We’re pleased to bring you this guest blog post from Don Tebbe of LifeAfterLeadership.com. Learn more about this topic and succession planning, both new benchmarks in the Standards for Excellence Version 2.0 when Don presents at Maryland Nonprofits Special Event, The Standards for Excellence Forum on May 28th in Baltimore, Maryland.
Click here to register to attend The Standards for Excellence Forum.
Every Nonprofit CEO Should Ask
By Don Tebbe, April 24, 2014
The goal of sustainability planning is to ensure that your organization remains a high-value community or societal asset over time. When an organization’s financial sustainability comes into question it’s often due to a financial shock of some sort. More often than not, there are other sustainability problems beneath the financial one. Building a sustainable organization requires attention to more than just the finances.
Several years ago I conducted an extensive literature review and correlated the results with cases from our consulting practice – exemplary organizations as well as those that were struggling. What I found was that sustainability hinges on four core elements – strategy and business model, leadership, resources, and culture. Here are some high-level questions you can ask about each of these areas to build a more sustainable nonprofit.
1. Business strategy and business model
A business strategy is a top-level plan that defines your organization’s future direction. Powerful nonprofit strategies start with an impact vision, e.g., “Boost the District’s high school graduation rate to 95% by…” It should also position the organization in the market and define a future state. Do you have a strategy in place? Does it state your intended impact – how the world will be different? Does is set an inspiring direction? Does it position the organization to meet future needs and demands? Do your board and staff understand it? Are you in action – actively pursuing it?
A business model is a component of strategy and it describes how your organization creates and delivers value, and how it gets paid for that value-creation process. Do you, your executive team and board have a clear understanding of the key elements of your business model? (Your target customer. The customer problem or challenge you solve. The value you deliver. How you define and differentiate the services you offer. How you reach, acquire and keep customers. How you generate revenue. Your cost structure and margins.) Where are the vulnerabilities in your business model and how can you address them? How future oriented is your business model?
Good executive and board leadership are critical to sustainability. Do you have the right executive team in place to meet the current and future leadership needs of the organization? Do you have succession plans to ensure leadership continuity? Is your board an asset to the organization? If not, what changes need to be made? Is the board adequately covering the three core roles of a board: (1) shaping mission and direction, (2) ensuring leadership and resources, AND (3) monitoring and improving performance, including its own?
Resources are financial as well as nonfinancial. In the financial arena: Are recent trends and future outlook for revenue and expenses headed in a positive direction? Do you have sufficient financial resources to meet commitments for next few months? Are your revenue streams properly diverse and—here’s the key—will they be long lasting? Do you have a resource development strategy in place? Is there a sound link between your business model, your strategy, and your resource development plan?
Your review should also include the “soft assets” (non-financial assets) that underpin sustainability. These fall into two key areas: (1) social connections and reputational capital (who you know and who you are known as); and (2) human and organizational capital (what you know and what you know how to do. This includes knowledge, systems, intellectual property, team capabilities, and leadership capacity). These are genuine assets that the organization deploys in the pursuit of its mission. They are every bit as much an asset as the financial resources, buildings, and computers. Sustainable organizations are asset builders. What are the soft assets critical to your mission? What’s the current state of each of those assets? How’s your stewardship of those assets? Is there a place to improve?
4. Organizational Culture
The final element of sustainability – often most slippery and overlooked – is organizational culture. How resilient is your culture? Do you bounce back quickly from setbacks? How agile or nimble are you? How engaged, cohesive, and energized are your board, staff, and volunteers? Could virtually anyone on the team make a compelling case for support to a potential donor?
Organizations are complex systems and each of these elements must work together to further sustainability. A change in one area, successfully implemented, will likely require changes in other areas. For example, strengthening your business model might require developing core capabilities (resources), which might require a change in your executive team (leadership) and maybe a shift in culture to sustain the change. That might lead to an adjustment of board roles and expectations (both leadership and culture).
This article can only touch on the topmost questions, but you can boost your organization’s sustainability by making these questions the focal point of a sustainability planning meeting with your staff and board.
Don Tebbe (dontebbe.com) is a planning consultant based in Montgomery Village, Maryland. He is also the founder and editor of LifeAfterLeadership.com, a website dedicated to helping retiring leaders develop exit plans and explore life’s next chapter. He previously was a cofounder of TransitionGuides. Don is the author of Chief Executive Transitions: How to Hire and Support a Nonprofit CEO, published by BoardSource and winner of the 2009 Terry McAdam book award. He can be reached at (240) 813-4681 or Skype: dontebbe.
Connect with Maryland Nonprofits on Facebook, Twitter, LinkedIn, and Google+, tell us what you think and what kind of topics you would like to see more of on our blog.