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4 Things Every Nonprofit Needs

By Nell Edgington



If the leaders of a nonprofit organization are really serious about creating change, there are some things they must have in place. I spend my days talking with a variety of nonprofit organizations, and the problems that bring them to Social Velocity all fall into these broad categories:

  • An inability to raise enough money
  • A lack of strategic direction
  • An inability to “move the needle” on a social problem
  • A disconnected, disengaged, ineffective board of directors
  • Lack of sufficient organization infrastructure

In my mind, the solution is so simple. If every nonprofit had 4 key things in place, those problems would go away. Here’s what I think every nonprofit has to put in place:

1. A theory of change. Nonprofit organizations exist to meet some sort of social need or problem. Unlike for-profit organizations, nonprofits can’t simply use their financial bottom line as a barometer of success. Rather, a nonprofit must articulate what they exist to do. A theory of change, or logic model, allows a nonprofit to state (to internal board and staff, and to external funders, volunteers, supporters) how they take community resources and turn them into social change. Without a theory of change, a nonprofit cannot convince anyone to be part of their work, let alone measure whether that work is actually resulting in anything.

2. A strategic plan. And I don’t mean a “pretend” strategic plan where board and staff went through the motions to create something they could show to funders and put up on their walls. I mean a real strategic plan that is built on the logic model and guides the day-to-day work of the organization, is compelling and inspiring, and results in real solutions to social problems. A good strategic plan allows a nonprofit organization to understand and articulate their contribution to a larger community marketplace and then craft organization goals around that knowledge. Without a good strategic plan a nonprofit is just twisting in the wind, probably doing a lot of work, but to what end?

3. A financing plan. It is not enough to have big goals and  a plan for the future, a nonprofit must understand the price tag associated with their strategic plan and how they are going to bring enough money in the door to finance that plan. And a good financing plan analyzes all potential sources of money, lays out a clear road map for bringing that money in the door, and fully integrates the securing of money into the other work of the organization.

4. A pitch for capital. Capital is money to build the nonprofit organization infrastructure, as opposed to revenue which helps the nonprofit provide more services. Most nonprofits simply go out and raise revenue, but few go out and raise money to build a stronger, more effective and efficient organization. This kind of money is capacity capital. If more nonprofits put together a pitch to convince funders to invest in organization building we would start to see many more effective solutions to social problems grow. In the for-profit world we understand that you can’t just sell widgets. You need an infrastructure behind those widgets (staff, technology, systems, sales, etc), but in the nonprofit sector we insist on starving organizations and forcing them to spend every last dime on services, with no money for infrastructure. With a compelling pitch for capacity capital, that can change.

I don’t think I’m oversimplifying things. The nonprofits that will emerge from this recession stronger, more effective, and better able to really tackle and solve the many problems facing us are those organizations that have taken a step back and put in place the building blocks that will move them forward.

Photo Credit: 5mal5

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About the Author: Nell Edgington is President of Social Velocity (www.socialvelocity.net), a management consulting firm leading nonprofits to greater social impact and financial sustainability. Social Velocity helps nonprofits grow their programs, bring more money in the door, and use resources more effectively. For more information, check out Social Velocity consulting services and clients.


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6 Comments to 4 Things Every Nonprofit Needs

Kay Hodges
June 21, 2011

This was the most thought provoking article I’ve read about non-profit organization. The 4 items listed really hit home. Thanks for giving me a direction for my small non-profit.

Nell Edgington
June 22, 2011

Kay, I’m really glad to hear that this post was helpful. Good luck in your work, and let us know if we can provide you any help as you move forward. Thanks!

Willow Russell
June 22, 2011

Here here!! Thank you so much for this post, Nell. I totally agree that these are critical to nonprofit success. It’s why SVP funds nonprofit infrastructure and provides skilled volunteers to bolster nonprofit capacity in these areas and more.

We’d love to get more funders to do the same, and we’ve recently been wrestling with the question of who to target:

1) Should we focus our energy on communicating with other funders, emphasizing the importance of funding and supporting nonprofit infrastructure?

-OR-

2) Should we focus our energy on encouraging/helping our grantees make that “pitch for capital?”

I’d love your thoughts.

Thanks!

Nell Edgington
June 22, 2011

Willow,

I think you need to focus first on helping nonprofits put together a plan and a funding pitch for dollars to build their organizations. There are two reasons that more funders don’t invest in organization building. First, very few nonprofits come to them with a well-thought out, actionable, measurable plan for organization building. And second, funders don’t understand or even know about the distinction between buying services and building organizations in the nonprofit sector. To me, the latter (educating funders) is fairly easy once you have a compelling capacity building plan and pitch to put in front of them. You might be interested in our ongoing case study series on the blog where we profile how we are helping a small nonprofit build that plan and pitch for capacity capital. You can read the first post in the series here: http://www.socialvelocity.net/2011/05/a-case-study-in-raising-money-to-grow-on/.

If you are interested in talking about how we can help SVP Seattle prepare nonprofits for the capacity capital pitch let me know. Thanks for writing!

Willow Russell
June 22, 2011

Thanks Nell! Excellent advice. We’ve done a little of both, but have struggled to decide on an empahsis.

My colleague Lynn Coriano (who has often talked about the “build vs. buy” concept you alluded to above) recently collaborated with the Nonprofit Finance Fund and two local foundations to provide a nonprofit training to help our grantees assess their financial health, better understand the capital they need, and position themselves to tell that story from a finance perspective.

Your response gives us another push in that direction. Great to get your perspective.

Nell Edgington
June 22, 2011

Willow,

I’m a huge fan of the Nonprofit Finance Fund. George Overholser, who used to be with NFF, coined the “build vs. buy” concept, so they are real pioneers in this area. It sounds like you all are on the right track! Good luck!

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