The struggles and challenges nonprofits face all come down to one key problem: a misalignment of mission, money and core competencies.
For any organization three things must be aligned: 1) their mission, or reason for existing 2) their core competencies–what they do better than anyone else in the world, and 3) their resource 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 a nonprofit faces? When one or two of these three elements are out of alignment, chaos can ensue.
Mission is misaligned: A nonprofit 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: A nonprofit 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.
Resource engine is misaligned: This final misalignment is probably the one nonprofits are most familiar with. A nonprofit 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 before, is a great example of this misalignment. Their mission and programs are solid, but they struggled with the right financial 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 often it is the financial piece that causes the most problems. Financial misalignment is so difficult for nonprofits to overcome because the sector is undercapitalized. It can seem impossible to nonprofit leaders, who tend to be focused on the program and mission they are trying to deliver, to connect a sustainable financial engine to 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:
- A nonprofit’s mission 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.
- The financial support a nonprofit generates needs to complement, not detract from, their mission and core competencies, and
- The nonprofit must integrate what they do really well with their mission and financial model.
You can no longer leave the fundraising staff alone and hope for the best. You can no longer let the board say fundraising is not their role. You can no longer create a strategic plan without a corresponding financial plan. Money, mission and competence must all be at the table finding a way forward together.
If you want to learn more about creating a sustainable financial engine for your nonprofit, download the Develop a Financial Model Tool Bundle.