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Most non-profits operate alongside earned income-generating activities. In Canada, in a survey of 7,000 plus registered charities, 42% of them were involved in some form of income-generating activities. This is not an unusual. For charities to float, they need monies to cover for their general administration costs and most of the time they employ volunteers to implement these while paid staff focused on their mandates. This is also not an aberration since half of 170,000 charities and non-profits in Canada are entirely run by volunteers.
The survey did not look at how effective these activities are in actually tipping the point towards diversified financial portfolio leading to greater financial and organizational sustainability. One thing is that majority of these charities have very modest assumptions of growth in revenue noting that these activities ended up supporting programs rather than investing in areas of strategic value.
This is definitely an underfunded, underutilized area in sector development that very few studies have been produced on this account. While non-profits are created for societal good, the benefits of having a thriving and robust income-generating activity are hugely untapped. It seems that this for-profit versus non-profit mentality is still prevailing in this sector which did not actually help organizations move from a position of greater knowledge and capacity to handle the shift from merely conduits of public money to actual running an activity much less an enterprise.
How can an organization begin to understand that this is not just a way to get money but to integrate this in their overall strategy for financial sustainability? With financial freedom comes the ability to pursue to grow, innovate and evolve in different means. Here are some pointers to follow:
1. Align the income-generation to your mission-vision-goals and values
Clarify what the purpose of these activities and ensure that it aligns with the organizational fundamentals. Most non-profits do this on the seat of their pants just because they can charge a fee for this and that. This is very counterproductive because without a purpose, the organization will end up scattered, scrambling for the next money-making adventure and the next shiny object leaving them tired, frustrated and disappointed of its results.
Figure out what is the overall business value of this enterprise in your organization. What are the short term, midterm and long term plan for these activities and what business requirements are needed to be marshaled to be successful?
2. Run it like a business
There is something to say about being professional about it. In most cases income-generation activities do not compete well with profitable business because they do not run it like so-to generate value to customers.
Charity thinking is a hindrance to creating value. Your story is as good as the value of the product or service you bring to the table. Staff it with people that understand the business aspect of this enterprise and free them from unnecessary control to be able to deal with the market place with nimbleness and adaptation.
3. Invest in developmental areas
I was sitting in a board of an organization years ago that collects surplus from their income-generating activity year after year after year. It pains me to see that this fund will become an emergency fund once the organization decides to fold up. It has no vision but to become another program in itself. We can do better than that.
Tied public money is risk-averse. This will not let the non-profit innovate or take on risky projects unless it is proven to be the way of the future. Earned income can be used to invest in important developmental areas in the organization such as organizational development, innovations in programming, and novel experiments that will not fly with traditional donors but has the potential to create an expansive effect for the organization. Use that earned income strategically.
4. Evaluate and share your experience
Surround your organization with supporters that understand the value of these activities in your organization. Yearly evaluate these activities if they are meeting your goals and expectations. Remember that there is always a leg room to make mistakes because there is no such thing as a perfect enterprise, only a learning enterprise. Learn from the non-profits that have a thriving income engine side. They have learned the art of balancing social good with a good business model.
The for-profit versus non-profit is a false dichotomy. Having income-generating activities alongside the core mandates should not be a pain. Ensuring that the value that these activities provide to the organization is internalized and articulated to all parts of the organization can make a huge difference. Learn the best business model that works for your organization and reap the benefits and advantage of being financially sustainable.
Thanks for reading this article. Let me know what works for you. Did I miss something important?
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Looking for new people to appoint on your boards, committees, and commissions for next year? Why not take a closer look on how you can diversify the board to attract the best set of talent.
We all know the benefits of a diversified group of people that are aligned on a specific task, goal, project or mandate. Intelligent organizations harness, cultivate, and encourage this diversification in order that the fruits of real collaboration, creativity, and non-linear thinking are reaped.
Some of these benefits are:
1. Diverse Boards bring added value and competence
Boards that come from diverse backgrounds in terms of age, ethnicity, faith, ability, educational attainment, occupation and socio-economic level have a differentiated understanding of the social realities that civic and voluntary organizations face on a day-to-day basis. They are keen in generating solutions to complex problems through creative appraisal and through their own exposure from their ethno-cultural or social environments. These cultural and social intelligence add a dimension to creative problem solving and collective decision-making work.
2. Diverse Boards expand the horizon of the organization
Organizations undergoing strategic planning or long-term organizational change management can benefit from a diverse set of committee members. They provide the “eyes and ears” of the organization from the wider communities of practitioners and a strategic outreach to the expertise, experience and contacts the organization needs in order to achieve its strategic/business plan and projects. With the right combination of expertise in the Board, the organization will have the potential to ‘stretch’ itself to be flexible and viable especially during financial hardship and/or leadership/organizational crisis.
3.Diverse Boards challenge the status quo
Diverse boards bring to the table a variety of perspectives that may challenge the ‘usual’ way of doing and looking at issues. They are confident about their experiences, perspectives, and insights coming from their unique backgrounds and life/work experiences that will bring to bear in formulating new paradigms of practice and skills necessary to navigate governance and leadership issues as they arise.
4. Diverse Board is a project of the whole organization
The Executives and the members of the organization should endeavor to find the right mix of diversity within their Board at a given time. It takes conscientiously effort in bringing the combination of expertise, experience, and diverse backgrounds that will complement the organizations’ capacity and ability to manage change in a sustainable way. The organization should be ready and able to embrace a diversifying set of governance leaders that are equally empowered to make change happen. This diversification can take years until its place is secured in the values and best practice of the organization.
Are you ready to take on a diverse board? Is your organization ready to reap the rewards from it? Not yet, check out my next blog on what to do.
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It`s beginning to look a lot like Christmas. The rush is set. While offices are struggling to close their programs and implement Christmas-themed services, eyes are on for next year. In an inter-agency meeting I attended, people from different service organizations shared their wishes for New Year. Most responses are about money- maybe a new or renewed funding, more donations, more collaboration or partnerships, higher client intake, better office space, so on and so forth.
It is obvious that it is easy to say that they would like more money for their agencies. Yes money is important. It helps the organization create more, better quality programming with adequate staffing to look after community needs. But this is more of the same. For most organizations, the default is status quo.
For a lot of non-profits, for profits and governments, a new year besets a closer look at their operational plans. Is it time for another strategic planning? What happened to the last one? While hoping that more money will come, what exactly does more money mean for the organization? As executives, it is important that to see the big picture-the forest from the trees. A strategic planning may prove to be useful in determining if the agency is just surviving or thriving, should be doing more with less or doing less with more. The difference lies in the detail.
We all know the benefits of the exercise-it is both a process and an outcome-a real written plan. From my experience being involved in a number of strategic planning and thinking, most of these plans do not survive contact with reality. But yes, planning is everything.
Tired of becoming just another rote exercise, here are some tips to see the three decades old process in a new light. Aha moments do not have to come from an expensive retreat environment.
First, Strategic Planning process is a stock-taking process. It is an opportunity to stop and take stock of what has been achieved in the direction that has been chosen in light of rapidly changing environment. The world has changed for the past five year that a plan to engage in social media is not an innovation, it is a standard practice. Revisiting the reasons why certain choices prevailed over others reveal so much about the realities, options and considerations at that time. Harvesting the experiences of what worked, not worked, and all the unintended, unexpected, negative results including failures can be very effective if done right.
Second, Strategic Planning is a visioning process. To envision a future is not necessarily to look at the past. Once upon a time this was the norm. In a disruptive economy, the achievements of the past are no longer the best predictors of success. The challenge for today’s organizations is to understand that there is no real blueprint out there. It is through adaptive capacity that organizations can have a reasonable handle on a set of givens in light of the volatility and unpredictability of the external environment.
Third, the Strategic Plan can be a powerful strategic communication tool. Good intentions plus good stories do not cut it. Donors, funders, and stakeholders would like a clear, simple yet compelling explanation as to the direction the organization is taking and that the organization has given a fair amount of thinking looking at capabilities, resources, tactics, and culture that are required to move the plan from paper to implementation. The challenge is not to come up with a flawless plan but that it is a just right guide for the organization in turbulent times.
Money can buy an office space or get new programs going but a good solid strategic plan will take the organization farther than its initial investment.