I have worked with several nonprofit organizations to create a new strategic framework since I started my practice a year ago, and part of my work includes reviews of peer organizations’ financial information and strategic direction. I have reviewed the goals and impact of about 25 United States-based nonprofit organizations in this time, and I am struck by one goal or strategy that appears in about a third of the organizations’ goals: financial sustainability.
Here are some examples of this:
- Secure stable and robust funding
- Build a sustainable and enduring organization
- Improve the [organization] by increasing and diversifying funding
I wonder what value there is in creating a financial sustainability goal, making it public, or in making it so vague? Unless you recently went through a multi-year period of running operating deficits without delivering impact, creating a goal that says “We will be financially sustainable” is just a throw-away line.
Imagine if these strategic frameworks also included goals of “We will serve our community” or “We will use volunteers.” Most staff, board, or funders would wonder whether the framework was strategic at all.
Board members and donors often believe financial “sustainability” is paramount, though, so we see it again and again. I wonder whether this helps any organization grow, evolve, or serve their mission, for several reasons.
1) “Financial sustainability” will not inspire anyone to join you in meeting this goal, or any of your goals. Donors and policy makers support “winners” who can demonstrate impact, who get things done. Goals to essentially “survive” look tame compared to growth and evolution. Instead of “stability”, project growth in your impact.
2) Stating “We will become stable, financially” is wishcasting. How will you do this? Financial goals like this imply the staff and board will simply run harder, faster, and longer. Instead, be specific. Are you shifting to a major donor funding model? Will you build an endowment? Build out your earned income? Launch a campaign? Be specific here, add metrics or measures, and explain why it is important.
3) Financial strength is not a measure of impact. There are plenty of nonprofit organizations with generous endowments and boards, who have a very narrow view of their role, their mission, and who they serve. Instead of assuming that financial stability is some measure of your impact, start with your impact and model how it will generate momentum in your organization, using the Jim Collins-inspired “Impact Cycle.”
4) Sustainability does not always have to be a goal for your organization. Which is more important, solving the problem you were created to solve, or existing forever? The community problems that we face, need urgent attention and investment now. The fixation on “perpetuity” or “sustainability” is a reflection of how so many funders and foundations operate: doling out 5% of their assets annually instead of pushing their funding out now to immediate effect. Vu Le and others write brilliantly about this showing how it leaves resources on the sidelines while communities and the planet face crises now. Be clear about why financial sustainability is critical to achieving your mission.
So, the next time you are creating a strategic framework for your organization and a board member or staff leader pushes for “financial sustainability,” take advantage of it! Carve out time or a small team to clarify this idea. Why is sustainability important? What would success look like? How does it fit into an “Impact Cycle” if at all? Instead of a financial sustainability goal, do you need a business, development, or campaign plan?
Running and growing a nonprofit organization is hard, and money helps drive impact and get more things done. So, treat it seriously in your next strategic planning process and go beyond wishcasting and dig into thoughtful business development instead!