“Pessimists are usually right, but optimists change the world.”

I used to say this to my business partner, who was an unflinching optimist.  I held up the realist and pessimist ends of our business approach, and so we had a healthy balance and strong partnership.  But if you can’t bring all of optimism, realism, and pessimism to bear in your nonprofit – either through yourself or through your team — you will likely succumb to at least some of the five biggest nonprofit mistakes described below.

Optimism, Pessimism and Realism

The good news is that if you’re running a nonprofit, you’re already an optimist in some measure. And that’s the best starting point.  As one marketing genius (Rob Siltanen) put it, “The people who are crazy enough to think they can change the world are the ones who do.”  But that’s not enough.  You need pessimism or pessimist partners to anticipate problems.  And you need realists to see things as they are in both the short term and long term.  These perspectives, along with having a positive, believable, and communicable vision for change (optimism), will generate sustainable and powerful nonprofit outcomes.

Given that, the five biggest nonprofit mistakes described below focus on the pessimist-realist (henceforth, just “realist”) side of the equation to counter-balance your optimism.  These mistakes are more common and impactful today than a decade ago.  The world has become more global, technological, volatile, unpredictable, and complex, all of which make nonprofit leadership more difficult and challenging.  But – as any optimist would affirm – opportunity to change the world (or your piece of it) is embedded in that difficulty.

1. Insufficient Attention to Vision and Mission Alignment

Both new and mature nonprofits can fall victim to this mistake.  It translates to many undesirable symptoms throughout the organization and its beneficiaries: a poor strategic plan, low morale, stakeholder confusion, weak execution, dilution of program impact, mission creep, ineffective marketing and communication, and others.  Both optimists and realists will appreciate vision and mission elements.  Vision looks to the future and is aspirational.  Mission focuses on the present and defines purpose. And of the five biggest nonprofit mistakes, this one feels the best to fix.

Publishing the first acceptable strategic plan is only the start.  A good plan evolves with your external and internal environments.  Observing kaizen or “continuous improvement”, when the plan needs to change, change it!  Don’t measure your success by conformance to a static document.  If done right, the strategic plan can gently force organizational adaptation and resilience.

Finally, once a respectable strategic plan has been developed, communicate it.  Don’t just tell employees what’s in it; ask them what it means for their work and how it connects.  Can every employee describe both the vision and mission for the organization?  Do employees test new and existing initiatives and investments against the strategic plan for vision and mission alignment?  Do stakeholders understand and actively endorse the strategic plan?  If you can answer “yes” to every questions, your organization will have not just a great strategic plan, but practical, working awareness of it, which is just as critical.

2. Ineffective Governance

As a nonprofit leader, you rely on your boards of directors for oversight, guidance, and strategic direction. The board is your biggest support structure, supplying critical insights and investing in your mission growth.  While a strong board is indispensable, a weak one can hinder decision-making, compromise the organization’s integrity, and impede mission delivery.

The biggest culprits here are usually:

• Your board is lacking in diversity and expertise
• Roles and boundaries between the board and senior leadership are not well defined
• Toxic or dysfunctional board members who are not held accountable or dismissed

The Solution(s)

Lack of Diversity and Expertise

A board lacking in diversity and expertise subverts the most important function of a board.  Your board should be shoring up the blind spots of your leadership team, offering novel insights and strategic solutions, and driving the imagination and motivation of the leadership team.

If that’s not happening, here are some suggested solutions:

• Build diversity, equity and inclusion into your mission statements.  No-one will argue with this and it raises awareness about board membership goals.
• Do a diversity audit and conduct annual assessments.  While these exercises can feel formal and onerous, they are beneficial: 1) the paper trail is always helpful if conflict ever arises; 2) they provide accountability and clear goals the board and leadership team.
• Have the hard discussions, preferably led by a third-party facilitator.  This step can follow an audit or assessment, and be an inflection point in improving the board.
• Cast a wider net for board recruitment.  Identify the potential limitations in your current recruitment processes and discuss new ways to attract a broader pool of potential candidates.  Consider using digital tools and partnering with other community organizations to find strong candidates from like-minded partners.
• Transparently set clear goals and monitor outcomes.  The goals should be SMART, with specific timeframes and measurable metrics, such as recruitment and retention rates.  Create a board skills matrix to identify strengths and weaknesses, gaps and opportunities.

Roles Between Board and Senior Leadership Poorly Defined

If the roles and boundaries between the board and the senior leadership team are not well-defined, the solution is not conceptually difficult.  Just define them.  Sit down with the board and get into the details.  And then share the result, as transparency will reinforce those boundaries.

What Boards do:

• Collaborate on strategic planning and vision with the CEO/ED
• Hire the CEO/ED and set CEO/ED compensation
• Provide feedback and guidance to the CEO/ED
• Advocate externally for the nonprofit
• Provide financial oversight
• Fundraise and/or make a financial commitment

What CEO/Eds do: 

• Direct the nonprofit at the operational level
• Manage the staff and serve as liaison between the board and staff
• Collaborate with the board on strategic planning and vision
• Develop/maintain the culture with the senior leadership team
• Monitor and report on all relevant data

To summarize, boards shouldn’t be dipping into operations, where reasonable boundaries are usually transgressed.

Toxic or Dysfunctional Board Members

Dealing with a dysfunctional board member requires a lot of tact to preserve board effectiveness and organizational harmony.  But to state it bluntly, the damage a toxic board member inflicts is directly proportional to the amount of time the situation goes unaddressed.  Dysfunctional board members must either be rehabilitated or removed.

Here are some suggested steps for fixing this problem:

• Assess the behavior and impact objectively.  Determine what specific harm is being done to the organization and/or board.  After consulting your organization’s governance documents, document your concerns with detailed records.
• Initiate a private, respectful conversation with the board member.  Express the importance of the board’s constructive role and provide specific examples of behaviors and impact.
• If direct communication fails, see facilitation.  A neutral third party can mediate the situation to encourage constructive dialogue and common ground.
• Utilize board leadership (specifically the board chair) to address the issue and uphold board norms by setting expectations for collaboration.  Seek regular feedback from the board on board dynamics as an ounce of prevention.
• Remove the board member if the above efforts are unsuccessful.  Leverage your governance by-laws to implement the action.
• Invest in board development and unity to cultivate a positive and constructive board culture and to prevent future dysfunctions from arising.

3. Weak Financial Management

Like all of the five biggest nonprofit mistakes, poor financial management practices can infect every aspect of your mission.  Budget deficits, cash flow problems, lack of transparency, and poor reporting can undermine your organization’s ability to deliver programs effectively and can erode trust with donors and supporters.

Signs of weak financial management include: cash flow issues, lack of budget discipline, inaccurate or irregular financial reporting, high turnover of finance staff, audit findings, insufficient long-term financial planning,  over-reliance on restricted funds, noncompliance with regulations, uneven fundraising performance, stagnant program growth, and poor communication with stakeholders.  It’s clear that weak financial management has pervasive repercussions.

A very common perspective shift required for many nonprofits is to focus more on revenue and less on cost.  Nonprofit constraints make affordable resources more difficult, but budget cuts can wreak havoc and weaken mission output.  This often creates a negative downward spiral of reduced performance, more cost-cutting, under-reported costs, inflated board expectations, etc.

The Solution(s)

Fixing weak financial management in a nonprofit requires a systematic approach and a continuous commitment to improving processes and accountability. Here are practical steps you can take:

• A third-party assessment with transparency, board involvement, and rigorous, continuous follow-up.
• Clear financial policies and procedures, communicated to all relevant staff with training and education.
• Detailed budgeting and cashflow management processes that relates directly to mission goals and metrics, as well as board-visible financial strategies to sustain liquidity.
• Robust Financial Reporting that regularly shows targets, variances, trends, and recommendations, all with easy-to-consume graphics (business intelligence).
• Board and External Oversight that is both proactive and regular.  Along with your finance committee, external experts can help produce relatively unbiased information.
• Technology and Systems.  Technology shifts today are substantial and frequent.  Make sure your CIO and CFO are linked at the hip to provide the most efficient and future-proofed technology for your information flow.
• Communicate transparently and relentlessly.  Foster open communication to build trust and confidence in your organization’s financial practices. Consider putting readable financial displays with regular updates on a private page on your website that all employees can access easily.  Again, your CIO and CFO can partner to get this done quickly and with little overhead.

4. Resistance to Change

This is a general heading for accidentally or intentionally not embracing technology and social innovation, and failing to adapt to changing societal needs.  As the CIO/CTO of Mercy Corp, and as an executive board member of NetHope (an organization of CIOs/CTOs working with international NGOs), I frequently witnessed mistakes in this area.  Ironically, while many nonprofits don’t see and/or act on these changes, there are countless opportunities at the intersection of social/economic needs and new technologies available to address them.

Sometimes an innovation is available but not visible, and sometimes the organization actively resists change.  The second problem is more intractable.  In both cases, the main offender is usually partnerships and teaming inside the organization; how they are defined and unfold.

Poor Teaming Inhibits Awareness and Increases Resistance

An example might be the implicit or explicit role of the CIO/CTO with respect to other leaders in the organization, particularly program leaders.  Frequently this boils down to the CIO’s team being a service organization inside the organization, and not a full partner.  This could be any team on the forefront of technology and social innovations (not just the CIO or CTO’s team). The result is that half-baked program requests get lobed over the wall, and half-baked solutions inevitably are lobed back.

This linear dynamic impedes the development of useful innovations.  For impactful innovations to see the light of day, the CIO/CTO must understand fully the program problem set that needs to be solved.  And the program team must fully understand (at least at a high level) technology options that might move the needle.  This kind of Iterative, non-linear discussion sparks the education and imagination of all team members.  The result is a well-conceived, hearty solution set that reflects a solid match between the technology applied and the problem addressed.

The Solution(s)

Iterative education and interaction – with explicit attention to teaming dynamics — addresses both issues described earlier: potential innovations are more visible, and resistance to change  breaks down.  But how does resistance arise?  In short, change is difficult in any context.  Maintaining the status quo is immediately easier and doesn’t court negativity bias.  However, the costs of not changing are almost always more existentially threatening than the costs of making a meticulously crafted innovation come to life.

With good teaming and iterative dialogue, the factors that contribute to resistance — negativity bias, uncertainty, lack of knowledge, complexity, perceived cost and effort, attendant risks, inability to see the virtues of a solution – are all flattened.  Constructive teaming starts at the senior leadership level, so develop those relationships as a model for the rest of the organization.

5.  Poor Fundraising and Marketing Practices

This issue might be the most impactful of the five biggest nonprofit mistakes. You might prefer program-related work to fundraising. Still, fundraising – like program-related work — should be at the center of your operations. Without it, the lights don’t stay on and your beneficiaries don’t see any benefit. Due to the limited resources most nonprofits have at their disposal (do more fundraising!!), it’s easy to let fundraising take a back seat to putting out daily fires. At least some of these issues exist for every nonprofit; fundraising is an extraordinarily complex set of activities to get your arms around and master.

A List of Problems and Symptoms, and the Solutions

Focusing on Problems, not Solutions

If you’re in fund-raising or market at an NGO, the perennial question often arises: “Do we highlight the starving child or do we highlight the healthy and safe child?”  The reality is that you need both, but failing to show the effects of funds you raise is disheartening to donors and bad for your nonprofit brand.

Lack of Focus on Recurring Giving

This problem is common to smaller nonprofits, but it’s not that hard to build momentum on recurring giving.  Doing so exponentially increases your revenue over time, because your recurring base grows and continues to give along with new donors you attract.  It’s easier and less expensive to retain a donor than gain a donor.  Learn more about developing a recurring giving program.

Setting Targets That Are Too Moderate

Nonprofits succumb to this issue for many reasons.  The biggest one is that they do not fully value their operational efforts and costs.  Under-reporting these is tempting, because agencies like Charity Navigator rate you higher if more of your revenue goes to beneficiaries as opposed to operations.  As described earlier, though, this can perpetuate a “starvation” cycle where cost expectations and realities are misaligned.  Upsize your campaigns and fundraising targets to honor your real costs, both visible and hidden.

Over-Reliance on Single Income Sources or Larger Donations

Many nonprofits rely on a single source of income (like a large event) to generate revenue. If that source fails to deliver, your nonprofit is at risk.  Diversify your funding model to include individual and corporate gifts, grants, third-party fundraisers, events, and more.  An equally tempting practice is to focus on higher tier donors, which misses two realities:  1) lower tier donors will often observe the organization from that tier before graduating to a higher tier; 2) there are more potential lower tier donors than higher tier, and there’s strength in numbers.  Avoid both of these practices to create a well-balanced funding model to ensure growth and sustainability.

Under-investing in Relevant Resources

Whether it’s staff, process, data, money, or technology, many nonprofits don’t understand what it takes to run a successful fundraising campaign.  The knowledge gap often starts with these resources.  Investing in these resources is a direct investment in impact.

Ineffective Website

I’ve heard social media marketers say that websites aren’t as important as they used to be.  What they mean is that social media and other outlets for marketing are important, too.  Websites are still critical.  And a bad one prevents you from serving the public and can turn away potential donors/supporters (every visitor to your site).  Be clear about the priorities for your website and how it should function to attract donors, process donations, provide information to stakeholders, serve your staff, etc.  Then get a designer and your CIO to give it an overhaul and make sure it performs flawlessly.

Under-Communicating With or Under-Appreciating Donors

An appreciated donor is a retained donor.  If you’re properly stewarding your donors through tools like an onboarding process, a CRM to track and respond to communications, and building gratitude into all of your donor operations, you won’t suffer retention woes.  The donor relationship is both transactional and relational.

Focusing on Hitting Home Runs

Remember the movie Money Ball?  The lesson was that it’s better to spend less money on more hitters who will get on base than to spend more money on a few home run hitters.  Ad campaigns and fundraising campaigns can suffer the same affliction, and be constantly aiming for the fence.  But modern marketing and fundraising is a numbers/data game, and mega-wins are rare.  If you’re ignoring the data and a much larger donor population, you might hit an occasional home run, but you won’t win the game.

Conclusion

Most of the five biggest nonprofit mistakes involve more subtraction than addition.  Meaning, not doing certain things is as important as taking on new initiatives.  Nonetheless, getting your nonprofit to fire on all cylinders requires serious strategic and tactical work.  To help you, there are two methods that cut across all of the above problems and solutions: continuous improvement, and whole-system thinking.

Continuous improvement (or kaizen) means that you are never really done because the world inside and outside of your organization is constantly shifting.  The habit of expecting change and making smaller adjustments more frequently works better than giant initiatives based on a static plan.  This improves morale, increases operational focus, makes measurement easier, and builds organizational agility and resilience.

Whole-system thinking means that you recognize and honor the connections and inter-dependencies that pervade your organization.  Like the human body, fixing one thing in isolation or dealing with just the symptom can short circuit a solution or produce ugly side-effects.  A whole-system approach creates more durable, substantial outcomes.

Getting on a path to greater revenue and impact – the major outcomes you probably want — is not wishful thinking.  It’s both optimistic and realistic.