each group, making sure you are fully aligned, transparent, and accountable with each, iterating and improving the plan as you go.
The good news for board members is that you “only” need to oversee this process and provide substantive, supportive feedback. It’s the executive team’s job to figure out the specifics, and its your job to give them the support and resources to climb all these mountains
How does this land with you? Are you excited by the challenge and eager to explore how this difficult-but-necessary work can dramatically increase the amount of good your organization is able to deliver to the world? Or does it all seem impossible? Because in the final analysis, whether you think you can or think you can’t, you are probably right.