Breaking the Nonprofit Financial Glass Ceiling

Nell Edgington

I received some great responses about my last post, “Why Don’t We Make Big Bets on Nonprofits?” One of the recurring questions in those responses was “How do we change nonprofits and the nonprofit sector to be able to absorb bigger investments?”

The fact is that a financial glass ceiling exists for nonprofits — a limit, which many nonprofits hit, where the money just won’t grow. They may have a great solution to a social problem, but they are unable to attract the money necessary to deliver on that solution.

I see this all the time in my consulting practice. A nonprofit has existed at a certain budget level — let’s say $1.5 million — for years and years, and though they have big ideas for how much more they could be doing, they just can’t seem to get past that $1.5 million mark.

But if we are ever going to truly address the challenges we face as a society, we have to figure out how to grow the finances of our social change organizations, networks, and movements. Certainly funders can help alter this reality (and a topic for a future blog post, to be sure). But I think a big part of the change comes from nonprofit leaders who have a vision for growth taking a systematic approach. In my experience, there are 4 key steps to breaking the nonprofit financial glass ceiling:

  1. Create a Long-term Strategy and Financial Model

    I see it time and time again — a nonprofit board and staff want to do more, but they have not articulated exactly a) what it is they want to accomplish (through a Theory of Change), and b)what it will take, in terms of people, money, and systems to get there. Or, far worse, they have articulated what they want to do and what it will take, but they have set that plan aside for the easier path of just “winging it.” As with anything in life, if you want a different outcome, you have to envision that new outcome and then align your behavior accordingly.

  2. Develop Your Internal Critical Mass

    It takes people to create change. It is not enough to have your nonprofit leader and board chair excited about a larger financial model. You have to build a critical mass of people inside the organization — staff, board, volunteers — who understand and fully believe in your vision for the future and your plan to get there. And they can’t just understand it theoretically, each person has to understand very specifically what their part is. Because fundamental change takes all hands on deck.

  3. Build Your External Network

    But you also need to move beyond the usual suspects. It is not enough to have those close to the organization on board with a new way of planning for, growing, and securing your financial future. You have to break out of your own walls and forge new, deeper and broader networks. One of my clients had struggled for years to grow their financial model because they kept comfortably insulated within their own community and well-trod paths — returning again and again to the same donor pool, the same board members, the same partners . So when I began consulting with them, the first step was to help them think through which new people, organizations, and networks they could forge relationships with and how to do it.

  4. Educate Your Funders

    Just as women have been counseled for years to be more assertive in asking for raises and promotions, nonprofit leaders need to be more assertive in discussing the financial realities they face with their funders. If your nonprofit has an exciting strategy for the future and a corresponding financial model, a critical mass of board and staff bought in, and an expanded network, the final step is to work one-on-one with all of your current (and future!) funders to help them understand your future plans and how each funder can play a critical role in realizing those plans. Another of my clients put in all the work of creating an exciting strategic plan and new financial model, and then thought they were done. Instead, I encouraged them to take their new plan on the road and share it with their current and prospective funders to invest them in this new road forward. My client was taken aback — it hadn’t occurred to them that funders would be interested in what my client viewed as largely internal work. But when you have game-changing news to tell, involve your funders, get them excited, and demonstrate how they have a critical (and increased!) role to play in your movement forward.

Certainly nonprofits are woefully under-resourced, and funders can help change that reality. But a big step forward could likely happen when nonprofit leaders themselves get more strategic, more organized, more networked, and more vocal about what much larger financial investments could do for their social change goals.

If you want to learn more about how Nell works one-on-one with nonprofit leaders to chart their future course and grow their financial model, check out Nell’s Consulting services.

Photo Credit: Patrick Baum 

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