Balancing the Mission Checkbook

The “S” Word: In Pursuit of Sustainability

The term “sustainability” and its variations are everywhere in management articles, research reports, and conference presentations throughout the nonprofit sector. I’ll confess that I use it all the time, too. We can joke that this is just the newest buzzword, but the impetus is real. Leaders and advocates in the nonprofit sector are driven to find ways to ensure that valuable work can continue. This quest isn’t new—it has been an important topic for decades, as I shared in this recent post.

But what do we really mean when we set our sights on sustainability? I hope by now we’ve all learned that it’s not a destination—a magical land with a guaranteed flow of grants, contributions, and endowment returns that will remove all financial and organizational worries forever. That’s the myth that won’t go away. Instead, how do we ensure we’re asking the questions that lead us down the sustainable path? To move towards real sustainability, we even have to ask about what needs to be sustained: an individual organization, or the capacity in a community to achieve the mission?

Pursuing sustainability is an approach to leading an organization that incorporates and accepts uncertainty and change.

At Nonprofits Assistance Fund, we have the honor of working closely with many nonprofits as they pursue this path. Here are ten lessons we’ve learned through this work.

1.  Do great work

The number one component for sustainability is to do great work that will result in progress for your mission, which means you have to define what it is and how you’ll know. This has to be the starting point for every organization. What is worth sustaining?

2. Focus on more than more revenue

Another grant or contract might be important, but that’s not the answer to all of your sustainability questions. Not every revenue dollar is equally valuable for nonprofits for a number of reasons: one-time gifts, restrictions, related costs, and other requirement. Revenue is only one part of the nonprofit business model.

3.  Know what you’re best at, and act on it

What does your organization do best, in program work, community engagement, and generating revenue? In business this would be called your competitive advantage. Know what that is, and build strategies around it. There is a danger is being pulled in another direction by a funding opportunity, or the allure of “look at what they’re doing over there!”

4.  Understand the true cost of programs and what to subsidize

We’ve been standing on a soapbox on this topic all year. Knowing how to identify and understand true costs of delivering your programs and services is powerful. Some programs may be financially self-sustaining, or even generate a surplus, but others require subsidy from fundraising or other program areas. Determining whether and how to support these services is an essential strategic decision for nonprofits.

5.  The overhead debate is a distraction

I am concerned that this “debate” is perpetuating the very myth that we claim we want to dismantle. I am 100% behind the effort of bust the overhead myth, but I also believe that we as nonprofits need to put forth better and different information about the value of the resources we steward.

6.  Commit to your infrastructure

We know that great programs rely on an adequate and strong infrastructure. Does your organizational culture embrace management, financial leadership, governance, fundraising capacity, technology, and human resources? If you’re not committed to your infrastructure, who else will be?

7.  Capital structure is lasting infrastructure

Capital—those assets that accumulate over time at a nonprofit such as cash reserves, buildings, and long-term investments—are the most lasting form of infrastructure. When it’s time to change or adapt, it’s capital that provides flexibility, resilience, and durability.

8.  Don’t mistake a budget for a financial plan

A twelve month detailed budget is useful for managing and monitoring financial activities, but it’s not an adequate financial plan. What nonprofits need is the financial equivalent of the strategic plan that sets goals for programs and organizational development. This kind of financial plan is not for one year. How about a three-year financial strategy?

9.  Anticipate and prepare for change (again)

The world isn’t static or predictable. The capacity to change and adapt may be the critical capacity for sustainability. Does your organization change reluctantly, or do you continuously seek feedback to learn and plan the next adaptation?

10.  Do great work (even if it’s different)

Circling back to the first lesson on the list, we all have to honestly evaluate the value and importance of our programs and activities. There are times when nonprofits need to recognize that programs aren’t effective or relevant anymore. Rather than holding on because of history, ask the question again: what is worth sustaining?

When using the “S” word in conversation, make sure you’re taking into account its real meaning. Consider how your organization and programs can (and should) be sustained into the future—or not. Create space and time to have hard conversations with organizational leadership about what may no longer work—so you can evolve and respond to the ever-changing landscape of needs in the community you serve.

Go forth and adapt.

Kate Barr believes that every nonprofit financial question relates to strategy, structure and mission impact. She enjoys interpreting financial information to find stories numbers can tell. She loves writing, teaching, and talking with interesting people.