Nonprofits that are businesslike with passion take road to success

Published in the October 13, 2006 edition of Columbus Business First

Recently, I spent time talking with successful nonprofit leaders about the issues that most challenge them. One that regularly crops up is the internal tension created by being businesslike in a nonprofit.

An approach to nonprofit management that seems obvious to the for-profit sector may be interpreted as a betrayal of mission in favor of profit by a nonprofit’s most passionate supporters. This tension reflects a gap in understanding of what it means for a nonprofit to be businesslike.

This gap is not bridged by introducing business jargon or the latest fad from the business management bookshelf. Instead, bridge this gap by helping your staff, board and donors to understand that successful fulfillment of mission requires disciplined action in these seven areas:

• Overcome the fear of growing up

Ruth McCambridge, the editor of Nonprofit Quarterly, noted in a recent e-newsletter that every nonprofit must face the painful transition from organizational adolescence to maturity.

“Informality that is the energy and soul of a young organization … is a very positive force at first, but eventually you have to either grow out of it or the organization remains dangerously adolescent – and in and out of trouble over its lifetime,” she wrote. 

For-profit organizations face a similar challenge and most fail to make the transition as evidenced by the high failure rate among small businesses.

The key to successful maturity in a nonprofit is to recognize the need for more structure and formality while preserving passion for the mission. Every successful nonprofit executive that I have talked with has found repeated face-to-face communication with board, staff and volunteers is essential to build the necessary confidence and trust that the movement toward formality also comes with a disciplined passion and commitment to the mission. 

• Manage your human resources

As an organization becomes larger, structure needs to replace intuition. Hiring needs to include reference checks and background checks. Departures need to include meaningful exit interviews. Continual professional development for all staff needs to be considered as essential and routine as building maintenance.

• Base all decision-making on a viable strategy

At all times a successful business knows where it is going. There should be a strategy for how you plan to fulfill your mission, and it should be a meaningful guide for all major financial and operational decisions.

There should be strategic planning at least every three years that involves your board, staff, donors, patrons and clients. Staff should develop goals and objectives afresh for each new year. Your annual budget should be built around strategy, goals and objectives so that you can demonstrate your budget links mission to money.

• Be objective and realistic about resources

A mature organization knows that, no matter how committed are its supporters, it is solely responsible for its success and survival. That responsibility means you know what resources you have available, you do the best you can with those resources and you don’t overextend yourself.

Without losing the passion to meet the need, a successful organization must be objective about what it can sustain. Even in the for-profit sector, growth based on unrealistic assumptions of revenue is a primary cause of failure.

• Replace instinct with measurement

A young organization can often thrive on seat-of-the-pants efforts and instinct, but a mature one has a size or complexity that makes that approach misleading and dangerous. While community need was obvious early on, you need to develop empirical measures of the community needs your mission is addressing: Who are you trying to help? What are their needs? How has the “who” or the “what” changed in the past year? You also need to be able to measure what you are doing and its impact. 

As you grow, you must be able to know bang for the buck for each of your activities if you are to manage your priorities and maintain your overall effectiveness.

• View the board as a catalyst for success

As a nonprofit grows and staff take on tasks that were once performed by board members, there is a tendency for the board to become an oversight or fundraising body and for board meetings to be viewed as a necessary evil and a burden on staff. 

A successful nonprofit chooses each board member for a specific skill and each board member has a purposeful task to perform between each board meeting. In successful nonprofits, board meetings are decision-focused and board members fill skill gaps that staff cannot fill.

• Regularly reinvest in your administrative infrastructure

A serious business develops its management, uses up-to-date information technology and devotes resources to improving its measurement capabilities. Unfortunately, there can be a perverse nonprofit pride in being tattered as a demonstration of commitment to mission, often unwittingly encouraged by executives who restrict their gifts to programs only or favor nonprofits with unreasonably low administrative expenses. 

A mature, businesslike nonprofit must be unyielding in its insistence that adequate resources be invested in its administrative infrastructure.

Businesslike organizations – for-profit and nonprofit alike – are disciplined and focused in these seven areas. A nonprofit with this discipline has the best of both worlds: It is businesslike with passion.

Allen J. Proctor was chief financial officer of Harvard University and is the author of “Linking Mission to Money Finance for Nonprofit Board Members.”  www.proctorconsulting.org

Copyright 2006. Reprinted with permission, Business First of Columbus Inc.