Nonprofit Sustainability E-Book

Jeanne Bell

• Herausgeber: John Wiley & Sons
• Kategorie: Fachliteratur
• Sprache: Englisch

Seitenzahl: 248

Veröffentlichungsjahr: 2010

Beschreibung

Praise for NONPROFIT SUSTAINABILITY "This is much more than a financial how-to book. It's a nonprofit's guide to empowerment. It demystifies mission impact and financial viability using The Matrix Map to provide strategic options for any organization. A must-read for every nonprofit CEO, CFO, and board member." --Julia A. McClendon, chief executive officer, YWCA Elgin, Illinois "This book should stay within easy reaching distance and end up completely dog-eared because it walks the reader through a practical but sometimes revelatory process of choosing the right mix of programs for mission impact and financial sustainability. Its use is a practice in which every nonprofit should engage its board once a year." --Ruth McCambridge, editor in chief, The Nonprofit Quarterly "Up until a few years ago, funding and managing a nonprofit was a bit like undertaking an ocean voyage. Now, it's akin to windsurfing--you must be nimble, prepared to maximize even the slightest breeze, and open to modifying your course at a moment's notice. Innovative executive directors or bold board members who want their organization to be able to ride the big waves of the new American economy must read this book." --Robert L. E. Egger, president, DC Central Kitchen/Campus Kitchens Project/V3 Campaign "Most nonprofits struggle to find a long-term sustainable business model that will enable them to deliver impact on their mission. Thanks to Jeanne Bell, Jan Masaoka, and Steve Zimmerman help is now in sight. This book offers practical, concrete steps you can take to develop your own unique path to sustainability without compromising your mission." --Heather McLeod Grant, consultant, Monitor Institute, and author, Forces for Good: The Six Practices of High-Impact Nonprofits "At last! An urgently needed framework to prepare leaders to meet head-on the persistent twin challenges of impact and sustainability. This is a practical tool based on good business principles that can bring boards and staff members together to lead their organizations to sustainable futures." --Nora Silver, adjunct professor and director, Center for Nonprofit and Public Leadership, Haas School of Business, University of California, Berkeley "Together, Jeanne Bell, Jan Masaoka, and Steve Zimmerman equal wisdom, experience, and know-how on sustainability and lots of other things. Buy, read, and learn from this terrific book!" --Clara Miller, president and CEO, Nonprofit Finance Fund "Wisdom, experience, and know-how. Buy, read, and learn from this terrific book!" --Clara Miller, president and CEO, Nonprofit Finance Fund

Leseprobe

Table of Contents

Praise

Title Page

Copyright Page

List of Tables

Table of Figures

Table of Exhibits

Dedication

THE AUTHORS

PART ONE - Introduction to Key Concepts

chapter ONE - Who Will Find This Book Useful, and How?

HOW THIS BOOK IS ORGANIZED

WHO WILL FIND THIS BOOK USEFUL, AND HOW?

chapter TWO - Two Aspects of Sustainability

CORE PRINCIPLES

WHAT IS SUSTAINABILITY?

CASE STUDIES: THREE ARCHETYPAL NONPROFITS

PART TWO - Mapping Your Business Model: The Matrix Map

chapter THREE - Identifying Core Activities: Business Lines

IDENTIFYING IMPACT AND REVENUE STRATEGIES

THE PREMISE OF THE DUAL BOTTOM LINE

chapter FOUR - Determining Profitability

WHY DO NONPROFITS HAVE TO BE PROFITABLE?

DETERMINING THE FULL COSTS OF A BUSINESS LINE

DETERMINING REVENUE

chapter FIVE - Determining Relative Impact

CHOOSING CRITERIA FOR IMPACT

FAST AGREEMENT ABOUT IMPACT

SEVEN CRITERIA FOR DETERMINING IMPACT

WEIGHTING AND SCORING

chapter SIX - Mapping the Matrix

SIZING THE CIRCLES

AHA! SEEING THE CURRENT BUSINESS MODEL

FROM AHA! TO THE BUSINESS MODEL STATEMENT

WHAT DOES IT MEAN WHEN A SECONDARY PROGRAM IS ACTUALLY BIGGER THAN OUR CORE PROGRAM?

WHAT IF ALL OUR PROGRAMS ARE OF EQUALLY HIGH IMPACT?

PART THREE - Making Choices to Adjust the Business Model

chapter SEVEN - The Strategic Imperatives

THE REASONS FOR STRATEGIC IMPERATIVES

STRATEGIC IMPERATIVES FOR EACH TYPE OF PROGRAM OR REVENUE ACTIVITY

A FINAL WORD ON STRATEGIC IMPERATIVES

chapter EIGHT - Toward the New Business Model

EVEREST ENVIRONMENTALISTS

MIDTOWN MULTISERVICE CENTER

TEMPEST THEATER

VARIATIONS AND COUNTERPOINTS

EVALUATING DECISIONS

chapter NINE - The Morphing Map

HOW STARS BECOME HEARTS

HEARTS ARE OFTEN THE PROGRAMS THAT STARTED THE ORGANIZATION

DRIFTING FROM STAR TO HEART TO STOP SIGN

CHANGING AN ACTIVITY FROM HEART OR STOP SIGN TO STAR

WHEN THINGS DON’T MOVE AS EXPECTED

ANALYZING NEW OPPORTUNITIES

USING THE MATRIX MAP TO ANALYZE A POSSIBLE MERGER

PART FOUR - The Business Logic of Nonprofit Income Types

chapter TEN - A Look at the Business Logic of Types of Donations

INTERNET FUNDRAISING

MAJOR GIFTS

ANNUAL APPEALS AND MEMBERSHIP RENEWAL CAMPAIGNS

DIRECT MAIL TO A WARM LIST

FOUNDATION GRANTS

CORPORATE FOUNDATIONS AND CORPORATE GIVING PROGRAMS

PLANNED GIVING

CHARITY SALES AND SCRIP

IN-KIND DONATIONS

chapter ELEVEN - Earned-Income Business Lines

FEES FOR SERVICE: THE NONPROFIT SPECTRUM

PART FIVE - Ongoing Decision Making and Leadership

chapter TWELVE - The Matrix Map and Strategic Planning

BUILDING A STRATEGIC PLANNING PROCESS WITH THE MATRIX MAP

CIRCUMSTANCES ESPECIALLY SUITED TO USE OF THE MATRIX MAP

THE MATRIX MAP AND BUSINESS PLANNING

chapter THIRTEEN - Decision Making and Leadership

DEFINING EXECUTION

THE CHALLENGES OF DECISION MAKING

CONCLUDING WORDS

ADDITIONAL RESOURCES

Acknowledgments

INDEX

Table of Figures

Figure 3.1 Dual Bottom Line: Mission Impact and Financial Sustainability

Figure 6.1 The Profitability Axis

Figure 6.2 Three Programs Along the Profitability Axis

Figure 6.3 The Impact Axis

Figure 6.4 Three Break-Even Programs with Different Impact Levels

Figure 6.5 Impact/Profitability Quadrants

Figure 6.6 Scale Numbers Added to Matrix Map Axes

Figure 6.7 Initial Matrix Map for Tempest Theater

Figure 6.8 Matrix Map for Tempest Theater with Shaded Circles

Figure 6.9 Completed Matrix Map for Tempest Theater

Figure 6.10 Matrix Map for Large Human Services Organization

Figure 6.11 Matrix Map for Midtown Multiservice Center

Figure 6.12 Matrix Map for Everest Environmentalists

Figure 6.13 Matrix Map with Cluster of Activities

Figure 6.14 Matrix Map Magnified

Figure 7.1 Matrix Map for Midtown Multiservice Center

Figure 7.2 The Star: High Impact, High Profitability

Figure 7.3 Strategic Imperative for Stars: Invest and Grow

Figure 7.4 Matrix Map for Everest Environmentalists

Figure 7.5 The Stop Sign: Low Impact, Low Profitability

Figure 7.6 Strategic Imperative for Stop Signs: Close or Give Away

Figure 7.7 The Heart: High Impact, Low Profitability

Figure 7.8 Strategic Imperative for Hearts: Keep, but Contain Costs

Figure 7.9 The Money Tree: Low Impact, High Profitability

Figure 7.10 Strategic Imperative for Money Trees: Water, Harvest, and Increase Impact

Figure 7.11 Strategic Imperatives: The Adjustments Demanded for Sustainability

Figure 8.1 Matrix Map for Everest Environmentalists

Figure 8.2 Matrix Map for Midtown Multiservice Center

Figure 8.3 Matrix Map for Tempest Theater

Figure 9.1 Stars Drift to Become Hearts

Figure 9.2 Program Migration and Corrective Action

Figure 9.3 From Star to Heart to Stop Sign

Figure 9.4 A Program Migrates over Time from Star to Stop Sign

Figure 9.5 Matrix Map for a Domestic Abuse Prevention Center with Administrative Costs Fully Allocated to Programs

Figure 9.6 Matrix Map for a Domestic Abuse Prevention Center with Administrative Costs Broken Out as a Separate Item

Figure 9.7 Matrix Map for Midtown Multiservice Center

Figure 9.8 Organization A Before Merger

Figure 9.9 Organization B Before Merger

Figure 9.10 Projected Matrix Map for Two Merged Organizations

Figure 10.1 In-Kind Donations on the Matrix Map

Figure 11.1 Business Models for Five Preschools

Figure 11.2 Sliding Scale Programs Can Span the Matrix Map

Figure 13.1 From Implementation Focus to Execution and Decision Making

List of Tables

TABLE 3.1 Business Lines of Three Nonprofits

TABLE 3.2 Impact and Revenue Strategies at Tempest Theater

TABLE 4.1 Determination of Full Costs, Everest Environmentalists

TABLE 4.2 Assignment of Revenue by Business Lines, Everest Environmentalists

TABLE 4.3 Determination of Profitability, Everest environmentalists

TABLE 5.1 Impact Ratings, Tempest Theater

TABLE 5.2 Profitability and Impact Scoring, Everest Environmentalists

TABLE 8.1 Strategic Imperatives for Everest Environmentalists

TABLE 8.2 Everest Environmentalists: Decisions Made on the Basis of Strategic Imperatives

TABLE 8.3 Midtown Multiservice Center: Decisions Made on the Basis of Strategic Imperatives

TABLE 8.4 Tempest Theater: Decisions Made on the Basis of Strategic Imperatives

TABLE 11.1 Funding Through Government Contracts

TABLE 11.2 Funding Through a Mix of Direct Payers and Government Contracts

Table 11.3 Funding Through a Mix of Direct Payers and Fundraising

Table 11.4 Funding Through a Mix of Direct Payers and Volunteer Efforts

Table of Exhibits

Exhibit 1.1 . Notes to Different Types of Readers

Exhibit 2.1 . Nonprofits and Community

Exhibit 4.1 . Income Statement for Everest Environmentalists, Year Ending December 31, 2009

Exhibit 4.2 . Considerations for the Finance Staff

Exhibit 5.1 . Impact Scoting Sheet, Everst Environmentalists

Exhibit 5.2 . Impact Assessment with Compiled Scoring, Everst Environmentalists

Exhibit 6.1 . Sample Business Model Statements

Exhibit 7.1 . Closing a Program: Impact on Common and Administrative Costs

Exhibit 12.1 . A Strategic Planning Process That Uses the Matrix Map

“As a former CFO, now an executive leader of a large nonprofit, I found that this makes for a great read to recalibrate my thinking and find greater balance between mission impact and financial return. We, as leaders of social change organizations, are driven by our heart and passion—this book allows for thoughtful and deliberate analysis to evaluate and develop a business model that propels our mission and strengthens our organization while never compromising our philosophies. Executive directors and their board leadership will find this book invaluable—a remarkable resource in assessing and planning their nonprofit’s future success.”

—Gloria Aguilera Terry, president, Texas Council on Family Violence

“At last! An urgently needed framework to prepare leaders to meet head-on the persistent twin challenges of impact and sustainability. This is a practical tool based on good business principles that can bring boards and staff members together to lead their organizations to sustainable futures.”

—Nora Silver, adjunct professor and director, Center for Nonprofit and Public Leadership, Haas School of Business, University of California, Berkeley

“Up until a few years ago, funding and managing a nonprofit was a bit like undertaking an ocean voyage. You plotted your course, loaded provisions, and set sail. Now, it’s akin to windsurfing—you must be nimble, prepared to maximize even the slightest breeze, and open to modifying your course at a moment’s notice. Innovative executive directors or bold board members who want their organization to be able to ride the big waves of the new American economy must read this book.”

—Robert L. E. Egger, president, DC Central Kitchen/Campus Kitchens Project/V3 Campaign

“This book should stay within easy reaching distance and end up completely dog-eared because it walks the reader through a practical but sometimes revelatory process of choosing the right mix of programs for mission impact and financial sustainability. I have used this matrix ever since CompassPoint first published on it and believe, especially considering changing conditions, that its use is a practice in which every nonprofit should engage its board once a year.”

—Ruth McCambridge, editor in chief, The Nonprofit Quarterly: Promoting Spirited Nonprofit Management

“Together, Jeanne Bell, Jan Masaoka, and Steve Zimmerman equal wisdom, experience, and know-how on sustainability and lots of other things. Buy, read, and learn from this terrific book!”

—Clara Miller, president and CEO, Nonprofit Finance Fund

“This is much more than a financial how-to book. It’s a nonprofit’s guide to empowerment. It demystifies mission impact and financial viability using The Matrix Map to provide strategic options for any organization. A must-read for every nonprofit CEO, CFO, and board member.”

—Julia A. McClendon, chief executive officer, YWCA Elgin, Illinois

“Most nonprofits struggle to find a long-term sustainable business model that will enable them to deliver impact on their mission. Thanks to Jeanne Bell, Jan Masaoka, and Steve Zimmerman, help is now in sight. This book offers practical, concrete steps you can take to develop your own unique path to sustainability without compromising your mission.”

—Heather McLeod Grant, consultant, Monitor Institute, and author, Forces for Good: The Six Practices of High-Impact Nonprofits

Copyright © 2010 by Jan Masaoka, CompassPoint Nonprofit Services, and Spectrum Nonprofit Services, LLC. All rights reserved.

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Library of Congress Cataloging-in-Publication Data

Bell, Jeanne, date.

Nonprofit sustainability: making strategic decisions for financial viability/Jeanne Bell, Jan Masaoka, Steve Zimmerman. p. cm.

Includes bibliographical references and index.

ISBN 978-0-470-59829-0 (pbk.)

1. Nonprofit organizations—Finance. 2. Nonprofit organizations—Management. I. Masaoka, Jan. II. Zimmerman, Steve, date. III. Title.

HD62.6.B45 2010

658.4’012—dc22

2010026640

PB Printing

One of the most profound questions a nonprofit can ask itself is “Who is our constituency, and what does it need our organization to be?”

This book is dedicated with heartfelt gratitude and admiration to all the people in nonprofits who ask this question, and who know that financial sustainability must be accounted for in the answer.

THE AUTHORS

Jeanne Bell is CEO of CompassPoint Nonprofit Services (www.compasspoint.org), one of the country’s leading providers of training and consulting services to nonprofit organizations, based in the San Francisco Bay Area with a national practice. Jeanne is a nationally respected consultant, researcher, and speaker on nonprofit finance, strategy, and executive leadership matters. She is coauthor of Financial Leadership for Nonprofit Executives, and her other research includes Daring to Lead: A National Study of Nonprofit Executive Leadership, San Francisco’s Nonprofit Sector, and Securing the Safety Net: A Profile of Community Clinic and Health Center Leadership in California. Jeanne is board chair of the national Alliance for Nonprofit Management and serves as a board member for the Nonprofits’ Insurance Alliance of California and Intersection for the Arts. She has an M. A. degree in nonprofit administration from the University of San Francisco, is co-founder of the Finance Professionals Network, and is a frequent contributor to nonprofit journals.

Jan Masaoka is director and editor in chief of Blue Avocado, an online magazine for nonprofits that has sixty thousand subscribers (www.blueavocado.org). She served as executive director of CompassPoint Nonprofit Services for fourteen years, in which position she was named Nonprofit Executive of the Year by the Nonprofit Times in 2003. Jan is an eight-time designee as one of the national nonprofit sector’s fifty most influential people, and in 2005 she was named California Community Leader of the Year by Leadership California. She is the author of The Best of the Board Café and All Hands on Board: The Board of Directors in All-Volunteer Organizations. Her research includes studies on nonprofit leadership, women executive directors of color, all-volunteer organizations, and the nonprofit workforce. She lives in San Francisco, speaks frequently on nonprofit-sector issues, and is a frequent contributor to nonprofit journals.

Steve Zimmerman is principal at Spectrum Nonprofit Services (www.spectrumnonprofit.com) in Milwaukee, where he provides consulting to community-based organizations in the areas of finance and strategy and works with staff and boards to better understand and strengthen their business models. Steve also speaks frequently and conducts trainings nationally on these subjects. Prior to starting Spectrum, Steve was a projects director with CompassPoint Nonprofit Services, where, in addition to training, he consulted on management issues to organizations whose revenues ranged from $250,000 to more than $20 million. He has also served as chief financial officer, development director, and associate director at other nonprofits. In addition to being a certified public accountant, Steve has a B.A. degree from Claremont McKenna College and an M.A. degree in business administration from Yale University.

PART ONE

Introduction to Key Concepts

In Part One of the book, we explore the key concepts of sustainability, decision making, and strategies for nonprofit organizations. Chapter One offers an overview of what is covered in the book, describes how the topics are organized, and discusses how different audiences may use the book in different ways. Chapter Two introduces you to the three fictitious organizations that are used throughout the book to illustrate a variety of business model concepts.

chapterONE

Who Will Find This Book Useful, and How?

This book is about sustaining financial health and mission impact over time. Today, nonprofit leaders are deeply challenged by an array of complex, changing, urgent pressures that demand faster, smarter decisions than ever before. Success cannot be driven—or measured—by long-term, detailed plans and by whether those plans were carried out as written. Instead, community nonprofits sail in stormy seas where changing conditions mean a new route must be plotted every day. And on board these tossing ships is precious cargo: the lives of people in our communities, and the spirits and hearts of communities themselves.

For nonprofits, financial sustainability and programmatic sustainability cannot be separated. It’s not enough to have a high-impact program if there’s no effective strategy for sustaining the organization financially. And neither is it enough to be financially stable: we build our organizations for impact, not for financial stability.

Yet surprisingly, in the nonprofit sector financial information and information about mission impact are seldom discussed in an integrated way. Instead, financial reports and analysis rarely include data about what impacts have been driven by a particular financial activity. Moreover, program evaluations and progress reports are discussed out of context with funding streams, profitability, and financial sustainability.

This book’s key premise is that financial and impact information can and must be brought together in an integrated, fused discussion of strategy. On that premise, in Part Two of this book we introduce a tested tool—the Matrix Map—as well as a perspective on and orientation to leadership and decision making. The following illustration shows how the Matrix Map leads to better decisions that in turn lead to a sustainable nonprofit organization.

Getting to Nonprofit Sustainability

HOW THIS BOOK IS ORGANIZED

This book is designed around the understanding and regular adjustment of a nonprofit’s business model, both of which are essential to sustained impact. We offer a number of practical concepts and tools for understanding the component parts of a business model and determining the optimal adjustments for improved mission and money results. These concepts and tools—put to use as part of a strategic planning process, in between strategic plans, or even in place of strategic planning—will help leaders make decisions that hold mission and money front and center in an integrated way.

The book is divided into five parts, described in the sections that follow.

Part One. Introduction to Key Concepts

Part One contains two chapters. In Chapter One, which you are now reading, we orient you to how the book is structured and discuss how different audiences will find the book useful. In Chapter Two, we define and discuss new ways to understand business models, sustainability, and financial viability in a nonprofit context. We also introduce the three fictitious nonprofit organizations that will serve as case studies throughout the book.

Part Two. Mapping Your Business Model: The Matrix Map

In the four chapters that make up Part Two, we identify and group programs and revenue lines, and then use the Matrix Map to analyze them for relative mission impact and for relative financial impact on the organization. The result is the expression of the organization’s business model as a single, comprehensive, and compelling visual image.

Part Three. Making Choices to Adjust the Business Model

Once we have the mapped, de facto business model in view, the next steps, discussed in the three chapters contained in Part Three, are analyzing the individual parts and the whole and making strategic choices for program and fundraising activities. Part of doing so involves developing alternatives that may not have surfaced immediately.

Part Four. The Business Logic of Nonprofit Income Types

In the two chapters that comprise Part Four, we take a deeper look at the most common types of nonprofit income. This analysis is helpful to organizations considering new income strategies. It also illustrates the wide variations in how income is structured—and, as a result, it shows how different types of income need to be managed to different benchmarks.

Part Five. Ongoing Decision Making and Leadership

The two chapters in Part Five explore how success with a business model involves more than having a plan, and more than monitoring with that plan in mind. Success also requires attention to three areas for which we provide a perspective: an emphasis on execution, an orientation toward continuous decision making, and a differently understood role for leadership.

WHO WILL FIND THIS BOOK USEFUL, AND HOW?

Because of this book’s focus on strategy and decision making, many nonprofit executive directors (CEOs) and other organizational leaders will find its concepts helpful in their demanding roles. Management teams will also find the book useful in both conceptual and practical ways as together they confront significant organizational decisions.

Nonprofit boards are also an important audience for this book. Too often board members know quite a bit about all the parts of the organization—its six programs and its two special events, let’s say—but don’t have a good way to understand the organization as whole. This book will enable them literally to see the organization’s program and financial strategies in an easy-to-grasp visual image. And, after really grasping the comprehensive business strategy, they can act in more informed, strategic partnership with their executives.

Although we touch on process steps, this book is not organized around process guidelines, such as “Form a cross-department committee.” Each organization evolves intentionally and unintentionally along its own path, and we leave it to each reader to develop an appropriate process for his or her organization.

We do, however, suggest different levels of intensity with which to engage these concepts. In some cases, a group can develop a quick Matrix Map (see Part Two) for a series of activities in less than an hour. In other cases, quantitative tools and analysis can be brought into play over a period of weeks or months. We’ll suggest different ways to use these concepts, but our focus is on the concepts, ideas, and tools rather than on prescriptive process steps. Exhibit 1.1 offers notes to readers serving in a variety of nonprofit roles.

Let’s get going.

Exhibit 1.1. Notes to Different Types of Readers

NOTE TO THE EXECUTIVE DIRECTOR/CEO

One area of tension for the person at the head of a nonprofit organization is a gap between a sense of where the organization needs to go and an inability to get the organization to move fast and intelligently. There are highly developed processes and frameworks for planning that are designed for consensus building, but an effective leader needs processes and frameworks for making faster decisions and for challenging the board and management team to look at bolder and more urgent questions than those often raised in a more leisurely planning process.

As an executive, you are likely to have many ideas for what the organization should be thinking about, but you may be uncertain about how to bring those discussions to the various circles within the organization. Part Five, on decision making and leadership, provides some ways for you to think about the role of the executive in leading decisions, ways that may be different from those you have read about before. In particular, Part Five focuses on understanding the processes by which business analyses, business plans, and strategic decisions are created and carried out.

NOTE TO MANAGEMENT TEAM MEMBERS OTHER THAN THE EXECUTIVE DIRECTOR/CEO

Management team members often like the phrase “Plan the work, then work the plan.” In this light, they sometimes view their executive directors with both admiration and annoyance. On the one hand, the executive director has great ideas. On the other hand, she always seems to be starting new projects while disregarding what’s already in the work plan. Or an executive director is great at “the vision thing,” but he doesn’t understand what it would take to implement a new program.

An underlying question for some management team members is often “How effective is the X program anyway?” As long as a program has enough funding, few management teams seriously question whether it should continue. But even when management team members do have opinions about the relative importance and impact of a program, they seldom have the venue or the circumstances in which such issues can be explored authentically.

Every organization makes decisions differently, and so every organization will use the Matrix Map differently (see Part Two). Nevertheless, we believe that management teams will find the Matrix Map especially useful as a way to raise deeper questions about strategy and impact, questions that often fail to get onto agendas that are already crowded with staffing issues, budget cuts, and program coordination. We also hope that you will find Part Five useful in your role as a program director, an administrative director, or a leader serving in another management position. Decision making and leadership have an even greater presence within an organization’s departments than at the top of the organization.

NOTE TO BOARD MEMBERS

One of the difficulties—and one of the pleasures—of serving on a nonprofit’s board is being involved in a field that is new to you. Your day job may be in banking, but your board may oversee an organization devoted to autism. You may work in corporate human resources, but your organization is involved in wetlands restoration. Just as a clinical nurse practitioner may not know much about business models for advertising firms, board members may be newcomers to the business models of various conservation strategies.

Lack of experience with nonprofit income models can make it particularly difficult to participate fully in discussions about possible new ventures. If, for instance, a consultant or the executive director proposes a substantial investment in developing a mail donation campaign, it’s hard for a person without knowledge of such campaigns to make an informed judgment about whether the investment is worthwhile.

This entire book will be useful to board members, but Chapter Ten, on nonprofit income models, may be especially helpful to board members and others who want to know the basic business logic behind such nonprofit vehicles as direct mail, major gifts, planned giving, and fees for service.

In addition, because this book bridges the gap between finance and mission, it will also help bridge the gap between nonprofit executives, who often intuitively and implicitly bring mission and money together in their minds, and boards, which function best when discussions explicitly bring concerns to the surface. One or two board members may find themselves constantly bringing up concerns related to the organization’s financial sustainability, only to be seen by others as giving insufficient weight to mission-related goals. The frustration on both sides of this dynamic can be turned into positive energy through the use of the Matrix Map (see Part Two).

NOTE TO FUNDERS AND CONSULTANTS

Like nonprofit executives, funders and consultants also struggle with the need for plans that unify mission and goals on the one hand with financial realities and sustainability on the other. In particular, consultants with backgrounds in finance often tend to overemphasize conventional financial projections, whereas too many consultants in the area of strategic planning focus on consensus-building processes but lack the financial skills to bring financial perspectives productively into play.

You can use the Matrix Map (see Part Two) as a tool for strategic planning, and you can also use it to look more closely at sustainability in the context of a completed strategic plan. The Matrix Map incorporates financial information in a way that makes it easy to use even when board members, the executive, and consultants don’t have backgrounds in finance.

A common role for funders and consultants is to give nonprofit grantees and clients guidance in developing plans for sustainability. It is our hope that the perspective presented in this book will be helpful to you in your own work, and in your role as a trusted advisor to nonprofits.

SUMMARY

Each chapter in this book concludes with a brief summary of the chapter’s main points. In the case of this chapter, the main point is that nonprofit organizations, in order to be financially and programmatically sustainable, must combine their financial and programmatic dimensions in an integrated strategy. This book, written for leaders of nonprofit organizations, introduces an orientation to that integration as well as practical tools for its accomplishment.

chapterTWO

Two Aspects of Sustainability

Every decision that nonprofit leaders make affects both the programmatic and the financial sustainability of an organization. Should we increase the size of our Head Start program? What should we do about our youth classes’ loss of funding? Should we hold our dinner-dance this year? Where should I spend my time today? In some moments, boards and senior management may think of these decisions as being only about programs or finances, but every decision is about both. Finding the best allocation of time and resources to accomplish the organization’s mission is a fundamental question and tension within each organization. When nonprofit leaders understand both aspects and hold them both in mind, they can make the best, most strategic decisions for an organization—decisions that will lead to ongoing programmatic and financial sustainability. Taken together, programmatic impact and financial viability are what make nonprofits sustainable.

CORE PRINCIPLES

This book takes the following as its core principles:

• Financial sustainability. Nonprofit emphasis on real-world impacts and on mission alignment is fundamental, but the separation of impact goals from financial goals and strategies has been a deep flaw in both business planning and strategic planning within the nonprofit sector. Financial sustainability is not only a legitimate goal; it is a necessary, intrinsic, core goal.

• Hybrid revenue strategies. Nearly all nonprofits now are hybrid organizations rather than traditionally funded charities: they combine donations, earned income, contracts, grants, and other income types. As a result, different financial goals must be set for different types of income streams, and they must be managed in significantly different ways.

• Development of an explicit nonprofit business model