Photo by Khyta on Unsplash
By: Steve Zimmerman
Uncertainty: Noun. The state of having doubt; lack of certain knowledge or not being clearly identified or defined.
Uncertainty is perhaps the defining theme as nonprofit leaders prepare for the upcoming year. What will the new administration’s policies mean for the people our organization serves? How will shifting economic and tax policies affect charitable contributions? What do changing government and foundation funding priorities mean for revenue streams? Will the demand for services continue to grow and how will organizations meet these needs?
From economic fluctuations and global conflicts to evolving social norms and climate crisis, nonprofit organizations find themselves navigating a maze of unpredictability. It is easy to feel overwhelmed, distracted and caught up moving from one urgent task to the next.
To navigate uncertainty, leadership can focus on what is within their control. Shifting attention from macro-level challenges facing our world to an organization’s immediate community enables leadership to set strategies that build resilience. In this moment nonprofit leaders should focus on the following:
- Understand constituent needs in relation to organizational impact
- Assess and communicate financial health
- Support and develop staff
- Identify the organization’s distinct advantages; and
- Embrace adaptability and relationships.
Understand constituent needs in relation to an organization’s impact
The core of every nonprofit organization is its impact. What specific change or benefit does the organization aim to create? While this question may seem straightforward, understanding the feasibility of those goals and the necessary activities to achieve meaningful impact requires a deep understanding of constituents’ needs.
Even if our board and staff reflect the communities served, it’s essential to foster two-way communication and develop systems for engaging directly with constituents. This helps organizations more clearly define their services and programs. Without such engagement, leadership risks designing ineffective strategies. When constituents are involved, their voices are heard, and their needs are met. The organization’s services are more likely to be utilized. This also provides valuable insights to share with potential funders.
Assess and communicate financial health
Nowhere is uncertainty more evident than in financial health. The ending of ARPA funding, shifting foundation priorities, increasing contributions to donor advised funds and fluctuating individual giving have left many organizations facing budget shortfalls. Rather than keeping financial knowledge siloed within a small group of “finance” people, leadership should invest in building financial knowledge across the entire organization. Three key questions to ask are:
- How much cash do we have on hand? Put another way, what are our organization’s reserves? Calculating this will give board and staff a clearer picture of the organization’s financial safety. This will help them understand the level of urgency in decision making.
(Net Assets Without Donor Restriction-Fixed Assets)
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Typical Months Expenses
- How are our programs performing financially? Nonprofits sometimes feel uneasy or guilty about the true cost of achieving impact, but solving complex social issues requires adequate resources. Understanding the fully allocated cost and revenue of each program, or its profitability, will show where the gaps are and help focus fundraising efforts.
- How is our revenue trending? Every revenue stream – whether philanthropic or earned – requires its own set of relationships, skills and infrastructure. A well-rounded revenue strategy starts with understanding where the organization has been successful. Reviewing revenue streams over the past 5 years will highlight shifts post-COVID and uncover where strengths may lie.
Support and develop staff
Nonprofit organizations are at their heart a people-driven business, and personnel costs often represent the largest expense. With a changing labor market, nonprofits have seen high turnover and open positions over the last several years. Organizations have responded by raising wages, finding creative ways to make positions more attractive and building training and development programs.
Labor challenges are likely to persist. To understand the impact on your organization, analyze turnover over the last several years and conduct a satisfaction survey of current staff. This data will inform the next steps in staff retention and development. Thriving organizations are proactive in building an inclusive culture and intentionally developing their team.
At the board level, a personnel committee or a standing agenda item to discuss personnel support and development will ensure the organization has the skills and capacities to achieve impact.
Identify the organization’s distinct advantages
As nonprofit leaders reflect on their communities, they should ask “What is the value our organization brings to the community that isn’t already being offered?”. While some can look at this question through a competitive lens, we also see it through a collaborative lens. Understanding the organization’s distinct advantages as well as what other offerings exist in the community opens the door to greater collaborations and partnerships that enhance impact.
In strategic planning, more emphasis tends to be placed on “planning”. However, in times of uncertainty, leaders must focus on being strategic. Strategy is about positioning an organization to deliver exceptional impact in a financially sustainable manner. This requires an in-depth understanding of the organization’s desired impact, the needs of those served and the community, and how to align revenue strategies and human resources to achieve goals.
Answering the first three questions around impact, finances and staff provides a framework for leadership to understand the organization’s strengths and weaknesses and outline priorities to strengthen the organization’s position in the community.
Embrace adaptability and relationships
Marketing guru Seth Godin wrote, “A strategy . . comes with the motto: ‘This might not work.’ Strategy is a philosophy of becoming, a chance to create the conditions to enable the change we seek to make in the world.” Given the uncertainty organizations face today, prescriptive, long-term plans are increasingly ineffective.
Nonprofit leaders must embrace adaptability, learning and flexibility. By grounding themselves in the organization’s strategic position, leaders can remain anchored as they adjust and evolve in response to challenges.
Throughout these five areas of exploration – impact, finance, staff, advantages, and adaptability – the constant thread has been relationships. Strong relationships with constituents, funders, partner organizations, the community and staff and board are the foundation of success in navigating uncertainty. Relationships begin with communication. In today’s polarized environment, cultivating relationships through listening and maintaining open dialogue is more essential than ever.
We may face uncertainty, but if we’re intentional and strategic about building relationships, we won’t face it alone. Rather, relying on everyone’s collective wisdom to surface solutions builds trust, reinforces sustainability and allows a nonprofit to fully embrace being a community-based organization.
Together, by focusing on impact, financial health and people, nonprofits can strengthen their position and ensure they continue to drive positive change, even in an uncertain world.