Top Challenges Facing Nonprofit Organizations
Information drawn from regional and national studies on the challenges facing nonprofit organizations indicates that several themes are shared as concerns for nonprofit leaders. Board development and fundraising are top issues for nonprofits with a secondary emphasis on challenges related to improving operations and managing resources more effectively.
EMERGING ISSUES
Some critical concerns were commonly identified in the studies, which surveyed nonprofit CEOs and board members. Five main themes emerged clearly from the problem inventories of the various reports. These suggest areas of most pressing need as indicated by nonprofit leaders:
1. Board Development – The most frequent concern was the creation of an active and strategically oriented board of directors. The specific problems identified were:
Recruitment of high-impact board members
Cultivate a dynamic and effective culture among board members
Foster a strategic direction for boards
2. Marketing/Fundraising – Developing effective marketing programs to recruit and retain donors was also a high priority. In particular, respondents were concerned about:
Application of marketing/technical communications to donor outreach activities
Expanding your current donor base
Increase donations from current donors and improve donor loyalty and retention.
3. Information Management: Using effective information management to measure and evaluate operations and programs was also very important.
Establish a clear set of quality benchmarks for evaluating services
Use of IT to reduce costs and create value
Evaluation of programs/services against key performance measures
Establish a better model for measuring and reporting results
Measurement of the real benefit of investments in development and marketing
Design a consistent approach to measuring organizational performance and impact
4. Human Resources: Attracting, developing, and retaining productive staff and volunteers was a critical concern:
Attract and retain qualified personnel
Attract trained and motivated volunteers
Develop a leadership transition and succession plan
Improve workforce performance
Provide ongoing training and skills development
5. Collaboration: Seeking constructive alliances, partnerships and mergers was also an important theme.
Develop collaborative partnerships with public sector agencies, including government.
Forging partnerships with the private sector
Pursue mergers with overlapping services/agencies
Extrapolating from these themes, a sixth theme is implied as a complementary concern:
6. Business Competence – The need to adopt the essential business skills and processes to effectively address the needs identified in these five main themes.
EXTERNAL INFLUENCES
Various changes in the operating environment of the nonprofit sector are affecting leaders’ perceptions of the issues they face.
Funding Challenges: Many nonprofits are simultaneously facing a rapidly changing funding environment and an ever-increasing need for services from the communities they serve. Reduced or narrowly focused government funding is putting great pressure on the sector, which has also seen a proliferation of new nonprofits over the last decade, increasing competition for a smaller pool of funds. Countless nonprofits are feeling the impact of federal cuts in their main funding streams at the same time endowments and foundation donations decline, and many state and local governments are experiencing deficits that are reflected in spending reductions. in social programs.
Accountability pressures: As a result of some high-profile cases, nonprofits face powerful accountability pressures to provide measurable evidence that the services they provide impact the communities and populations they serve. that they are heading Funders and the public want to know in detail whether the funded organization is effective in doing what it sets out to do and also efficient in what it does. While gaining and maintaining public trust is absolutely essential, calls for accountability can lead nonprofits to spend more time seeking financial support and accounting for the performance of funded tasks in order to continue receiving funding. from the source. This can make nonprofits more like businesses, but it can also divert attention from responding in innovative or distinctive ways to community and/or customer needs.
Fascination with collaboration: Government and foundation funders increasingly require the use of inter-organizational relationships, such as collaboration, partnerships, and alliances, as an element of funded projects. Yet while there is a growing body of knowledge about the factors that support the effective negotiation and integration of strategic partnerships, much less is known about the actual results nonprofits experience and how they compare to expected results. . Many nonprofits expend large amounts of organizational energy for questionable returns as they pursue interorganizational relationships. Nonprofit organizations often encounter significant barriers to collaboration, such as issues of autonomy and “tourism,” conflicting organizational cultures, and building trust between organizations.
ADAPTIVE IMPLICATIONS
Responding to these difficult circumstances requires adaptations that involve more than simply developing additional financial support.
Leadership Challenges: The health of the nonprofit sector depends on the quality of its executive leadership. Agency leadership, including board members, must be able to ask critical questions related to strategy, mission, and responsibility, as well as the roles their organizations play within their communities. For many nonprofits, responding to changes in the environment means an increased need to:
Determine the most effective way to serve a customer population that may be growing or changing;
· Develop strategies and processes to access and manage new funding streams;
· Decide where and how to make budget cuts;
· Develop information capture technology for reporting and billing;
· Manage cash flow challenges;
· Consider new partnerships, explore possible collaborations and consider mergers or acquisitions.
Given the challenging changes in the typical nonprofit work environment, effective board leadership becomes particularly crucial. The issues facing the nonprofit sector underscore the need for responsive, trained, and effective board leadership to maintain and improve the quality of organizational performance. It is appropriate for nonprofit boards to take a leadership role in assisting agency management with critical issues such as mission definition and strategic planning, legal compliance and conflicts of interest, management oversight agency funding, resource development, establishing inter-organizational collaborations, cultivating community relationships, and capacity-building training opportunities.
Management Challenges: Nonprofit managers are challenged to perform multiple functions and roles as they guide their organizations through today’s complex environment. They must be highly trained not only in the technical aspects of their organization’s mission, but also in managerial areas such as finance, human resources, information technology, program evaluation, resource development, and many other managerial responsibilities. Furthermore, an organization’s human resources represent the collective capabilities and experiences of its people. Unfortunately, nonprofits often face challenges when it comes to actively managing staff talent. Attracting and retaining qualified staff, as well as increased responsibility and competition, creates a need to develop the specialized skills and business processes required of for-profit organizations. Consequently, like their counterparts in the business world, nonprofit managers must continually seek out and use the latest organizational management and leadership methods and techniques.
IMPLICATIONS FOR SUCCESS
Restoring the six needs identified as positive attributes indicates that resilient nonprofits will have:
1. A strong governance structure and visionary board members with the right skills and access to resources.
2. Sufficient and flexible financing.
3. A defined set of best practices in service and management functions and an effective way to measure performance against these benchmarks.
4. A skilled workforce that operates in a culture that facilitates opportunities for innovation and growth.
5. Effective community relationships that include collaborative partnerships with other providers, funders, and other organizations and systems.
6. Management capacity to support services, including accounting, human resources, technology, and marketing/development functions.
A PRESCRIPTION IN SEVEN STEPS
Viewed from this perspective, there are seven actions nonprofits can take to achieve these characteristics and address the challenges they face:
1. Conduct an organizational assessment and create a strategic plan to address any capacity gaps.
2. Engage board members to ensure quality governance structures, practices, and oversight.
3. Embrace and adopt strong marketing and communications strategies.
4. Develop business skill sets and integrate basic business practices and tools.
5. Identify and implement appropriate metrics and make better use of technology to enable evaluation of the success and impact of service and program delivery, as well as internal operations.
6. Institute progressive HR practices focused on skills and team building.
7. Explore and adopt new collaborative business models with complementary organizations.
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