Judy Alnes, Executive Director of MAP for Nonprofits, is on a roll about the importance of innovation.  In her article for MCF’s Winter 2010 Giving Quarterly, she outlines what might come next for the nonprofit sector, finishing with a call for innovation:

1. “Scrub-Down” Won’t Be Enough
2. We Aren’t Going Back From Where We Came
3. Strategic Investments Aren’t Optional
4. We Must Do a Better Job Measuring and Taking the Positive Results to Scale
5. We Have to Innovate and Be Bold

Judy was also our guest blogger this week at Balancing the Mission Checkbook, and her post Ready, Set, Innovate provides a number of resources to help nonprofits embrace the discipline of innovation.

Thinking Differently

To help nonprofits think outside the box, we are offering a workshop Financial Planning in Uncertain Times.  This training is built around our scenario planning tools, which any nonprofit can use to think through how different circumstances - such as changes in the state budget or foundation grants - impact your programs and other operations.

For nonprofits interested in assessing new revenue streams, you can listen to a recording of the webinar Alternative Revenue Strategies and download the Revenue Matrix.

What other tools do you need to think differently? Tell us in the comments and we’ll do our best to find existing resources or develop new materials to meet these needs.

C is for Collaborate, Good for You and Me?

Another hot topic is collaboration, especially as nonprofits try to find new ways to deliver services with fewer resources.  Around Thanksgiving I wrote a blog post What I’m Thankful For - Strategic Collaboration that highlighted some examples of successful collaborations. 

So what does it take to have a successful collaboration? Here are some resources that help make these partnerships work for everyone.

Administrative Alliances

The Nonprofit Times recently published an article, Secret Sauce Of Backroom Collaborations, that identifies three common factors in successful administrative collaborations:

• Standardization: The reason why many nonprofit back room operations are not standardized is because they tend to be put together in support of programs and services that are not standardized. Each has different terms referring to essentially the same thing.

• Replicability: Without an overarching agreement about the service models using the administrative services, it is unlikely that two or more back rooms will have enough in common to maintain replicable processes.

• Scale: Low volumes of transactions will not support the added administrative effort needed to make an alliance work… This “administrative alliance tax” is the reason why small organizations might be better off co-locating rather than trying to build administrative alliances.

Strengthen Your Collaborations

As the Nonprofit Times article mentions, working collaboratively can be hard:

The staff time required to make them happen is almost always “extra” time, over and above the normal demands of day-to-day operations. That means collaboration time is often of a lower priority, squeezed out in favor of more pressing business.

When partners don’t work well together, the goal is muddy, and responsibilities aren’t clear, collaboration can be far more effort than it is worth

The webinar Collaboration: Construction, Repair and Maintenance was designed to help nonprofits consider the pros and cons of collaborating during tough economic times and asses whether collaboration is the right strategy to reach your goal, and how to build a strong foundation.  Listen to the recording to learn more about how to build trust, lead successfully, and make collaborative decisions.

Case Studies

• Nonprofit Collaboration Case Studies: The Charity Lawyer presents four case studies, complete with what worked, what did not, and lessons learned.

• Looking for an example of a successful backroom collaboration?  Check out the MACC CommonWealth.

• Nonprofit Collaboration Database: The Lodestar Foundation, which awards the Collaboration Prize, has created a database of collaborations.  You can search by type of partnership, geographic area, service area, and even challenges faced.

Other Resources

• Mergers - Due Diligence Items: After a conversation with La Piana Consulting, Nonprofit Law Blog outlines the most important things to think through before any merger.

• From the Answer Desk: What do I need to know about collaboration and other kinds of strategic alliances? The librarians at the Foundation Center in Cleveland explain different kinds of collaborations and round up some useful tools.

Here are a few other things for that to-do list.

Assess Your Hyperlocal Conditions

We can all agree that local conditions vary. I just returned from a brief vacation to sunny Florida, and these words have never felt more true.  Nonprofit Quarterly took used idea as the theme for their Winter 2010 issue.

Local Conditions

There are many factors that impact your nonprofit, such as your funding sources, field of service, and the needs of your constituents.  Let’s think of these as the local conditions. The Minnesota Council of Nonprofits and Minnesota Council on Foundations have updated information on how the economy is affecting funders and Minnesota nonprofits in general. National Organizations such as The Foundation Center, NFF (view information from 2009 or take the 2010 survey), and the National Council of Nonprofits all have good resources that can help you take action.  However, these reports can only take you so far.

Go Hyperlocal

The most useful information is the “hyperlocal” conditions - what is happening on the ground at your nonprofit. As our ED, Kate Barr, says in her article for Nonprofit Quarterly:

“In all forecasts, ‘local conditions vary,’ and the most relevant information is the situation at an individual nonprofit organization. Only by clearly understanding its own financial position, strengths, and risks can a nonprofit develop strategies to respond to the economy and plan for the future.”

How can you get a handle on the conditions at your nonprofit? Our Assessment of Recession Risk and Preparedness for Nonprofit Organizations is a tool designed to help you quickly assess your organization. By answering these 20 questions, you will identify potential risk factors, immediate priorities, and proactive steps to take right away. Keep in mind; this is a first step, not an in-depth organizational assessment.

Whatever is happening on the ground at your organization, the Recession Preparedness Assessment provides useful information to help you better understand what’s happening and develop strategic responses. You can read the full article in Nonprofit Quarterly or download the Assessment from our website.

Re-Set Your Internal Controls

Internal controls are another factor that can impact a nonprofit’s stability. Smaller organizations in particular are often cited for lacking adequate segregation of duties in management letters.  Blue Avocado’s recent article,  Five Internal Controls for the Very Small Nonprofit, is a great starting point to help you strengthen your internal controls.  CPA Carl Ho outlines five main categories that are crucial, and do-able, for even the smallest organizations:

1. Set the control environment
2. Assign responsibilities
3. Physical controls - lock it up
4. Cash, always have two people count it together
5. Reconcile the bank statement

Read the whole article for additional suggestions and examples.  For more on this topic, you can participate in our webinar on February 22nd, Financial Policies for Internal Control.  You’ll receive sample board and management policies and learn how to customize them for your organization.

Know Your True Program Costs

More on everyone’s favorite topic - overhead! (If you missed our past blogs about overhead, and why we think it’s an overrated metric, start here.) Last week the Chronicle of Philanthropy hosted a discussion on Making Smart Decisions About Overhead Costs.  What cannot be said enough is the importance of knowing (and then budgeting for) the true, full costs of your programs and operations. As Daniel Stid of The BridgeSpan Group stated:

It goes without saying (but perhaps we should say it!) that having a clear view of the full direct and indirect costs of delivering a program is essential. We often encounter situations in which clients have failed to budget even for their full direct costs let alone so called overhead.

It has to be said, explicitly, because too many organizations do not know the actual costs of delivering their services.  We have a workshop dedicated to this topic, and I encourage any Minnesotans with questions to attend our April training Calculating True Program Costs.  If you don’t live here, or don’t want to wait until April, check out Nonprofit Cost Analysis: Introduction from the BridgeSpan Group.  It’s a thorough introduction and very helpful, although it may not be the most accessible to those without a strong financial foundation.

Update Your Bookmarks!

Intrepid nonprofit accounting guru and friend of the blog Alan Strand has has moved. Not-For-Profit Accounting remains a helpful resource, but for new content from Alan visit Nonprofit Accounting, a resource from the Nonprofit Center in Washington State.

Many nonprofit and social enterprise bloggers have the same idea.  My favorite was Nell Edgington’s ideas about Social Impact Finance:

It’s a new year and a new decade, and both hold tremendous promise for creating real social change.  And key to significant social change is a fundamental restructuring of how we finance that change.  I think (hope) that in the next decade we will see the emergence of a new Social Impact Finance.  And I imagine it will look something like this…

• Nonprofits Understand the Power of Finance. Nonprofit organizations understand and become successful at financing their overall operations, instead of fundraising for them.  And they begin to think bigger about their work, the overall outcomes they are trying to achieve and how finance fits into that (The GiveWell blog did a great series on the “Room for More Funding Question.”)

Another one of her predictions, Individual Donors Become a Powerhouse, echoes Kate’s post, The Year For “Right-Sized” Donations and the outpouring of support we have seen in response to the tragic earthquake in Haiti.

(For more on Haiti, I suggest visiting Philanthropy.com and PhilanTopic, which have done a great job covering this story from a nonprofit and philanthropic perspective.)

2010, The Year of the Board?

Is 2010 the year of the board?  Two blogs I read regularly are focusing on  governance to start the new year:

• Nonprofit Law Blog: 10 New Year’s Resolutions for Your Board
• January Risk Management Tip of the Month: Getting Your Board’s House in Order

Are you looking for ways to help your board of directors take their leadership to the next level? Check out our webinar Financial Clarity for Nonprofit Boards next Friday, January 29th at 2pm CT (3pm EST). This training is a great way to prepare boards to assess and pursue new financial strategies, as well as shore up their understanding of nonprofit financial reports, terminology, and responsibilities.

We offer a range of financial trainings throughout the year.  They are an easy and affordable way to enhance your nonprofit’s financial management. For more information you can visit our website or sign up to receive training updates.

New Year, New Rules

We know there’s a new 990. Since organizations operate with different fiscal years (our Fiscal New Year is also April Fool’s Day) how do you know which form to use? Not-For-Profit Accounting has a short explanation to help you:

When do we file the new 990? Read below or click here for a PDF of a general overview of the instructions.

Calendar year – Use the 2008 Form 990 to report on the 2008 calendar year accounting period. A calendar year accounting period begins on January 1 and ends on December 31.

Fiscal year – If the organization has established a fiscal year accounting period, use the 2008 Form 990 to report on the organization’s fiscal year that began in 2008 and ended 12 months later. A fiscal year accounting period should normally coincide with the natural operating cycle of the organization. Be certain to indicate in the heading of Form 990 the date the organization’s fiscal year began in 2008 and the date the fiscal year ended in 2009.

The Nitty Gritty

There have been many useful guides to the new 990. Here are some of my favorites:

• Not-For-Profit Accounting’s 990 To Do List
• From Guidestar: The Revised Form 990: A How-to Guide for Your Organization
• The Charities Review Council’s New IRS Form 990 Resources
• Eve Borenstein’s Form 990 Tips and Resources

In case you want to go directly to the source, these are updates and resources from the IRS:

• Form 990 Resources and Tools
• Form 990 Case Study - The New Form 990: Getting Started - Video Series Introduction - This series of videos, each between five and ten minutes long, are part of The New Form 990 Getting Started case study. Each video covers a key area of the Form 990, using facts from the case study.
• Form 990 Filing Tips archive
• Questions about Schedule A (Public Charity Status and Public Support) and Schedule L (Transactions with Interested Persons)
• IRS Stay Exempt Mini Course, including special features on how to file the new form and information about the revisions.

This is also a good time to review the Top 5 Compliance Problems for 501(c)(3) Organizations.

For folks interested in taking their analysis to the next level, check out The Door Has Opened: New Form 990 Creates Strategic Opportunities and Risks for Nonprofit Organizations.

Nonprofit Harvest

• What Does Grantmakers’ 2010 Funding Outlook Mean for Minnesota Nonprofits?
• Nonprofit Fiscal Rules for the “New Normal”
• Tips : Third Sector Connector : Nonprofit and NGO Tips, News, Best Practices, Resources
• Nonprofit Managers Say Top Investment Priority Is Having Assets in Spendable Form
• NFF’s State of the Sector Survey

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.

The Wall Street Journal Makes It Personal

Why is management advice to the philanthropic sector filed under personal finance?

This section includes commentary about foundation payout rates, general operating support, social enterprise, public-private partnerships, and corporate philanthropy - not personal finance. There is a related blog post on how financial advisers can help their clients maintain their charitable giving in a recession, but it’s not part of the special section.

At least the New York Times section on Giving is part of their US coverage.

Why It Matters

This might seem off topic, but when business leaders (and their publications) tell nonprofits how to behave, how to improve, how to be more efficient and effective, while also treating us as an afterthought, that’s a problem.  It underscore how little time and energy they spend thinking about the challenges - and possible solutions - for our sector.

And I think it also explains why often the rallying cry is “be more like business,” even when that doesn’t make sense.

Philanthropic Investments

If you read about Goldman Sach’s Foundation’s unusual investment strategies, you might be curious about “traditional” investments.  The ideas of prudence and risk management - because the funds are intended to benefit the community - underscore most philanthropic investment strategies.

In her blog post from last year, Jittery About Investments, Kate lays out some fundamental guidelines for nonprofits:

• Time Horizon – Funds that may be needed within a few months must be invested in highly liquid, safe investments. This is the most common type of investment fund for most nonprofits, composed of operating funds and reserves. In order to be assured that the funds will be available as needed, the investment choice must be readily available.

• Risk Tolerance – One of the fundamentals of investing is the balance of risk versus return. Investments with a higher return almost always also come with higher risk. The key question for nonprofit leaders and boards is to understand how much risk is involved and to decide if they can accept the risk. As an example, if the funds to be invested represent the balance of a large program grant that will be spent over the next year, then the organization can’t afford to risk the loss of any of the funds. A permanent endowment fund, on the other hand, is usually invested in a diverse portfolio that includes more risk in return for a higher long-term return.

• Responsibility – The nonprofit’s board of directors is responsible for overseeing this balance of risk and return for the health of the organization and any legal requirements. In order to fulfill this responsibility the board must act as prudent and loyal stewards of the organization’s assets.

Here are some additional resources:

• Notes from Endowment and Investment Policies
• The Chronicle of Philanthropy’s Special Report on Endowments
• The Care and Feeding of a Healthy Organization
• It’s 10 am, do you know where your cash is?
• Cash is Cash, Sometimes

Foundations can also use mission-related investments and program-related investments as part of their portfolio. Learn more about MRIs and PRIs:

• Aggregating Impact: A Funder’s Guide to Mission Investment Intermediaries
• Philanthropy’s New Passing Gear: Mission-Related Investing
• PRI Makers Network
• Program-Related Investing guide from Grantcraft

Nonprofit Harvest

• A four-part series from Nonprofit Capital Management’s blog on tax deductible business expenses
  • Transportation and mileage
    
  • Travel
  • Office moves
  • Education
• Fiscal Sponsorship Revisited from the Nonprofit Law Blog
• MCF Research on Giving Trends Released
• The L3C: A new business model for socially responsible investing

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.

Dealing with Uncertainty

McKinsey Quarterly’s article, How managers should approach a fragile economy cautioned business managers that the economic uncertainty is far from over. Uncertainly is something that nonprofit financial managers are well acquainted with. McKinsey continued with some suggestions for managing in this environment:

What else must companies do these days to survive and thrive? First, they must drop the pretense that they can predict the future. Second, they must continue adapting their management processes and capabilities with an eye to making better decisions under uncertainty—for example, by abandoning the fixed calendar and planning schedules typical of annual budgeting and operating processes. This change will require a shift to monitoring macroeconomic indicators in real time, something akin to “just in time” manufacturing approaches applied to decision making. It also means building greater flexibility into strategic activity by putting a greater focus on acquiring options, contingency planning, and the use of stage-gating techniques for committing resources.

If you want to employ some of these suggestions at your nonprofit, we have resources that can help.

Cash Flow

• Cash flow template
• Projecting and Managing Cash Flow Webinar

Scenario Planning

• Scenario Planning Example
• Scenario Planning Worksheet: A blank template for you to use

Additional Resources

• For more on scenario planning, check out Contingency and Scenario Planning - What’s the Difference and How Do Nonprofits Get Started? from PhilanTopic.
• To learn more about adapting your budget for greater flexibility, read Blue Avocado’s article, Focus on the Destination, Not the Route (Budget)!

Nonprofits are Awesome

The Harvard Business Review’s The Awesomeness Manifesto questions the constant calls for innovation.  Instead of innovating, it suggests that businesses should focus on what is awesome about their product or service:

Love. You know what’s funny about walking into an Apple Store? The people working there care. They don’t just “work at the Apple store” — they love Apple…the goal of Apple Store employees is simply to show off their awesomeness, and let you share it [rather than sell a product]. Love for what we do is the basis of all real value creation.

Reading this, I was struck by how much love exists in the nonprofit sector. We are here because of the mission.  How can we better tap into this love, the awesomeness of what we do?

Some more food for thought at the Nonprofit Quarterly’s article, Nonprofits: We Must Start Beating the Drum and the v3 campaign’s efforts to raise the profile of our sector.

Nonprofit Harvest - Updates on the 990

• IRS Releases Tips for Attachments to the Form 990 Tax Return
• IRS and 990 Resources from Not-For Profit Accounting
• Sample Policies:
  • Board Operations from the Community Foundation of Sarasota’s Nonprofit Resource Center
  • Model Documents and Policies from the Charities Review Council