Stop Begging For More: 3 Business Principles for NonProfit Organizations
And why the word “nonprofit” is the wrong thing to call a 501c3
My client was in a quagmire of uncertainty.
There wasn’t enough money.
The team was not making enough money. Under-performers filled many positions.
The two board members who were involved with this organization didn’t seem to care about the internal management of the program services. They were more interested in sexy results.
This is the why my client was approaching donors with a mindset of deep need and poverty. It was an Oliver Twist-esque ask of “Please sir, may I have some more?”
And donors weren’t interested.
My client had a desperate need for a mindset change and the application of fundamental principles of business. They are not along in this.
Legal IRS registrations aside (you still have to file your organization’s 501c3 according to the rules), nonprofit leaders need to lose the nonprofit mindset.
Don’t confuse “nonprofit” with a successful company making the world a better place, and is funded by donations.
That’s not a nonprofit.
A nonprofit organization is a company that runs out of money and goes out of business.
Your nonprofit should actually make a profit. If it’s not, your cause will float away in red ink. Nonprofit organizations should use a for-profit business operating system. Conversely, there is a lot for-profit businesses should learn from the nonprofit world. In my consulting work with Growability Consulting, I teach clients 12 fundamental principles that every organizational leader must know, whatever their organization’s IRS filing.
Here are three of the most essential.
Don’t be a “nonprofit” organization. Be a “for-purpose” organization.
Every company, no matter its status with the IRS, should be a company with purpose. Leaders lead with vision, bringing clarity on the unique value the organization is bringing into the world. And it’s not enough to simply “know your purpose.” The organization needs to decide based on purpose. Purpose is your guide rail. This makes the difference between good and great organization. Purpose statements that are essentially a word salad on a poster will not inspire or motivate anyone. Purpose that is clear and interesting can take the entire organization to undreamed of locations. Ask the following questions about your nonprofit:
- Does your organization have a clearly stated purpose your team and stakeholders know and understand? Do your people know why you exist?
- Does your organization’s vision paint a clear picture of the future that could exist if you fulfill your purpose? Can you quantify your vision?
- Does your organization have a mission statement that clearly articulates how you will achieve your vision and serve your purpose?
- Make a list of every program activity your organization executes on a weekly or monthly basis. Does every activity align with your stated purpose, vision, and mission?
Measure everything, but count what matters.
Having worked in a nonprofit world for most of my career, I know it’s all about metrics. I was employed by a program-heavy nonprofit. They had pages of metrics every month — books of metrics at the end of the year. These were apart from fundraising and financial metrics.
Metrics are good.
But what we most need to measure are outcomes.
Nonprofit leaders should not deceive themselves into thinking they’re succeeding because they are measuring everything other than desired outcomes.
I work with a lot of churches. One of the obvious measurements for a church is attendance. Butts in the chairs every Sunday. But, for most churches, the bigger goal has to do with changed-lives and discipleship. That’s a lot tougher to figure out.
However, it’s essential to figure that out because that’s what really matters for their organization.
Ask the following questions for your nonprofit:
- What really matters in your organization? What defines success?
- What are you measuring now? Are your numbers inputs, outputs, or outcomes?
- What would you like to measure but think you can’t? What will it take to get that measurement?
Determine your customer and define your stakeholders
Yes, nonprofits have customers.
And they may not be who you think they are.
Nonprofit organizations have a unique place in the community, with more complexity and nuance than the simple exchange of goods and services for money. Thus, nonprofit leaders must be clear on the on the following relationships as a minimum:
- The Board Are they active? Are they overactive? Do they provide the right amount of accountability?
- Program Beneficiaries: What expertise are you bringing to the world and how is that making people’s lives better? Who are the beneficiaries of your expertise?
- Donors: What specific value do you bring to your donor base? What does giving to your organization do for the donor? Why do people give to your organization? Which kind of donor is most necessary for you to continue? (Foundations, individuals, community organizations, government?)
- Vendors/Partners: Who are the other people/organizations necessary for you to accomplish your vision? Now, which group’s behavior is most critical for you to achieve your outcomes?
That’s your customer.
Only one of these groups can be your customer, and it’s critical to know exactly who these customers are. Nonprofit leaders must know the market. Lack of market awareness is the reason many nonprofits fail.
For most nonprofits, your customers are your donors.
Every nonprofit leader should do the following with their team:
- Define your stakeholders.
- Be clear on your organizational value proposition.
- Determine which stakeholder is your customer.
- Create customer personas.
- Determine the competitive advantage you provide for each persona.
Nonprofit organizations can thrive when they implement basic principles in the business world. Nonprofit leaders must be strategic about what they plan and what they measure. There is no reason to have a mindset of poverty and want. No more begging for more. Oliver Twist can have a full stomach from now on. (I’m happy to report that with implementing these and other business-oriented strategies, my client’s organization is now stronger and healthier than ever!) Keep your sights on target and be:
- Guided by purpose.
- Measure what counts.
- Know their customers and the market they serve. Business smarts and strategy make for long-term nonprofit success.
If you are a nonprofit leader and want to know more about the Growability® fundamentals for organizational growth, reach out today to discover your options for coaching and training.