Nonprofit Starvation—the way of the world?

boxiconToday we see numerous nonprofit organizations struggling to deliver worthy services to an even more worthy constituency.  Drastic budget and programming reductions to offset falling revenue seems to be the order of the day.  Is it recent “funding cuts” or something else?

Research conducted by Stanford Graduate School of Business (The Nonprofit Starvation Cycle, Stanford Social Innovation, 2009) points to a much more endemic and systemic culprit as the prime cause of nonprofit budget woes.  According to the work done by Gregory and Howard, it is the pervasive lack of sufficient infrastructure in nonprofit organizations that has, in the current climate, many nonprofits teetering on the edge of oblivion.

Shipwreck at Sea # VectorNonprofits routinely try to “make do” with the weakest of systems and the absolute fewest number of staff to “keep the doors open.”   They do so largely out of a misplaced focus on being “efficient”—that is always the low price—and the expense of being “effective.”  Such narrow margins lessen the quality of services and threaten the very existence of the organization with each foul wind.

Organizations create a no-win by telling their donors that 100% of their gifts always go to programming with none to administration.  Such a claim is misleading, at best, and an outright fabrication, at worst.  All activities have administrative costs.  Every business owner, no matter how “efficient”, knows this.  Nonprofits are no different.  They need office space, computers, properly trained staff and the ability to generate revenue.  The watchword here is “sufficient” not “minimal.”

So how do we break this vicious cycle?  Begin with an honest engagement of your donors and continue with an ongoing emphasis upon effectiveness and outstanding outcomes.  Principle 2 of The Eight Principles of Sustainable Fundraising® is Begin at the Beginning™.  Change lives.  Leave efficiency to the assembly line.

This article first appeared here on 10 March 2010.  It is repeated by request.

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