Posts Tagged ‘Mike Stone’

Beyond the obvious: what a “funding problem” may reveal about a nonprofit

Ask any nonprofit board member or executive director what poses the greatest challenge to his/her organization and you are likely to hear this: “We need more funding.” While s/he may not be able to offer a complex analysis of the organization’s financial circumstances, the conclusion is…well, obvious: Not enough money is coming in the door to meet the cost of delivering our programs.

At the root of the problem?

It is my belief that for many nonprofits, funding shortfalls are not the core problem. Rather, fiscal stress is a symptom of other, more deeply-rooted problems that lie beneath the surface of monthly profits and losses. If your organization falls into the category of the financially-challenged, what might this reveal about other aspects of the organization? Below are four questions a board should ask to properly diagnose the root cause of the seemingly obvious.

1. Do we have a coherent resource strategy?

Writing more grants isn’t always the solution to a budget deficit, though it seems to be a popular response among nonprofits. The same is true for traditional fundraising: The answer isn’t always to go out and raise more money. The fact is grant writing and fundraising are pieces of an overall resource strategy that may include government contracts, fee-for-service,earnings from investments, in-kind gifts, volunteers and bartering arrangements. Some nonprofits have generated revenue through alternative ventures, such as the mental health agency in my hometown that opened a sandwich franchise that produces revenue while providing employment to its clients. A full exploration of all funding options will help the organization identify the possibilities and the limitations before it, which in turn provides the proper context for the development of a fundraising strategy.

2. Do we have a targeted fundraising strategy?

Deciding that your organization needs to raise money from individuals and corporations as part of its resource strategy is a good start. But the real work of strategy development is in knowing where you are likely to be successful: Who is likely to support you? What do they need to know about your organization? How can you best solicit the actual gifts? And while nonprofits like to claim to be the best-kept secret in town, the ability tocraft and deliver a compelling story is what separates the successful organizations from the frustrated ones. Absent these deliberations and subsequent choices, nonprofits will continue to “fish with a net,” hoping to nab the big fish that just happens to be in the right place at the right time.

3. Do we have the infrastructure to support the fundraising strategy?

Having the board members instruct the executive director to go raise money and let them know if s/he needs their help does little more than increase the pressure on him or her to do even more with already-constrained resources. Indeed, some nonprofits view fundraising as the addition of another glass of water into the large bucket of organizational activity. But fundraising is an orientation, more akin to adding a drop of food coloring into that bucket of water. It changes everything. So before rewriting the executive director job description or hiring a development director, nonprofit boards need to engage in a realistic inventory of the human, financial and technological resources available to support the fundraising strategy. Especially in the age of social media, the ability to connect the right message to the target audience becomes key. Without adequate infrastructure, fundraising may actually deplete more resources than it produces.

4. Are we still relevant?

In the for-profit environment, the market will determine the relevance of a particular business. Are there too many gas stations? Not if they can all make a profit. Is the family-owned hardware store relevant in the age of the big box store? Again, the market will answer that question. Having no similar market mechanism in place, nonprofits may continue to function long after their market position has begun to evaporate. Loss of funding or the inability to attract additional funding may indicate an external perception that the social good produced by your organization no longer matters relative to other priorities. Complicating the analysis of relevance is the ability of struggling nonprofits, through desperation appeals, to attract just enough funding to live to see another month or year. But nonprofit boards need to recognize that maintaining an organizational pulse is not the same as meeting a social mission.


Even in good times, the unpredictability of external funding requires vigilance in monitoring the financial standing of nonprofits. And there is no reason to expect that funding challenges will subside any time soon. Only through proper and thorough diagnosis will nonprofits be able to respond effectively to the root causes ofthe financial challenges they face.

See also:

The Zone ofInsolvency: How Nonprofits Avoid Hidden Liabilities and Build Financial Strength

The Cash FlowSolution: A Nonprofit Board Member’s Guide to Financial Success

Nonprofit Sustainability: Making Strategic Decisions for Financial Viability

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Great boards follow three key principles

I have been asked numerous times by clients to describe what a “good board” looks like. I understand the point of the question–what is the right size, what are the right committees, etc. But asking what a board should look like misses the more important point, which is this: a good board is defined not by what it looks like but rather how it thinks and behaves.

Based on my work as both a consultant and board chair for a large nonprofit, I have concluded a “good board” exhibits three essential and interrelated characteristics.

1.      A good board is one in which form follows function. “Do we need a marketing committee?” is the poster question for this phenomenon. The answer is, of course, “It depends.” Specifically, it depends on a) what your organization is trying to accomplish strategically and b) what you need from your board to make it happen. I have seen valuable time wasted trying to fill committee slots simply because the committee exists on paper. If the people were in place, one should ask, what would we have them do? If there is no compelling answer, chances are your board has been wasting energy trying to create a function to fill an existing form.

2.      A good board is one whose work is aligned with the life stage of the organization. As we know from the excellent work on “nonprofit lifecycles” from Susan Kenney Stevens, nonprofits move through predictable stages of development. However, not all aspects of the organization move forward in lockstep. Usually, it is the board role that lags behind the evolution of the program model and the administrative systems. One key consideration for the board of a maturing organization is to have an honest discussion about how far removed from the “inner circle” its members are drawn. As a start-up or young organization, the board is made up of people who have a direct personal connection to the mission and/or are drawn to the charisma of the founder. The work of the board at this stage consists of gathering together, rolling up the collective sleeves and pitching in to get the work done. Unfortunately, some boards unwittingly create a mismatch of interest and skill by retaining the same board orientation long after the other aspects of the organization have settled. The board that is able to reorient its work and perhaps even repopulate its committees to support the emerging needs of the organization is positioned to become a good board.

3.      A good board is one that values principles over practices. I have written about the shortcomings of a “best practices” approach, particularly when too much credence is given to merely mimicking the practices of other organizations. (The short version of the argument is that things work in a particular context because of everything else that is going on within that context). By contrast, effectiveness principles focus on the desired ends and the manner in which those ends are pursued.

For me, it boils down to three key principles:

Effective Oversight. Oversight means striking the balance between trust and verification. Financial crises don’t develop overnight but over time. Too often, boards are forced to respond in crisis mode because they didn’t ask the right questions, didn’t ask the right questions soon enough or didn’t know what the right questions were. Like the frog in the boiling water, a board that doesn’t pay close attention to the elements in the environment may discover too late things are getting hot.

Open Communication. I have been involved in more than one contentious discussion about the “need to know.” Here’s the deal: there are no degrees or ranks when it comes to board authority. Anything important enough for the board chair or executive committee to know is important enough for every board member to know. Granted, sensitive personnel issues may be better kept under a tight lid. But this is the exception. Nothing is more disengaging for board members than the presence of a pocket of power (and information is power) within the board.

Strict Accountability. Simply put, some boards are just too darn nice to each other. Yes, the board was relying on the resource development committee to plan the upcoming event. And it didn’t get done. But they are very busy people…you shouldn’t expect too much from them. Really? To quote a former client, “Board members should be expected to bleed for the organization.” If you sign up, you are expected to perform. Period.

When it comes to board “goodness,” there really is no there. People change, issues emerge and priorities shift. But focusing on these three characteristics will allow boards to maintain consistency of purpose even in the midst of changing structures.

See also:

A Fundraising Guide for Nonprofit Board Members

The Ultimate Board Member’s Book

The Board Game

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Nonprofit strategy: Who’s in the driver’s seat?

A few years ago, I discovered a framework for evaluating foundation strategy developed by Peter Frumkin that draws attention to three critical features of strategy: its soundness, the quality of its implementation, and the results it produces. The framework has proven to be immensely helpful to me as I work with foundations and has transferred nicely into my work with other nonprofits.

The truth is I work with a number of nonprofits that operate under strategies that appear to be…well, less than sound. Either the elements of the strategic plan itself do not seem to hang together or the actions and decisions of the organization do not fall into a discernible pattern. Lacking anything beyond my observations and intuition, however, I could say nothing more than soundness was lacking because I didn’t see evidence of it.

So, what exactly is that evidence we should look for in assessing soundness of a nonprofit strategy? What is it that holds a strategic plan together or gives coherence to a set of discrete decisions?

I have concluded that soundness of strategy rests on two essential features. The first is the clarity of the organizational core, a definitive statement encompassing the essential who, what and why of the organization’s work. The second feature of a sound strategy is the presence of a strategy driver. Whereas the core is the starting point for strategy development, the driver is the mechanism that ensures that decisions and actions – whether to strengthen the core or expand beyond it – are intentional and consistent.

The Organizational Core

To help clarify the essential elements of the organizational core, I devised the following definition for use with clients:

Your strongest competencies aimed at the highest priority needs of your targeted      population within your defined domain.

To illustrate, consider the organizational core of Second Chance, whose mission is to reduce recidivism among ex-offenders by preparing them to acquire and retain gainful employment:

Strongest competency – teaching and training

Priority needs – skills to acquire and retain gainful employment

Target population – recently released inmates

Domain – the local criminal justice system.

Once clarified, the core provides the basis for the development of an organizational strategy. It is at this point that the second feature of sound strategy comes into play: the primary strategy driver.

Strategy Drivers

The strategy driver, in essence, defines the nature of your business and consequently provides the lens through which program decisions and resource allocations are considered. I present nonprofits with three possibilities: a client-driven strategy, a service-driven strategy and a domain-driven strategy. While all three considerations come into play, a sound strategy utilizes a primary driver as its guide (“what prompts us to act”) and the other two to set boundaries (“how far we will go”). To illustrate, consider the choices facing Second Chance.

A client-driven strategy is based on the specialized needs of the target population and leads an organization to seek additional opportunities to address those needs. For Second Chance, this means deciding which specific needs of former inmates it will – and won’t – address (the service boundary) and where they will go to reach additional clients in the target population (the domain boundary). A client-driven strategy might lead to the development of services to help new inmates and their families prepare for reunification.

A service-driven strategy builds on the organization’s content expertise or specialized knowledge. For Second Chance, this would mean offering its core expertise – preparing individuals to secure gainful employment – in new places or to new groups of people. The boundaries are defined by which groups it believes can benefit from that core expertise (theclient boundary) and where those new groups can be found (the domain boundary). A service-driven strategy might lead Second Chance to develop a training program for displaced workers from local manufacturing plants.

With a domain-driven strategy, the organization responds to the changing needs or preferences that occur within its “sandbox” as it has defined it. For Second Chance, this would mean building on its relationship with the local criminal justice system to address additional issues or concerns related to recidivism. The boundaries of the strategy are defined by which people it would serve (the client) and how it believes it can best meet their most pressing needs (the service). A domain-driven strategy might lead to the addition of recovery programs for inmates with alcohol or drug dependency.


By identifying the organizational core and the primary strategy driver at the outset, boards and executive staff set the framework for discussions that are far more likely to produce a strategy that is focused, relevant and consistent over time.

See also:

The Nonprofit Strategy Revolution

Nonprofit Strategic Positioning

The Nonprofit Business Plan

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