Build a Winning Program

For nonprofits, there might be another lesson here: How can you transform your team from just another mid-major hoping to get invited to the dance into a legitimate contender each every year?  How can you be the nonprofit version of Gonzaga’s basketball program?

Here are some ways to improve your financial practices and lay the groundwork for a sustainable organization.

Recruiting Your Team

In order to be successful, you need the right team members for your organization’s staff and board.  Here are some resources to help you recruit and work with board members:

• Treasurer and Finance Committee – Who to Recruit and How to Use Them
• Recruiting and Vetting Nonprofit Board Members

Coaching and Strategy

A successful coach sets their team up for success.  They draw up plays that have the best chance of scoring, but ultimately trust their players to implement it.  Likewise, boards and staff leadership engage in strategic planning, develop realistic budgets, and put their organizations on the path to success.

• This Scenario Planning Worksheet is a step by step guide to contingency planning.  This resource will help you consider several possible scenarios and get ready to make informed budget and management decisions.

Practice, Practice, Practice

Successful teams spend the necessary time developing and honing their skills. At Nonprofits Assistance Fund, we have a resources and trainings that can help you improve your financial management.

But practice is more than just training and skill development. It’s also about working together effectively, staying in rhythm, building on what’s working and rethinking what is less successful.  Nonprofits need to keep their financial reports, cash flow projections, and other key benchmarks up to date. Without this information, it’s hard to know where to focus your efforts.

• Managing Cash Flow and the Cash Flow Template are resources to help you understand your organization’s cash position . Many organizations have an uneven cash flow. Recognizing when you may need additional capital will help you plan.

Rally Supporters

Successful teams have fans.  So do nonprofits.  Effective nonprofits are able to leverage their volunteers and in-kind donations to save resources and strengthen their organization.

• Blue Avocado has an excellent resource, Tracking Volunteer Time to Boost Your Bottom Line: A Complete Accounting Guide, to help you get the most out of your volunteers, including how to improve your financial position by accurately reflecting the value of this donated time.
• If you’re looking for a good primer about in-kind donations, Alan the Nonprofit Accountant, answers many common questions, including how to record donations at auctions and other events.

For another take on how March Madness can inspire nonprofits, check out Razoo’s March Goodness.

Rather than dwell on the series of year-end reports issued in the last few days (see below) , I’d like to take this moment to share a story.

How to Win at Life

Recently, the work of an individual near and dear to Nonprofits Assistance Fund attracted the attention of the Star Tribune. My colleague’s husband is a substitute teacher who has really connected with his students – so they started a facebook group dedicated to him called Mr. Brackett wins at life.

So what’s the takeaway, other than being two degrees away from a celebrity?

How to Win at Nonprofit Life

Mr. Brackett has found the sweet spot where skills meet community needs.  In nonprofit speak, he’s focused on mission – how he can help educate and positively impact the lives of his students. He knows his core competencies, his assets, and he’s getting results in and out of the classroom.  Every nonprofit convening I have attended, and probably half the blogs and other updates I’ve penned this year, have echoed these same ideas. In a time when we cannot do more with less, the best way for nonprofits to make a meaningful impact is to focus on our mission and core competencies. And deliver those with excellence.

Another takeaway is the value in letting those you serve share their experiences. The success of GiveMN is another example of nonprofits and their constituents being really proactive communicators. As we think about how to deliver services in an era of diminishing resources and high needs, the ability to effectively demonstrate your impact will crucial.

Season’s Greetings

From everyone at Nonprofits Assistance Fund, we wish a safe and happy holiday season to all nonprofiteers and the communities you serve.  See you in the new year!

(In the meantime, here are some pictures from our holiday party and the final nonprofit harvest of 2009.)

Year-End Harvest

In January, we’ll unpack some of the readings below, but if you want to get a jump start over the holidays I bring you year-end readings.

Minnesota’s Nonprofit Sector

• MCN has just released their 2009 Nonprofit Economy report, as well as an updated Current Conditions report.   (You can also hear our own Michael Anderson’s reaction in the video clip.)
• Star Tribune Nonprofit 100
• Trouble Ahead for Minnesota Nonprofits
• Nonprofits still feeling the crunch in Minnesota — bigger needs and smaller revenues

General Nonprofit News

• Nonprofit Policy Trends under President Obama
• Nonprofit Fiscal Rules for the “New Normal”
• Hear Ye, Hear Ye – Overhead is Dead

IRS Updates

• IRS Issues Exempt Organization Agenda for 2009-2010
• 2010 IRS Mileage Rates and Other IRS News
• Form 990 Videos: Understanding the Changes

I think it’s interesting, and timely, that in the last few weeks both my original and adopted hometowns blew me away by their community and collaborative spirit.

Partnerships That Produce Results

First, Buffalo, NY took full advantage of Extreme Makeover: Home Edition coming to town, using the opportunity to transform an entire neighborhood and illustrate the importance of green building practices, such as deconstruction.

Then Minnesotans donated more than $14 million dollars to 3,141 nonprofit organizations in 24 hours, setting a national record. That is certainly above average.

Wow.

Neither effort would have been possible without significant community support – in the form of 5,000 volunteers and 38,778 donors, respectively – as well as the work of countless organizations behind the the scenes and some public-private partnerships.

There is no reaction except to be humbled. But there are lessons that we can learn for projects large and small.

Let’s Collaborate

Right now, everyone who wants to improve the nonprofit sector is emphasizing collaboration.  Certainly in some instances the results are impressive.  But successful partnerships take a lot of work and trust.

There is no one size fits all model. Collaborations range from joining forces on a project to combining backroom operations to a full merger.  Advantages include increasing impact or taking advantage of unique skill sets, such as in these examples, and minimizing costs.  Challenges include letting go of control, managing the needs of diverse stakeholders, and confusion around roles and responsibilities.

GiveMN as an Example

The GiveMN Give to the Max Day effort was incredibly successful in promoting individual giving, engaging new donors, increasing online donations, and getting significant amounts of cash into the hands of nonprofit organizations.

However, there was also confusion around some details, especially the matching funds. Regardless of how the uncertainty happened, it underscores the importance of clear communications among stakeholders – in this case that includes the 3,141 nonprofits, 38,778 donors, and the project partners.  Everyone needs to be on the same page about project goals and outcomes.

Beyond illustrating the widespread community support for Minnesota’s nonprofit sector, GiveMN also shows that nonprofits and their supporters can effectively use social media and other online tools to leverage their networks to take action.  There was an earned media blitz from the partners, but organizations and individuals took advantage of email, facebook, and twitter to get the word out.  The very nature of social media is collaborative.

What are your stories of collaboration? What lessons have you learned from those experiences?

Case Studies

• Nonprofit Collaboration Case Studies
• Where Can I Find Case Studies of Nonprofit Collaborations, Mergers, and Other Strategic Alliances?
• Joining Forces in the Back Office – Lodestar Foundation Resources
• Interview: Collaboration Prize Co-Winners
• What happens when two competitors combine forces
• By sharing expertise, agencies are able to improve operations, save money and help more clients

Tools and Resources

• What do I need to know about collaboration and other kinds of strategic alliances?
• Nonprofit Mergers and Acquisitions: More Than a Tool for Tough Times
• Project ReDesign and Merge Minnesota

Scenario Planning

The McKinsey Quarterly recently wrote an article about the advantages (and some potential pitfalls) of scenario planning.  At Nonprofits Assistance Fund, we love scenario planning for the reasons laid out in McKinsey Quarterly:

Scenarios are a powerful tool in the strategist’s armory. They are particularly useful in developing strategies to navigate the kinds of extreme events we have recently seen in the world economy. Scenarios enable the strategist to steer a course between the false certainty of a single forecast and the confused paralysis that often strike in troubled times.

What’s in your Planning Toolbox?

Here are some resources that can help you craft your own scenarios.

• Scenario Planning tools:
  • Scenario Planning Example
  • Scenario Planning Worksheet: A blank template for you to use
• Cash flow template
• Contingency and Scenario Planning – What’s the Difference and How Do Nonprofits Get Started?
• Focus on the Destination, Not the Route (Budget)!

You can also read Kate’s post on this topic, What H1N1 Taught Me About Contingency Planning.

Photo Credit: Dunecasher on flickr

There are many things that make nonprofit work challenging.  However, often we’re not battling the forces of evil (or even indifference), but rather misinformation and public perception.  So I want to focus on some of the myths that threaten our ability to be effective.  Unfortunately, many of these assumptions that are shared by nonprofit staff, boards, and their allies, as well as the general public.  It’s time to educate ourselves and each other.

We are Businesses

In case you have not heard…

We have real employees and comprise a significant portion of the economy.

• Nationally, the nonprofit sector employs 7% of the workforce – 14 million Americans are nonprofit staffers.
• In Minnesota alone, we are 10% of the state’s workforce, paying $12 billion in wages.
• There are twice as many employees in the nonprofit sector than in the construction industry.

Nonprofits Can Make a Profit

CharityLawyer tackles the top Nonprofit Law Urban Legends, starting with the pervasive (and problematic) assumption that nonprofits can’t make money:

I covered this surprisingly persistent legend in a related post, but it bears repeating. The designation of an organization as “non-profit” or “tax-exempt” does not mean that the organization can’t have money left over in its bank accounts at the end of the year.

Kate discussed this topic last year, Why Nonprofits Should Think About Profit:

Call it what you want – surplus, positive change in net assets, or profit – nonprofit organizations really need to plan for, and embrace, the importance of building financial capacity by generating a cushion. We don’t have a common language for this, and many nonprofit leaders would be uncomfortable using a term like “profit” when describing their financial goals. The word is much less important than the practice of budgeting and managing to build surpluses…  [Woods] Bowman makes it simple and direct: “Where does financial capacity come from? There can be only one place: annual surpluses.”

Not only can nonprofits “make a profit,”it’s in their best interest:

Planning for an annual surplus, specifically an unrestricted surplus, is a positive, important, beneficial, and necessary practice for all nonprofits. I emphasize the importance of viewing unrestricted operating results, rather than the total of all unrestricted and restricted funds, because of the volatility in results caused by the timing of project and multi-year grants.

What can nonprofits do with that money?  A lot of things – invest in their own capacity, which means being able to do better, more efficient work over the long-term.  A few examples of these investments include establishing an operating reserve, enhancing management systems, investing in technology, and staff development.

Capacity Building Enhances Capacity

There are consequences when we are unable or unwilling to invest in our organization.  The Bridgespan Group’s recent article The Nonprofit Starvation Cycle is pretty frank:

Organizations that build robust infrastructure—which includes sturdy information technology systems, financial systems, skills training, fundraising processes, and other essential overhead—are more likely to succeed than those that do not. This is not news, and nonprofits are no exception to the rule.

We have to combat these myths, because they undermine our ability to be effective. Here are some additional resources to help you.

Budgeting for a Surplus

• “Organizational Slack (or Goldilocks and the Three Budgets” by Woods Bowman, published in the Spring 2007 issue of The Nonprofit Quarterly
• Nonprofit Budgets Have to Balance: False!

Cash Reserves

• Operating Reserves
• The Yin and Yang of Operating Reserves   
• Reserves – What Kind and How Much?
• From The Answer Desk: How Much Should My Nonprofit Have in Operating Reserves?

Working Capital and Capacity Building

• Ending starvation by planting seeds for growth
• On the Money
• Beyond Cash Reserves
• Nonprofit Capital
• How to Get Out of the Current Services Trap

Other Myths

Visit Balancing the Mission Checkbook’s series, Mythbusters: Nonprofit Finance Edition for more mythbusters, including

• Donors and Overhead: Maybe They Don’t Care
• The Cash Reserves Myth
• The Magic Donor Myth

Be a Change Agent

Continuing our superhero theme, we’re hosting a session at this week’s Transforming Our Work, the MCN and MCF joint annual conference called Change Agents. This breakout is all about how you can help transform your organization’s business model and be sustainable over the long term.

It could be renamed Learn to Love the Balance Sheet.

In honor of this useful financial document, we’re having a Balance Sheet Haiku Contest.  Submit your poem for a chance to win a special prize.

And for a blast from the past, here is a poem I wrote in response to Nonprofit Quarterly’s call for a mission haiku:

So, do you haiku?

(Post) Halloween Harvest – No Tricks, only Treats

• 19 Free Webinars for Nonprofits – November 2009
• What happens when two competitors combine forces.
• SROI Act II: A Call to Action for Next Generation SROI from REDF
• Nonprofit Groups Spin Off Green Ventures
• What Makes Nonprofits Laugh?

What Is Risk Management?

According to the Nonprofit Risk Management Center:

Risk management — A discipline for dealing with the possibility that the future may be surprisingly different from what we expect (see Strategic risk management).

Strategic risk management — A discipline that counters downside risks by reducing the likelihood, magnitude, and unpredictability of losses and financing recovery from these losses; and seizes upside risks by searching for opportunities to more fully, more certainly, and more efficiently achieve an organization’s nonprofit goals, and developing plans to act on these opportunities when the future presents them.

So, how does this impact nonprofits?  Writing globally, Seth commented:

When things get interesting is when the apparently risky is demonstrably [less safe] than the actually risky. That’s when we sometimes become uncomfortable enough with our reliance on the apparent to focus on the actual.

In other words, sometimes it is safer to take a risk.

And the Risk Management Center agrees.  Check out their Hallmarks of a Risk-Aware Nonprofit – best practices for strategic risk management (not strategic risk avoidance).  The very first hallmark is Takes More Risks than It Avoids:

A nonprofit cannot go about its daily work of mission fulfillment without taking risks. Risk-taking may lead an organization into uncharted territory when it expands its services to a new category of beneficiaries, or brings its programs to foreign countries, or adds an on-line “donate here!” button to its web site.

Avoiding risk, while not child’s play, is much easier than knowing which risks are imperative for the nonprofit to take. It is hard work to evaluate whether to take a risk or avoid it. Nevertheless, for nonprofits that take more risks than they avoid, the work of evaluating risks pays off. An excellent risk management program will enable the nonprofit to achieve a proper balance between prudent risk taking and the paralysis of trying to avoid all or most risks (and in the process, necessarily avoiding some, or even all opportunities.)

Peter Drucker said, “People who don’t take risks generally make about two big mistakes a year. People who do take risks generally make about two big mistakes a year.” A nonprofit that takes more risks than it avoids can innovate and explore uncharted paths to accomplish its mission, while remaining alert to emerging threats that must be avoided in order to protect critical assets.

These are uncertain times.  The safe things, the tested things, may not help your organization deliver services in a sustainable way.

Help your nonprofit do something risky. Check out these risk taking tools or read more from the Risk Management Center.

Go ahead, embrace the possible.

Nonprofit Harvest

Update on the Minnesota Economy

• State’s October Economic Update says the recession is over, but times are still tough
• Minnesota’s economic outlook appears bleak for foreseeable future

GiveMN

• Editorial: An online boost for charitable giving
• You say you want a revolution? GiveMN promises to change the way you donate, for good.
• GiveMN Webinar

990 Updates

• Form 990 Case Study – The New Form 990: Getting Started – Video Series Introduction
• IRS Offers Online Video Program to Explain the Form 990

Other Resources

• Cost Allocation
• Nonprofit and Charity Law Jargon Buster – Non-profit vs. Tax-exempt 
• IRS clarifies grant restrictions

The state of Minnesota (including yours truly) is celebrating a playoff berth for a plucky squad of baseball players, assumed out of the running after All-Star slugger and 2006 AL MVP Justin Morneau’s season ended on September 16th.  But contributions came from unexpected places and the Twins went 17-4, winning their last 5 games including last night’s tie-breaker.

Yesterday, looking forward to the game, I started thinking about what nonprofits could take away from this transformation. 

Put On Your Rally Cap

At Nonprofits Assistance Fund, we have been encouraging organziations to consider new ways to generate revenue and/or trim expenses to build a sustainable business model in this economy.

Morneau was a major run producer (or income source).  And even with him in the lineup, the Twins were barely hanging on.  How could the team adjust their strategy (business model) in order to be successful? 

On twitter and facebook, I asked what nonprofits could learn from this turnaround, and here are some responses:

• What about an angle on hanging in there like the Twins tied to [nonprofits] in tough times and tackling new approaches.
• That even superstars need to be surrounded by great teams for success.
• Bench strength rules. Always play hard.
• We shouldn’t be overly dependent on one [income] source.
• Lean…They run that org lean. Plus, they’re great with crisis management aka injury replacement moves.

Here are some additional takeaways:

• Use your lineup: The Twins are carrying three catchers because they think that gives them the best chance to win. What do your staff, board, and volunteers bring to the table? Take advantage of your in house skills.
• Be flexible: I think I’ve seen Nick Punto play every position.  Jason Kubel, the designated hitter,  is now playing full time in the outfield. Are there ways to be flexible with program delivery, fundraising, or communications? Are there expenses that you could defer?
• Play smart defense and don’t commit errors: Make sure that you have the systems in place in order to be successful. Good management systems can prevent and minimize some challenges.
• Swing for the fences: Other players stepped up to produce runs in Morneau’s absence.  Make your case to donors, foundations, and the community.
• Be a good sport: Take a note from Brandon Inge and Jim Leyland when things don’t go your way.  If another organization receives a sought after grant or contract, be gracious. Focus on the good work that will be done in the community, rather than your disappointment.
• Don’t give up.

One last thought, from Harvard Business’s Tip of the Day – 3 Survival Lessons from Small Business:

Planning. Plans are often outdated as soon as they come out of the printer. Small businesses tend to focus more on planning and less on plans. They watch their surroundings and act accordingly.

Let’s play ball.

This blog is cross posted at Balancing the Mission Checkbook.