There's a good chance that your nonprofit needs a fiscal checkup. At the BoardSource Leadership Forum (BLF) annual conference and other venues, nonprofit leaders have told me that they made it through the recession by hunkering down and getting lean. First they cut fat, then muscle, and then bone.
How do you know the true impact of these cuts and how to fix any problems they've created until you truthfully—rigorously—examine your organization and tackle the reality that you will never have the money, people, and time you would need to take advantage of all the opportunities you see out there or to solve all of the problems sitting on your desk?
From my conversations with approximately 50 nonprofit directors, I have developed the 800-pound gorilla spotlight quiz. The quiz identifies the top 20 issues that boards or organizations should talk about but sometimes do not discuss in meaningful depth or even at all.
As you respond to the questions below, give yourself 5 points for each issue your organization handles well and 0 points for those that need examination. With the results of this quiz in hand, your board can better prioritize which issues to address in more detail, and in what order.
- What will your association look like in 10 years?
Regulatory requirements are rapidly blurring the distinctions between nonprofit and for-profit organizations. Form 990 is expected to dramatically change again and move closer to for-profit proxy level disclosure.
- How often do your board directors err on the side of politeness when speaking out is more appropriate? Because we are a nonprofit, we err on the side of being OVERLY nice to everyone. Beware of overly nice paralysis.
- How many different versions of nonprofit organizations with missions similar to yours are there?
By merger, decline, or liquidation, there may be fewer of us in the future. Besides, how many nonprofits doing the same kind of work do donors really want to choose from?
- Is it time to have a retirement party and pass out a few gold watches?
You need the right board. Directors know when they no longer carry their weight.
- How much does you organization have in common with contemporary dinosaurs like Motorola or Sears?
You should be prepared to disrupt or be disrupted.
- Where would better capital expenditures and best practices reduce the need for you to play referee, reduce internal politics, or minimize misallocation of scarce resources?
Prioritize with CAPEX (capital expenditures) logic.
- At what point does the value delivered to a stakeholder group not warrant that group's continuing the support?
You need to deliver value for fees charged.
- Ever say or hear the statement "it takes forever to make a decision around here?"
Your organization should be nimble.
- What is the average age of the donors consistently providing most of your funding?
You need to replace donors who are dying away and have a planned giving program for those on the way out.
- Are you forward looking or historical oriented?
Give the right people the right information at the right time to make the right decisions. Metrics are only as strong as the weakest link of measuring the right things, measuring accurately, and reporting.
- What would you change if you thought you would lose your three most strategic, operationally focused directors in three months?
Have a plan for holding on to top talent.
- How well do directors, staff, and donors passionately explain why your organization should exist?
Create a strong value message for your organization, and have stories to illustrate your message.
- Where does financial or social value received not warrant the financial and human costs to deliver those services?
Question the balance between fees charged and costs of services.
- Are some of your organization's assets overstated or some of your liabilities understated?
Make sure your balance sheet reflects the real world. What issues and practices need to be reevaluated, dramatically changed, or ended?
- How specific are revenue and bottom-line targeted results by major revenue segments?
Create a long-term——at least three years into the future—strategic plan with clear numbers and concrete objectives. How can you hold people accountable with vague long-term goals?
- How well and specifically identified are your top two expansion categories of potential customers who can more fully benefit from your organization's services?
Grow customer use of your services.
- What percentage of your activities comes from initiatives started in the last three years?
Align your business model with your current and future environment.
- How regularly do you significantly invest money, resources, and time in new initiatives?
Take a risk. How safe is it to fail fast and cheap to learn and improve? How safe is it not to?
- Where should you reallocate resources and think bigger?
Find new opportunities. It is too comfortable to keep doing what you have always done.
- How many of your directors want to believe things are great, rather than truthfully benchmarking against others in your space or even with for-profit organizations?
Clear out the cobwebs.
A score 95 is an A, 90 is an A-, and so forth. If your score is a B- or lower, is your institution one where every player gets a trophy? Is your score is telling you that you are putting both your personal and organizational reputation at risk?
By going through this process, you'll identify where you are and where you are at risk. This knowledge will position you to be proactive in managing those risks and capitalizing on opportunities. You will do a lot less worrying and find your million dollar blind spot before it finds you.
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Gary W. Patterson, FiscalDoctor®
© 2014, Gary W. Patterson
Gary W. Patterson, the FiscalDoctor®, is a growth and fiscal leadership expert and board member. The author of Million Dollar Blind Spots: 20/20 Vision for Financial Growth, he helps find your million dollar blind spot before it finds you and enables growth through leverage you did not know you had.