The Nonprofit Rule of Threes?

Posted by Laura Otten, Ph.D., Director on June 20th, 2018 in Thoughts & Commentary

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Let’s see if the “rule of threes,” that general belief that concepts or ideas presented in threes are inherently more interesting, more enjoyable, and more memorable, applies to my current concerns about nonprofits.

Start with strategic planning.   One thing that hasn’t changed in the nearly 40 years I’ve been working with nonprofits is that people don’t understand its purpose or value. Few organizations do it well; too many think it is a tool convenience rather than a solid road map, electing to follow it when convenient and ignore it when not.  But my greatest concern right now is that people aren’t incorporating scenario planning into all of their strategic planning efforts and the resulting strategic plan.

Recently, at a panel discussion on strategic planning, an executive director from an organization that addresses a variety of needs and issues surrounding immigrants and refugees, asked the following question:  our life, literally, changes every day.

Every day there is a new crisis; how can we possibly plan?  And while my internal thought was, “how can you not?” my external comment was quite different.  An organization should never do strategic planning in response to a crisis – address the crisis, then plan.  In this case, though, the organization isn’t in crisis; rather, it is working in a field that currently has a degree of unpredictability.  But that doesn’t mean the organization can’t plan for its own immediate (two-three years) future.

We know certain things:  either the flow of immigrants in this country will continue or it won’t. Certainly, legal immigration, though it may be greatly reduced will continue, but illegal immigration may change.  Legal immigrants will bring a set of challenges, some of which overlap with any illegal immigrants who pass into our country, while illegal immigrants will add challenges of their own.  The country will continue to be divided on immigration and, as a result, donations to organizations working with immigrant populations will be available in some quantity.

Just these realities alone, from someone who does not work in the field of immigration, is enough to look at different scenarios and plan accordingly.  Looking at the landscape during turbulent times isn’t any different from looking at it in calm times; there are just more things to see and, therefore, to take into account in planning during turbulent times.

Looking at your own organizational strengths and weaknesses is not affected by the nature of the times, though, an assessment of the organization’s ability to pivot and change is ever more important during uncertain times.  Having charted different paths, based on data and thoughtful reflection, to guide an organization for whichever scenario plays out in the future is the responsible way to handle uncertainty, and wins every time over reacting in the moment.

Next is finances.  Volunteer and paid leadership are simply not taking the financial health of their organizations seriously enough.  Too many continue to hold onto the old idea that nonprofits don’t have enough money; they never have and, therefore, it is okay if they never do.  Such a mindset leads too easily to insolvency, where an organization does not have enough cash to pay what it owes.  About half of nonprofits are operating with less than a month of cash reserve—and boards and executive directors allow this state to continue, month after month, year after year.  These are the organizations that are one funder’s priorities away from going under.  And in these ever uncertain times, such changes are increasingly a real possibility.

I am repeatedly stunned by the number of boards whose financial reports are snapshots of the now:  budget and year-to-date only.  There is no data that allows them to put the now in context; no data that allows them to think into the future.  The job of a board isn’t just to make sure that the organization is financially good for this minute, this month.  What about the future?  Do we have the financial ability to be here, solidly–not just hanging on by a thread, not a toe away from stepping into insolvency–next year, five years, ten years from now?  Too few, it appears, are minding that store.  This failure will harm the sector and our communities.

And my third issue is executive directors’ attitude toward boards.  Too many want to keep the board at a distance. I absolutely get that relying on a group of people who are not in the field every day, who may have no direct experience with the content of the organization’s mission, who come with perhaps different and varied backgrounds and paths to the board table to make decisions about and for an organization seems counterintuitive.  But that is what makes partnerships so powerful:  we get to tap into the wisdom, experiences, problem solving skills, brains, etc. of all involved in the partnership, valuing each for their differences and what those differences can bring to the table, and making a decision together.  With the drum of inclusion beating throughout our sector, what isn’t to value about a board?  But too many executive directors fail to see that they are supposed to be in partnership with the board, not in opposition.  They want to control the board rather than work with this potentially rich resource.

Each of these concerns is worrisome.  When permutations of them exist in one organization, and that is not uncommon, we go far beyond worrisome.

The opinions expressed in Nonprofit University Blog are those of writer and do not necessarily reflect the opinion of La Salle University or any other institution or individual.