As board members and volunteers rotate in and out, the task of how to create a sustainable organizational culture for nonprofits and keep the momentum going is challenging at best. Concern over sustainability gives donors pause, and it can seriously impact the morale of everyone involved with your organization. More importantly, struggling nonprofits may not have the resources to continue their programs and activities, and that has a direct impact on your benefactors.
Culture can exist on its own, and when it gets off course, it can seriously derail your board’s efforts. It’s better to build a sustainable organizational culture intentionally. Many things go into building a culture – your core values, the right people, communication, teamwork, past lessons, and so much more.
To assist your efforts in creating a sustainable organizational culture for your nonprofit, we’ll walk you through some of the common definitions of a sustainable organizational culture and describe how to help your board build a culture that reflects long-standing viability.
Drilling Down the Definition of a Sustainable Organizational Culture
Nonprofit governance hasn’t evolved to a point where there’s a standard, acceptable definition for a sustainable organizational culture (not to be confused with sustainability in an environmental sense).
Depending on who you ask, you might get one of the following definitions:
- Having the ability to attract unrestricted funding for multiple years.
- Becoming self-sufficient through the sale of goods and services.
- Having a diversified revenue stream.
- Understanding and funding all costs, including direct and indirect costs.
Nell Edgington, author and social change agent, defines a sustainable organizational culture this way, “Nonprofit sustainability occurs when a nonprofit attracts and effectively uses enough and the right kinds of money necessary to achieve their long-term outcome goals.”
While aiming for unrestricted multi-year financial commitments sounds like a worthy goal, it’s not easy to attain. Typically, foundations are the only nonprofit funding source that even considers making multi-year rounds of funding. Even if your nonprofit gets the support of a foundation, research shows that financial support from foundations only accounts for 2-3% of the revenue that flows to the nonprofit sector. It’s a drop in the bucket compared to what it takes to make a nonprofit sustainable.
As for diversifying your revenue stream, many nonprofits find that it’s the best way to ensure sustainability. That said, nonprofit funding isn’t one-size-fits-all. A fair number of nonprofits manage quite nicely with just one or two main revenue streams.
No matter how your board defines organizational sustainability, it’s essential to consider the various issues that help your nonprofit to be sustainable for the present and for the future.
Issues That Factor into Nonprofit Organizational Sustainability
When most people think about sustainability, they generally relate it to finance. While finance is a major factor in keeping nonprofits sound and strong, sustainability also pertains to leadership, adaptability, and strategic planning.
For most nonprofits, funds are scarce and limited. It’s common for nonprofit boards to struggle with how to find the balance between allocating funds, reserving funds, and investing. Every budgeting decision your board makes affects short and long-term sustainability.
Sustainability also pertains to the quality of your nonprofit’s leadership. Your nonprofit can’t run well, if at all, without strong, continual leadership. Succession planning, including emergency succession planning, ensures that your nonprofit will always have strong leadership.
To be sustainable, your nonprofit must be adaptable. The world is changing in too many ways to count – economically, socially, environmentally, politically, etc. Everything has an impact on the nonprofit sector. Trends come and go, new regulations are continually forming, and the unmet needs of society are prevalent. Nonprofits that are adaptable stand the test of time.
Annual strategic planning is important for sustainability because it allows your board to set goals for the future and identify the obstacles, risks, and challenges that stand in your way. Strategic planning also presents opportunities to integrate your board’s vision for sustainability into the plan, and that’s a good first step toward communicating your culture to your stakeholders.
Creating the Right Mindset for a Sustainable Organizational Culture
To create the right mindset for anything, you need to keep it at the top of your mind. The same is true for creating an organization-wide culture of organizational sustainability. Incorporate the principle into every part of nonprofit governance wherever you can.
Financial activities are a good place to start because they’re intrinsically connected to sustainability. Review your nonprofit’s budget at least quarterly, and encourage your board members to ask questions about line items. Be sure to budget adequately for overhead costs and monitor them. Nonprofit boards typically spend about 25%-35% of their budgets on overhead.
Incorporate long-term planning into your strategic plan. Make it a point to connect long-term goals to sustainability.
Fundraising is often a year-round activity for nonprofit organizations. Set fundraising goals that align with your strategic planning goals and sustainability efforts.
Despite some board members’ beliefs, your nonprofit doesn’t have to operate on the bare minimum to survive. It’s not necessary for nonprofits to spend all their funds just because they’re classified as nonprofit entities. In fact, governments expect nonprofits to be sustainable, and that means maintaining a reasonable financial reserve. When your organization operates too lean, you’re always playing catch up financially, leaving insufficient funds to invest in the infrastructure.
Before applying for grants, consider the strings that are often attached to them, and make sure they don’t constrain your funds so much that it risks your nonprofit’s sustainability. Grantmakers don’t usually support infrastructure needs, and your board will need to come up with other ways to fund those costs.
Get a consensus in the boardroom about whether it’s better to rely on one major funder or diversify your efforts by pursuing multiple funders. Allow enough time to make grant applications. It can take anywhere from 50-100 hours to complete a grant application.
As your board explores ways for how to create a sustainable organizational culture, it’s essential to get organized. Digital tools, such as a board management system by BoardEffect, will help you do the legwork of strategic planning and budgeting and give you the tools for collaborative work to ensure your nonprofit is sustainable now and for many years into the future.