Creating a framework to support sustainabilityThe heart of a society is the care that people have for one another. The expression of that care is often played out in the nonprofit sector, including charities and nongovernmental organizations, or NGOs, of all types.
As the role of the state in government services declines, it's often the nonprofit sector that steps in to meet the needs of the people. In fact, the trend line suggests that communities and even nations are becoming more reliant on the nonprofit sector than ever before. How the nonprofit sector responds to this increased demand is of global importance.
To assess the growing role of the nonprofit, consider that the U.S. nonprofit sector reported revenue of $2.26 trillion in 2013. That's 13.5 percent of the U.S. gross domestic product for the same year and just slightly less than the entire gross domestic product of Brazil. The value of the U.K. voluntary sector for the same time period was an estimated £12.2 billion.
In addition to economic terms, we must also recognize the nonprofit sector in its support of humanity. In the words of Shaugn McArthur, advocacy and government relations adviser at CARE Canada, NGOs have evolved to become the de facto guardians of the interests of humanity — filling the gaps in global governance where governments lack a foothold in sustainability.
Rather than depending on philanthropy and capacity building, however, today's nonprofit leaders must look toward long-term sustainability. This requires a new framework built on continual improvement and knowledge sharing.
Defining a sustainable nonprofit enterprise
Beyond traditional capacity building, the term "sustainable nonprofit enterprise" encompasses not only capacity, expertise and funding streams, but also human capital and the synergy an organization develops with its stakeholders — often over many generations.
The use of the term "enterprise" rather than "institution" is deliberate. To be successful, an enterprise must navigate ever-changing funding requirements and evolving policy and societal complexities. The sustainable nonprofit enterprise has a degree of nimbleness and cohesiveness that allows the organization to adjust its course as needed.
Indicators of a sustainable nonprofit enterprise
Leading indicators of a sustainable nonprofit enterprise include:
An effective, dynamic board
Key qualities of an effective board include:
- Regular self-reflection on board member commitment and individual contribution of time, talent and resources
- Clarity in the board's role regarding oversight, duty of loyalty and fiduciary accountability
- Dynamic synergy and trust between the board of directors and the executive director or chief executive
- Comprehensive recruitment, selection, training and mentoring of new board members — not only on the nuts and bolts of the organization, but also its mission, values and spirit
- Effective succession planning
Education for aspiring leaders
Among the most dramatic trends within the nonprofit sector is the aging of the current base of nonprofit leaders. To prepare aspiring leaders to assume these roles, the nonprofit sector must create a standard expectation for executive education — such as a master's degree in public administration, nonprofit administration or business administration and completion of an executive development program. Applied knowledge from programs such as these will provide the necessary background for successful nonprofit leadership.
Careful revenue or portfolio management
The notion of philanthropy lies at the center of the nonprofit sector. Along with a continued focus on gaining new donors and funders, however, nonprofits must also strengthen relationships with government entities and look to opportunities in fee-for-service areas or third-party billing. Management of revenue generation, return on investment and net asset margins is crucial for long-term sustainability.
Effective talent management
Bringing human resources capacity into the organization — either through an outsourced provider or in-house HR staff — is a clear threshold of capacity building for a nonprofit. Initial capacity building in human resources focuses on issues such as employee policies and procedures, training and development, performance evaluation and human resources information systems.
The next HR milestone is moving into the realm of talent management — a value, culture and set of guiding principles that support the long-term development of its employee base. As a culture, talent management recognizes the critical role of recruitment, onboarding and professional development for long-term employee relationships and enterprise sustainability.
Talent management requires:
- Trust between an employee and his or her supervisor
- A mutual understanding of the employee's intrinsic motivations and career objectives
- Opportunities within the organization for such growth
Talent management also supports succession planning at all levels of the enterprise, ensuring that the organization has a critical mass of employees who not only retain institutional knowledge but add to it over time.
Embracing the new era
The nonprofit sector is entering an era beyond capacity building. It is the era of the sustainable nonprofit enterprise. It is my hope that this article sets the stage for a new beginning in which those of us who are concerned about the long-term direction of the nonprofit sector work together to advance our understanding of applied theory, to support nonprofit executive development and to ensure the future prosperity of the sector. Doing so will support the love of humanity that is at the heart of society.