Nonprofits are having A Moment in current events right now, with the federal administration’s wholesale decimation of contracts and grants, foundations uncertain whether to hold resources in this economy or open the funding floodgates to support the sector, and the growing realization that a) nonprofits need more money for paying staff and b) nonprofits support both community members AND local economies.
I’ve noticed experts’ advice to nonprofits has been generally falling in one of three categories:
- Focus on Mission
- Diversify Funding
- Consider Mergers
The Focus on Mission school of thought takes a few forms. If your work is currently targeted by the forces that be, you might be doubling down on your mission and vision. If your work is under the radar now, you might want to stay that way, and perhaps rewording or eliminating references to targeted items like “DEIB” is how you focus on mission – by burying these initiatives in order to keep the funding for mission-central work. Focus on Mission can also mean jettisoning programs that are mission-adjacent to focus your efforts and resources on core activities, or outsourcing administrative functions like fiscal, IT, and HR.
Those who recommend nonprofits Diversify Funding might seem to be stating the obvious; after all, healthy nonprofits already have multiple funding sources. But over the decades, government contracts and grants became the go-to for consistent and reliable funding (late payments notwithstanding). Nonprofits with what was considered a good, stable mix would have local, state, and federal contracts in their portfolio.
Who could have anticipated events that would put ALL government contracts at risk?
For those not in the thick of this work, it’s not just the agencies with federal contracts affected by federal funding cuts. These cuts also impact states and cities, leading those governmental funders to reduce rates, scale back projects, and terminate contracts.
Individual donors, even those with deep pockets, can only make up a portion of what’s at risk. Some foundations are stepping up and increasing funding to private nonprofits, but not all. Applying for new grants takes time and generally requires starting something new, not getting funds for existing program activities. Attempts to diversify funding now is like finding ways to plug holes in the dam in hopes the plugs will last until a new administration restores the dam.
Nonprofit leaders in many sub-sectors were Considering Mergers before it was cool. Take residential foster care: demand was shrinking, and while organizations could double-down on the services they provide or pick up other types of residential contracts, it remained harder to operate with lower utilization. Some programs closed, were taken over by others, or merged. Some nonprofits teamed up to consolidate back-office functions while keeping separate agency identities for their programs, like zipping up a zipper halfway. These arrangements hold promise, if done well and if the organizations are a good fit with each other.
Nonprofit leadership teams and boards have hard decisions to make. You’re keeping the programs running and the lights on while anticipating the rugs being pulled out from under you, and evaluating these options or combinations of options takes dedicated time and clear thinking. Maybe you are re-evaluating or entirely redoing your strategic plan. Perhaps you are trying to assess your business processes or evaluation system to identify increased efficiencies or less-effective programs to cut. Or it could be you want to outsource some work instead of hiring another staff person to do the work in-house. If you want to bounce your thoughts off an experienced nonprofit professional, contact me for a free consultation.
More reading:
How Fed Changes Targeting Nonprofits Expose Organizational Weaknesses
Back to Your Roots: How Struggling Organizations Can Reground Their Mission for Lasting Impact
The Merger Mirage: The Triumph of Hope over Experience (written with a for-profit focus but with many useful concepts applicable to nonprofit mergers)
Can We Talk About Mission Drift?
(C) MJ Dessables
