nonprofit financial sustainability
In this month’s post in the on-going Financing Not Fundraising blog series I’m talking about creating a productive partnership between a nonprofit’s leader (the Executive Director or CEO) and a nonprofit’s chief revenue generator (typically the Development Director). If your nonprofit is going to start financing instead of fundraising, you must work to forge an effective Executive Director and Development Director relationship. If you are fully integrating money and mission, then your ED and DD should be planning, talking about, debating, and integrating their work on a daily basis. If that’s happening, the organization has a much better chance for long-term financial sustainability.
If you are new to the Financing Not Fundraising blog series, the series is about how nonprofits must break out of the FUNDRAISING (individual donor appeals, events, foundation grants) box and instead create a broader, more strategic approach to securing the overall FINANCING necessary to create social change. You can read the entire series here.
If a nonprofit’s Executive Director can fully embrace, support and promote the work of the Development Director, the organization can become much more financially sustainable. There are several clues that a productive partnership between a nonprofit’s Executive Director and Development Director exists:
- The Executive Director charges the Development Director with leading all revenue activities that the organization pursues (public, private and earned income) instead of limiting the Development Director’s role to just private income streams (individual, foundation, corporate).
- The Executive Director asks the Development Director to create an ambitious, comprehensive annual financing plan in conjunction with the organization’s overall strategic plan and then to monitor that plan to successful implementation.
- The Executive Director creates the organization’s revenue budget through an open and honest negotiation with the Development Director and based on the Development Director’s annual revenue plan, as opposed to simply telling the Development Director how much to raise.
- The Executive Director continually works to educate the entire board and staff about how critical money is to the work of the organization and how each member of the board and staff has a role to play, as opposed to leaving all revenue-generating efforts up to the Development Director.
- The Executive Director makes a constant and conscious effort to encourage the Program and Development Directors to work together, understand each other’s viewpoint, support each other’s goals and empathize with each other’s roadblocks. The Executive Director treats both positions, and both departments, as equally critical to the success of the organization.
- The Executive Director works closely with the board chair to make sure every board member is meeting their give/get requirement and doesn’t leave the Development Director to try to strong arm board members to contribute.
- The Executive Director encourages and helps secure funding for the Development Director’s requests for the additional infrastructure (donor database, staffing, materials, technology) required to deliver on the ambitious goals of their revenue plan.
- As with each member of their staff, the Executive Director evaluates the Development Director’s performance on an annual basis and sets performance goals for the Development Director for the coming year based on the overall strategic plan of the organization.
As the leader of a nonprofit organization it is up to the Executive Director to forge an effective partnership with their chief fundraiser. An ED that buries their head in the sand and leaves money up to their Development Director will eventually find their Development Director gone, their funding diminishing and their long-term financial outlook bleak.
If you want to learn more about applying the concepts of Financing Not Fundraising to your nonprofit, check out our Financing Not Fundraising Webinar Series, or download the 27-page Financing Not Fundraising e-book.
Photo Credit: USAJFKSWCS
There was a really interesting article in the Wall Street Journal recently about the New York City Opera that dramatically illustrates how critical a nonprofit’s strategic alignment of mission, money and competence is. I’ve written before that for a nonprofit to be truly effective and sustainable, three things must be aligned:
- Their mission, or reason for existing
- Their core competencies–what they do better than anyone else in the world, and
- Their revenue engine–all the ways in which they sustain themselves financially
So that an organization, in alignment, fully integrates and gives equal weight to those three elements. Those nonprofits not in alignment eventually suffer the consequences, which can sometimes be quite dire, as is the case with the New York City Opera (NYCO).
Once a shining star in New York City’s performing arts world, NYCO has fallen on financial hard times, requiring them to move out of their Lincoln Center home and dramatically scale back their performance calendar this year. The NYCO chorus and orchestra are so upset about the situation that they have held a protest. What a nightmare.
In the 68 years of its existence, NYCO’s mission statement has been clear, succinct and captivating: “The People’s Opera.” However, in recent years, the organization has struggled to align its core competencies and revenue engine around that compelling mission. In 2008 Gérard Mortier, the NYCO general manager and artistic director, canceled NYCO’s 2008-09 season while Lincoln Center was under construction. And the following season, after Mortier quit, NYCO scrapped their planned season and staged a selection of unpopular productions that flopped. The result is that NYCO has lost its audience, lost its revenue, and lost its way.
At the same time, NYCO’s competitor, the Metropolitan Opera, has transformed from a very conservative opera house into a media-savvy, artistically adventurous opera company that trains its own new singers instead of relying on NYCO to develop upcoming stars. All of this leaves the Wall Street Journal to ask, “New York already has one major opera company. Why does it need two? If [NYCO] can’t come up with an answer to that question, then New York City Opera is doomed—and deserves to be.”
Harsh, but true. NYCO is faced with a critical inflection point. They can either figure out how their mission should adapt to their core competencies (what they do better than the Metropolitan Opera) and develop an integrated revenue strategy around that mission and those core competencies, or they need to close up shop.
The reality is that NYCO isn’t alone in this dilemma. It is becoming increasingly difficult to survive these days. Growing competition from nonprofit and for-profit solutions, decreasing funding available, and the advent of new technological channels to reach customers, clients, and funders means that now more than ever nonprofits need to find alignment. They must constantly be analyzing whether their mission, money, and competencies are working in tandem to create an effective, sustainable organization that brings value to its community. Because to ignore alignment is to eventually wake up to the heart-wrenching decision NYCO now faces.
Photo Credit: NYCO website
February was another great month in the world of social innovation reading. As I mentioned last month, I’ve started a new monthly series on the Social Velocity blog highlighting my favorite 10 reads in the world of social innovation over the past month. You can read the January list here.
There are many more than 10 great reads out there, but these were the ones that really challenged me and got me thinking. I hope they do for you as well. As always, please add to the list in the comments. I’d love to hear what got you thinking this past month.
- Seedbeds for Social Innovation: The Echoing Green blog discusses a new Carnegie Mellon University report that details what it takes for a city to be a seedbed for social innovation.
- Nonprofits need to stop begging for scraps From the Chronicle of Philanthropy’s Money and Mission blog, authored by the Nonprofit Finance Fund, comes a great response to the Stanford Social Innovation Review article a couple of years ago about the nonprofit starvation cycle. This post discusses what nonprofits can do to break out of the cycle.
- A 10 Year Lesson in How Not To Spend $200 Million The Northwest Area Foundation in Minnesota has declared it’s ten year philanthropic experiment a failure. An interesting study in the less talked about side of innovation (failure) and transparency.
- Social Impact Bond Learning Group The Nonprofit Finance Fund has launched a learning and discussion group to explore the feasibility of social impact bonds (government bond funding for social impact organizations tied to outcomes) in the US. The UK has already experimented with similar kinds of bonds. If the US introduced these kinds of bonds it could be a revolutionary new tool for funding social innovation.
- Wired and Shrewd, Young Egyptians Guide Revolt A fascinating look from the New York Times into the structure and tactics of the small group of young innovators who brought Egypt’s ruling dictator to his knees. A real study in social innovation.
- To Collaborate or Compete? From New Philanthropy Capital comes a report studying when it makes sense for nonprofits to collaborate and when to compete. Such a framework could be a really helpful way to tackle to this burning question.
- Q&A With Middle East Entrepreneur Habib Haddad And another view of what happened in Egypt, a fascinating interview with a young entrepreneur who discusses the role of social media in the uprising.
- Stop Giving Donors What You Think They Want: Dan Pallotta challenges nonprofits to treat donors like adults and be upfront and honest with them.
- Rethinking the State of the Sector: The Deep Social Impact blog encourages the nonprofit and philanthropic sectors to focus on assets instead of challenges.
- Governmental “Crowding Out” in Philanthropy: Sean Stannard-Stockton argues that because of the arcane way nonprofit accounting is done, money from government sources might actually cripple the financial sustainability of a nonprofit.
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