It occurs to me in my work with social impact organizations that the struggles and challenges they face all come down to one key problem: a misalignment of mission, money and core competencies. For any organization (nonprofit or social business) three things must be aligned: 1) their mission, or reason for existing 2) their core competencies–what they can do better than anyone else in the world, and 3) their revenue engine–all the ways in which they sustain themselves financially. So that an organization, at equilibrium looks like this:
The mission is supported by the organization’s core competencies which both feed into how it generates money.
Jim Collins calls this the “Hedgehog Concept,” Mark Moore, a professor at the JFK School of Government at Harvard, calls it “The Strategic Triangle.” It’s such a simple and powerful concept, but it seems to be one that is often left on the bookshelf, a better theory than practice. But how transformative would it be if this concept were dusted off and applied to the challenges an organization faces? When one or two of these three elements are out of alignment, chaos can ensue. For example:
Mission is misaligned: An organization that can generate money and operates great programs, but can’t bring it all together in a coherent single purpose, this is otherwise known as “mission creep.”
Core competencies are misaligned: An organization that has a great, clear idea of what they want to do (mission) and can raise money around it, but can’t deliver. This is reminiscent of the dot com era when there were countless businesses with fabulous ideas that successfully raised VC and angel money, but didn’t really have a core competency or product to deliver and eventually went bust.
Revenue engine is misaligned: This final misalignment is probably the one nonprofits are most familiar with. An organization has a great mission and can produce great results, but they can’t find a way to make the organization financially sustainable. FORGE, a nonprofit working with African refugee camps, which I wrote about earlier this Fall, is a great example of this misalignment. Their mission and programs are solid, but they struggled with the right revenue engine (switching from individual fundraising to web-based fundraising without having the core competencies to make the switch). The end result was a $100K deficit.
And there are various other combinations of misalignment where two, or all three, areas are out of sync. But I think often it is the revenue piece that causes the most problems. Revenue misalignment is so difficult for nonprofit organizations to overcome because the sector is undercapitalized. It can seem impossible, at times, to nonprofit EDs, who tend to be focused on the program and mission they are trying to deliver, to integrate a sustainable revenue engine into their work. And indeed, many foundations and government funders will pay for programs and mission, but not a sustainable overall organization. The incentives do not reward an organization in alignment.
But there are solutions. If an organization can take a step back and look at all three elements and how they fit together they can start to make strides toward better integrating all three activities. The mission of an organization needs to be one that they can generate financial support around, but it also needs to be something that they can deliver on better than anyone else. And the financial support that an organization generates needs to complement and support, not detract from, the mission and core competencies. And they need to integrate what they can do really well with what their reason for existing and ways of raising money are. No longer can the fundraising staff be sequestered in a separate part of the building, only spoken to when there is a new program the organization decides it needs to raise money for. No longer can a board of directors say that fundraising is not their role. No longer can a strategic plan be created without a corresponding financial plan that is sustainable. All three voices must be at the table finding a way forward together.
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