Why Too Many Nonprofits Are On The Brink Of Failure

by Jesica D’Avanza

–And How to Avoid Becoming the Next One

Close your eyes. Imagine a ship out at sea, its hull pierced with a million tiny holes. Each hole is covered by a thin Band-Aid in a desperate attempt to stay afloat. One more crashing wave or gust of wind is all it will take to sink the ship.

Now open your eyes. That ship is what far too many nonprofit organizations look like today. With more than 1.5 million nonprofits[i] in the U.S. raising $390 million annually[ii] and employing at least one in 10 workers,[iii] it’s easy to assume that big missions mean big business. But spend an hour behind closed doors at many nonprofits, and you will find countless charities ready to deploy the life rafts.

For far too long, nonprofits have been using a Band-Aid approach to keep rough waters at bay, failing to create systemic solutions that will secure their strong future.

As the world has drastically changed during the past decade — from a donor evolution to a technological and philanthropic revolution — nonprofits have been slow to respond. Today, many charitable organizations make business decisions based on short-term cost-cutting measures, costing them far more in relevance, relationships, reputation, and revenue in the long run.

So how do we change the cycle and turn the ship around? Here are six major mistakes nonprofits are making and how to avoid them.

1. Fear Of Focus

Many organizations bring together every possible stakeholder — each with different agendas and pet projects — to cobble together a 30-page plan that reflects everything it does and could possibly ever do.

As mission-based organizations, nonprofits are wired to help as many people in as many places as possible. While our world needs this commitment more than ever, it’s a harmful business practice if not exercised with discipline. From the country’s largest national nonprofits to single community-based charities, we see one after the next crafting business plans that are neither actionable nor achievable. Many organizations bring together every possible stakeholder — each with different agendas and pet projects — to cobble together a 30-page plan that reflects everything it does and could possibly ever do. In a well-meaning effort to please everyone, these so-called strategic plans quickly turn into consensus-driven road maps with too many paths and side streets to travel. Subsequently, we sprinkle already limited resources across too many areas, resulting in incremental progress rather than transformational change.

To ensure your nonprofit positions itself for lasting business success and mission impact, first think about your ultimate vision and the reason you exist. Consider your organizational strengths — with limited resources, what do you do with the greatest expertise and effectiveness? Where do your core abilities intersect with your audiences’ deepest needs? This is where your conversation should begin. Appoint a strategist or hire a consultant to oversee and facilitate the process to ensure objectivity and accountability, while convening a small, cross-functional team to champion the process and recommendations.

Set concrete, measurable objectives, and have the courage to prioritize game-changers and de-prioritize or delete activities that don’t drive you closer to these outcomes.

Before jumping into everything you do, assess the marketplace to consider what is happening in the larger landscape and where there is an opportunity for differentiation, collaboration and/or cultivation. Gather stakeholder feedback through an interview process and/or quantitative research to inform organizational direction — giving important audiences a voice rather than affording everyone a vote. Set concrete, measurable objectives, and have the courage to prioritize game-changers and de-prioritize or delete activities that don’t drive you closer to these outcomes. Be sure to create a clear measurement dashboard that is visible to all employees, so everyone understands where they fit, can align performance with your larger purpose and optimize efforts based on progress.

2. Leading Without Leadership

These days, we are hard-pressed to find a nonprofit organization that isn’t considering, in the middle of or just completing a leadership transition. Continual changes within the C-suite along with ongoing board composition challenges drain money and motivation. There are two challenges we see most often when it comes to nonprofit leadership.

First, there are simply too many executive staff leaders who are not leading. Most notably, many chief executives are paralyzed by making decisions.

Employees, constituents and donors want a leader to drive the ship and chart a clear course.

Without a pragmatic business plan or a firm commitment to stick to it, we become seasick with uncertainty and/or ever-changing direction.

Second, one of the biggest challenges facing nonprofits today is their boards of directors. We recently worked with an organization whose board had only one woman, lacked any members of color and had no one under the age of 50. However, its constituents were primarily youth, and its target donors included moms and millennials. Half the board didn’t have social media accounts of any kind, yet, they were tasked with approving investments in robust digital strategies. This group of people — and many more like them — are responsible for making major decisions about the future of the organization, its strategic direction, it’s budget, and most importantly, the fate of the people it was created to serve. Anyone see the problem here?

Leaders are hired (or appointed in voluntary leadership roles) to lead. To guide teams, to open doors, to put the interests of the organization above their own and to help solve the greatest challenges facing our world. They must reflect the needs of those we serve, demand diversity in both people and perspectives, act with authenticity, promote transparency, foster collaboration and pave a clear path to realizing our mission. There is a lot at stake, so we must start hiring leaders who act like it. We must consider their connection to the cause, the depth at which they can engage and their ability to understand, connect with and represent the organization, its issues, and its customers.

3. Reaching Out Before Reinforcing Within

When resources are limited, investing in internal audiences when there is so much to do for external ones can feel counterintuitive. But it is one of the most important investments we can make. Our employees are our greatest advocates, ambassadors, and assets. They are our front-line to fundraising, relationship-building and community marketing. Without their full commitment, buy-in, and ability to articulate our story, we’re already at odds with achieving our objectives.

Having a clear plan for internal communications, performance management, recognition and engagement is a non-negotiable and can no longer be shifted down the priority list.

Internal communications and employee engagement are paramount to success. We must ensure our people understand what we do, why we do it and where they fit in making that possible. How can we adjust our onboarding to ensure it sets employees up for success early? How can we reinforce that year-round? What are we doing to retain top talent? We’ve worked with several community-based nonprofits whose turnover rates are 100 percent after 18 months of employment. The costs, productivity, knowledge, and relationships lost prevent organizations from investing more in their missions. Additionally, with Millennials representing 25 percent of the workforce, we must engage our people in the meaningful ways they crave by providing transparent, frequent communications, platforms for dialogue, forums for collaboration and meaningful opportunities to participate in the life of the organization to give back. Having a clear plan for internal communications, performance management, recognition, and engagement is a non-negotiable and can no longer be shifted down the priority list.

4. Too Late To Innovate

It has never been more critical as a nonprofit organization to stay abreast of trends, be part of the ongoing dialogue, understand audience needs and insights and optimize and innovate as a regular part of your business model.

Everything about our lives and our world — including the way we communicate and fundraise — is completely different today than it was 10 years ago. As the world has evolved around us, many nonprofits have been reactive, rather than proactive, in modernizing their portfolios and philosophies. Take legacy charities that have depended on traditional fundraising strategies for years that are either fractured by an explosion of micro-charities or simply no longer relevant — the United Way and workplace giving, the Muscular Dystrophy Association and its 24-hour Jerry Lewis telethon, the American Cancer Society Relay For Life walk. Some of these strategies no longer exist, while others are scrambling to reinvent themselves. Today, donors can fundraise for anything they want, anytime they want. They want control, they want focus, they want to know their dollars will have a tangible impact and they want a say in all of it. It has never been more critical as a nonprofit organization to stay abreast of trends, be part of the ongoing dialogue, understand audience needs and insights and optimize and innovate as a regular part of your business model.

5. Actions Don’t Match Words

At the heart of every organization is why it exists and what it stands for — our brand promise. This promise should extend across everything we do, from how we communicate to the way we make decisions and the programs and services we offer. With a growing number of nonprofits and a shrinking pot of donations, fierce competition puts our commitment to who we are and what we believe to the test. Recently, we’ve witnessed an organization dedicated to helping students reach their full potential cut critical services designed to support them. We’ve seen a health nonprofit committed to improving patient quality of life remove patients completely from their decision-making process. We’ve seen a national nonprofit whose livelihood and mission depends on community-based staff cut hundreds of jobs and pile new responsibilities on already drowning employees. We’ve seen organization after organization cut and snip, nip and tuck, focusing solely on the short-term challenge without thinking about that big-picture promise.

Have we lost sight of who we serve and why we started? Are the decisions we’re making being filtered through that lens? Can we stand in front of our community and say with confidence we are living our brand promise?

Ask yourself this as you face tough decisions about resources, staffing, and programs. While we must find the right balance between income and implementation (no easy feat!), the promise we’ve made to the audiences we serve must be more than lip service.

6. Believing “The Brand” Belongs To The Communicators

Speaking of brand promises, the final mistake that has become all too common is organizations looking to brand strategy, communications, and marketing to serve as a substitute for a missing or weak business plan. If only we had a better marketing campaign. If only our messaging was stronger. If only we had a better social media strategy. THEN, we would be successful. It’s true, all these things are important for creating a clear and compelling story that will move audiences to action. But, communications alone will not save you. Without a strong vision and business plan to back it up, clever campaigns will not empty wallets. Additionally, communications and PR staff do not own communications or your brand. Every person — from the CEO to the janitor to the passionate employee in the IT department — owns your brand. Every one of us is responsible for understanding and conveying our story. There is no such thing as lines of demarcation for who is responsible for brand metrics, reputation scores, and relevance. Marketing excellence is something we all own. Once we accept that, we can work together to strengthen our foundation and create a springboard to success.

Jesica D’Avanza is an award-winning communications leader who works at the intersection of brand and business strategy to enhance our lives and improve our world. As owner and chief strategy officer at Round Square, she applies nearly two decades of experience in brand and communications strategy to transform nonprofits, purpose-driven organizations and corporate responsibility platforms for greater relevance, resonance and results. Her independent consultancy supports clients across health care, wellness, education, environmental and nonprofit arenas.  Jesica has served in a variety of VP-level roles, overseeing communications strategy and brand revitalizations for some of America’s largest nonprofit health organizations. She holds undergraduate and graduate degrees from Florida State University and her Accreditation in Public Relations (APR). For a free consultation and to speak with Jesica about how she can help your organization, contact her at [email protected]. For more tips and to join the conversation, follow Round Square on Facebook, Twitter and Instagram via @RoundSquareUSA.

    • [i] National Center for Charitable Statistics, 2015
    • [ii] Giving USA, 2017
    • [iii] Center for Civil Society Studies, Johns Hopkins University, 2018

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