Financial ManagementMission Sending

Two things nonprofit organizations can learn from for-profit businesses

Nonprofit software makes fluid operations possible for charitable organizations. While nonprofits are fundamentally different than for-profit enterprises, there are things they can learn from their business-oriented counterparts about how to run a successful operation. When it comes to board accountability and strategic planning, both nonprofits and for-profits need to have their bases covered.

Board accountability
According to Wagenmaker and Oberly, LLC, a law firm based in Chicago that specializes in nonprofit law, the board’s accountability is tantamount to an organization running smoothly and growing over time. First, the firm noted that legal statutes for charities and for-profit corporations are typically very similar. The Illinois Not-for-Profit Corporation Act in particular outlines requirements for nonprofit reporting on formation, corporate powers and limited liability that structurally align with those of for-profits.

Where the two types of businesses diverge is accountability. For-profit leaders must answer to shareholders, which are parties that own a portion of the company and are interested in benefiting financially from this partnership. Nonprofit leaders are accountable to stakeholders, which are parties with a vested interest in the success of the organization, not necessarily in a fiscal sense. For instance, employees, grant recipients, church members and donors are all considered stakeholders. They care about how well a charity performs, but do not necessarily stand to benefit financially from it.

Annual reports demonstrate results to donors, showing how the NPO has made an impact.

In order to maintain a strong bond with stakeholders and ensure continued success, nonprofit boards need to make sure they communicate effectively. One of the best ways to do this is through the distribution of an annual report. Delivering substantial and relevant information on a charity’s impact each year communicates results to constituents. This helps stakeholders hold nonprofit boards accountable to their promises and for their actions.

Strategic operations
Nonprofits should also take note of the way for-profit organizations develop strategic operating plans every few years. Just like a business, a charity needs to have a road map with small, specific steps that will lead it to its larger goals.

Nolo discussed the essential ingredients for a stellar strategic plan. For optimal functionality, every NPO should create a working document that defines its mission statement, outlines goals, assesses resources and arrives at concrete actions to take going forward.

Mission statement
This portion of a strategic plan should clarify why the nonprofit exists in the first place. Identify what differentiates this particular organization from others with similar goals. While being concise, the mission should help identify what the nonprofit sees for its future.

Outline goals
This section actually consists of three separate parts: Goals, objectives and programs. Goals are individual tasks that contribute to the overall mission once completed. Objectives make determining whether a goal was successful simpler. They are incredibly specific and provide deadlines for organizations working toward a particular goal. Programs are the planned activities that relate the nonprofit’s work to the general public. They may even involve the support and participation of volunteers.

“Just like businesses, charities need road maps with small, specific steps leading them to their larger goals.”

Assess resources
Evaluate all the pieces of the puzzle that can help the charity meet its goals. Take note of volunteer databases, current funding, available expertise and staff skills. Do not focus solely on fiscal resources. As The TCC Group stated, take the most inclusive approach to this strategic planning as possible. Stakeholders like being included and having a voice as their NPO operates. A board shouldn’t take on this task alone. Plus, staff and volunteers may have a better understanding of needs at various levels than those in leadership positions.

Determine strategies
This may be the trickiest section, as it requires in-depth thought and time. By definition, strategic thinking is the development of ideas that alter the basic operations of an entity. Brainstorming actions to take to achieve goals and objectives should not be taken lightly. Taking a look at strengths and weaknesses, opportunities and challenges is important when writing out the map that will guide a nonprofit for the next several years.

According to Stever Robbins, Inc., the best strategic thinking in for-profit enterprises comes with time. Rather than jumping on the first few ideas that pop up, give them time to develop. It may turn out that what seemed to be a great opportunity at first presents too many risks. Alternatively, rethinking a strategy may reveal a risky move to be a valuable investment.

Nonprofit software helps charities better track their resources, communicate with stakeholders and keep their boards accountable. It’s a highly valuable investment for any not-for-profit operation.