What’s Next for Nonprofits?

Change is inevitable, so be nimble, look ahead

Published in the October 2, 2009 edition of Columbus Business First

This decade has been difficult for nonprofits.  Developments in philanthropy and government funding that began years ago have reached fruition.  Cultural shifts have occurred so often that we now have a Gen X alphabet soup of generational labels.  And then there’s the lousy economy.

While dealing with immediate pressures must always take priority, it is useful to look ahead at three challenges that will confront nonprofits in the coming years.

Letting Go

The successful nonprofit of the next decade will need to learn to operate in a permanent state of transition.  This will require a new definition of resiliency:  Learning to let go of donors, grantors, and services when they no longer support the priorities of the nonprofit’s mission. 

Donors and grantors increasingly view nonprofits as contractors to carry out programs they define.  Their support either is short-term, project oriented or comes with conditions that may create a harmful financial burden on the nonprofit.  Whether the donor/grantor chooses to move on because of the former or the nonprofit ends the relationship because of the latter, the resilient nonprofit must plan for a constant churning of its donors and grantors. 

Long-term relationships will be more scarce and the nonprofit must become comfortable with proactive marketing for replacement donors and grantors.

The nonprofit must create its own path to financial resiliency.  The past two decades have seen three recessions and some sharp investment downturns.  Nonprofits will need to value cash reserves more than endowments.  They must educate donors to view large reserves as signs of good management rather than as indications that fundraising is unnecessary.  And they must educate their own fundraisers that there is a hierarchy in the value of a gift:  A dollar of unrestricted cash is worth more than a dollar of restricted cash and a lot more than an endowment gift.

When all else fails, nonprofits will need to come to terms with having an annual review of which services they provide.  A sharp focus on current community needs with well-articulated service priorities must be the crucible for regularly identifying which services to keep and end.  Flexibility will distinguish survival from failure.  Nonprofits that continually adapt their services will best sustain their core missions.

Make Way for the Next Generation

A few years back the Annie E. Casey Foundation found that 65 percent of the nonprofit leaders it surveyed planned to leave their jobs in the next three years.  Moreover, 84 percent were older than 40. 

Nonprofits will need to prepare for a substantial change in leadership.  They must actively groom today’s young professionals to enter both the executive suite and the boardroom.  Today’s young professionals will become tomorrow’s primary donor pool.  Grooming a sense of volunteerism among young professionals that will evolve into personal philanthropy must become a significant recruitment focus for nonprofits.

The size and significance of the graying baby boom generation places particular urgency on integrating young professionals into nonprofit leadership.  Not only must the mission and work environment appeal to them, the method of outreach and communication must adapt to their preferences.  Many nonprofits are already integrating social networking into their regular communications. 

A web site is now essential for every nonprofit.  Web sites must be easy to navigate, always up to date, quick to be found by search engines, and fact-focused.  Financial statements, names and titles of staff and trustees, annual reports, program descriptions, and easy links for further information about volunteering, serving on boards, seeking employment, participating in activities – all must use the web site as the first and primary point of contact.

Life in a Fishbowl

Nonprofits have become an essential part of the service delivery system in the United States, particularly in healthcare, social services, and education.  That prominence brings increased scrutiny, replacing the quiet obscurity to which many nonprofits have become accustomed. 

Excessive executive compensation and tax exemption for over-sized endowments are already in Congressional sights.  Publicity and skeptical inquiries will become more common.  Nonprofits must adapt their culture and skills to make openness an advantage rather than an annoyance.  Openness, transparency, and persuasive communication will become synonymous with nonprofit success.

Transparency will also bring pervasive oversight.  Already the familiar IRS Form 990 has evolved from an obscure tax form to the most accessible disclosure about any nonprofit in the United States.  Readily available on the Guidestar Web site to any donor or employee, the newly revised Form 990 will become a formidable grass roots enforcement tool for effective governance, ethical conduct, responsible management, and mission focus. 

How well nonprofits adapt to these trends may well determine whether they thrive or struggle.  It is essential that we support the nonprofit leaders who are willing to take the risks that will accompany adapting to these changes. 

Allen J. Proctor was formerly chief financial officer of Harvard University and is the author of Linking Mission to Money® Finance for Nonprofit Board Members. Subscribe to his free newsletter at www.proctorconsulting.org.

Copyright 2009. Reprinted with permission, Business First of Columbus Inc.