From SSIR: Reality Time for Human Service Organizations

Excerpt: Nonprofit agencies are, for the most part, well run. Not all are as efficient as they might be, as many are more focused on mission than operations. Among the more sophisticated agencies, that has changed in recent years though. Groups of organizations are forming back-room cooperatives, agencies are combining their purchasing power, and several of the large “brands,” such as Girl Scouts of the USA, United Way Worldwide, and American Cancer Society, are combining sets of smaller local affiliates into larger and hopefully more efficient regional operations.

Being historic and having had success over the decades will not necessary spell success in this new era that seems to be upon us. Because of the financial pressures that are likely to affect the sector for the foreseeable future, every nonprofit organization has to consider its operations in new ways and perhaps consider organizational options it would rather not. From my vantage point, these are among the considerations:

Service offerings have to be evaluated: 1) to ensure that they reflect current needs (rather than providing a service because we always have); and 2) in light of current funding realities. Some service lines may have to be cast off. Some should be.

Every organization needs to understand and evaluate its financial model. This is not necessarily common nonprofit practice. Many of us have a funding mix that is historic and we work those sources from year to year. There are so many forces affecting the “tectonic plates” of the sector that we need to start from square one, evaluate not only the sources but also the alternative ways of financing the things we need to do. My organization, for example, found it was dependent on one source that was not growing and others that varied widely from year to year, and developed an earned revenue approach to round out our financial model.

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Source: Stanford Social Innovation Review

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