The Not-For-Profit Organization’s Life Cycle: Mature Not-For-Profit Organizations Face Changing Priorities

KEN TORNHEIM, CPA, CFE

Successful not-for-profit organizations typically proceed along a standard life cycle. Their early stage precedes a growth period that runs several years, followed by maturity. The maturity stage generally begins around an organization’s eighth year. By this time, the not-for-profit organization has built its core programs and achieved a reputation in the community.

However, no organization can afford to rest on its laurels. In fact, mature not-for-profits often face a critical fork in the road. The next step can lead to renewal or possibly stagnation and eventual decline.

Shift to Financial Sustainability

If you lead a not-for-profit organization in the maturity stage, you should set your sights toward sustainability. By now, your organization should have a good handle on its current resources and be adept at forecasting its needs. From a financial perspective, that means maintaining sufficient cash on hand to support daily operations, as well as adequate operating reserves. This also may be the time to initiate your planned giving and endowment efforts to sustain programs into the future.

Your organization probably requires more funds than ever. However, an organization of this age must be wary of “mission drift,” which happens when an organization begins to make compromises to generate funds rather than stick to its mission.

At this point, organizations often see more program and operational coordination and more formal planning and communications. Your not-for-profit organization also may explore the possibility of alliances with other organizations. Such affiliations can both extend your organization’s impact and increase its financial stability. Alliances also can help reinforce your mission focus and prevent your organization from getting too bogged down by policy and procedures.

The Mature Board of Directors

Another way to increase financial stability is to add members to your board. A mature organization’s brand identity may enable it to attract more wealthy, prestigious and well-connected members. Ideally, these members will have more to offer than simply money, such as expertise in a certain area or a strong personal commitment to your mission.

As your executive director and staff concentrate more on operations, your board needs to take an even greater leadership role by setting direction and strategic policy. The board may become more conservative, though. (The boards of younger not-for-profit organizations are usually more entrepreneurial and willing to take risks because less is at stake.)

Program Considerations

When it comes to programming, mature not-for-profit organizations must take care not to be lulled into complacency. It’s important to regularly review your programming, including the actual curriculum or content, for relevance and effectiveness. Your strategic plan should focus on the long range and may outline new opportunities.

Surveys can be a good way of keeping up to date on your constituents’ needs and interests, which can change over time. The results might lead to dramatic changes. One literacy not-for-profit organization, for example, stayed relevant to its community by shrinking its literacy programming and offering more English as a Second Language services instead.

Celebrate, but Strive

In today’s competitive environment, any not-for-profit organization that makes it to maturity has reason to celebrate. To continue to serve your mission, however, your organization must be strategic in both financial and program planning.

For more information, contact Ken Tornheim at [email protected], or call him at 312.670.7444. Visit ORBA.com to learn more about our Not-For-Profit Group.

Newsbits: Winter 2017

MARVA HARRIS, CPA

ALS Association Continues to reap benefits of Ice Bucket Challenge

The ALS Association announced that research funded through donations from its 2014 “Ice Bucket Challenge” has identified a new gene that contributes to the disease and that can become a target for drug development. The association also announced a new campaign called “Every Drop Adds Up” to follow up on the “Ice Bucket Challenge,” which raised about $115 million globally. It is a good reminder of a “best practice”: Keep donors informed about how their donations make a real difference to potentially generate subsequent donations.

Legacy Not-for-Profit Organizations Go Digital to Attract Millennial Donors

Large organizations such as United Way and the American Red Cross are turning to online appeals to reach Millennial donors who are “rewriting the rules of fundraising,” Adweek reports. Millennials grew up using smart phones and laptops and expect to do their giving online. One of the biggest challenges for not-for-profit organizations is engaging these donors through new fundraising channels. The not-for-profit organizations are responding by ramping up efforts in crowdfunding, mobile/social sharing and other digital modes of giving. United Way, for example, raised $570,000 for its “Restore Baltimore” campaign via crowdfunding. Digital funding helps Millennials to share their charitable giving and enable not-for-profits to connect with potential donors.

Fitness App Leverages Pokémon GO Craze

The fitness app Charity Miles, which lets people raise money for more than 30 charities by tracking the distance they walk, run or bike is now allowing users to collect miles while playing the popular Pokémon GO game on their smartphones.

As players roam their cities and neighborhoods in search of Pokémon characters, they can participate in the Charity Miles Pokémon GO Challenge. For every “Challenge Team,” the organization pays charities out of a pool of money from corporate sponsors, in proportion to the miles accumulated for each charity. For every mile walked 25 cents is earned for your chosen charity, and for every mile biked 10 cents is earned. There is a cap on the total amount paid out each year.

Survey Sheds Light on Hiring Challenges

According to this year’s Nonprofit Employment Practices Survey™ from Nonprofit HR and GuideStar, the ability to pay competitive wages ranks as the top staffing challenge faced by nonprofits for the fifth consecutive year. Since 2014, the second largest challenge has been finding qualified staff.

Organizations have the most trouble retaining employees in direct services or positions that work directly with clients, followed by fundraising development. And these are areas where the most job growth is expected in the coming year, suggesting the possibility of more staffing problems going forward. Some of the major obstacles of 2016 range from troubles with the Affordable Care Act (ACA), to the latest revision of the overtime rules and regulations.

For more information on the topics discussed in these stories, contact Marva Flanagan or your ORBA advisor at 312.670.7444. Visit ORBA.com to learn more about our Not-For-Profit Group.