Nonprofits Must Adapt to Achieve Mission Success
by Bruce Skyer, Ascent Advisory Council for Nonprofits

Nonprofit Business Models Are in a State of Flux

Over the last 20 years, I have had the great fortune to be involved with many fantastic nonprofit organizations, either as an employee, consultant, or volunteer. These organizations have varied widely both in mission and size, with annual budgets from less than $1 million to over $50 million. My responsibilities have varied widely as well. But the one common element in all my work for the nonprofit sector has been my efforts to strengthen the operational, financial, and administrative part of any organization to better deliver programs, serve clients, and fulfill the organization’s mission.

Furthermore, I’m elated to join the Ascent Advisory Council for Nonprofits. When Ascent’s leadership team approached me about the opportunity, I felt it aligned closely with my professional goals and could be a platform for change during a challenging time for many nonprofits. In my experience, organizations that hesitate to invest in technology to optimize their operations may struggle to achieve their intended outcomes. I understand the sentiment – dollars are scarce, and most nonprofit professionals would rather use these precious dollars on expenses that directly support their clients above anything else. But over time, this sentiment creates an unfortunate situation I’ve seen over and over again: a nonprofit organization that is expected to run its operation, serve its constituency and fulfill its mission in the present day with systems and infrastructure from many years (sometimes decades!) prior, because it hasn’t invested in technology.

It’s a testament to the nonprofit professional that, by and large, the work gets done; programs are delivered and clients are served.

How does this happen? Most often, due to the overwhelming passion employees have for those they serve, it is by sheer hard work, which we all know as “sweat equity.” At a nonprofit, sweat equity replaces efficiency and automation simply because while automation, typically via technology, is an incremental expense, sweat equity is not an additional hard cost; it is already a part of a nonprofit professional’s salary. It relies on the good will of the employee to work longer and harder to get the job done.

Single Source of Truth for Data Management

At a typical nonprofit, it is not uncommon for employees to maintain their own data. A soup kitchen manager may jot down the number of meals served on a piece of paper kept in her desk. Maintaining a count of meals served is an important part of her job, since every quarter, the number of meals served must be reported to a variety of governmental human services departments, the kitchen’s primary funders. Her assistant manager knows that this is important as well and keeps a count of meals in a spreadsheet on his local hard drive, just in case the manager gets too busy to do this on any given day. These two staff members work the lunch shift; their counterparts on the dinner shift also keep counts of meals, and also in a manner not shared with others.

Because these four employees are busy running the kitchen, they’ve had no time to aggregate and analyze the data until the quarterly reporting deadline forces them to do so. In short order, and likely after normal working hours, staff need to reconcile data that does not agree, aggregate them across the organization, and prepare the funder reports. Eventually, and as time allows, staff will then analyze what this data means in order to inform programmatic decisions. For example, an increase in meals served may mean that larger quantities of food must be secured so that no client goes hungry. Conversely, a decrease in meals served may indicate the need to review their community outreach efforts.

Why would nonprofit employees keep this, or any mission-critical, data to themselves?

Either there is simply no centralized mechanism to record this data or, more likely, the tools many nonprofits have available to maintain this data centrally is old and unreliable. “If I keep my own information, I know it will be right.” I’ve heard this time and again at numerous nonprofits.
When employees are keeping their own versions of similar information, there is no organizational “single source of truth.” This is more than a business cliché; it creates a tangible and significant problem for an organization and its employees. While the example above is intentionally simple, you can see how not being 100% sure that data is complete and correct compromises the ability of any organization to make informed decisions. And the effort to “clean” the data in order to analyze what the data means is significant.

The act of going back to collect, aggregate,

and correct data after the fact in order to meet the data needs of both internal (e.g. board, employees) and external (e.g. donors, regulators) constituencies often dominates all other activities at various points in the year. While, at face value, the incremental cost may simply be a bit of overtime paid to non-exempt employees, the opportunity cost can be huge. Opportunity cost is not a term heard very often in the nonprofit sector, but, in my experience, this is a cost incurred every single day at every nonprofit organization. The difference for the nonprofit sector is, unlike the for-profit sector, nonprofit organizations typically do not attempt to analyze and quantify opportunity costs against real costs expended.

At its most basic, the definition of opportunity cost is “the loss of potential gain from other alternatives when one alternative is chosen.” For many nonprofit organizations, the retroactive task of collecting and analyzing data is not an alternative at all, but a necessary task that takes employees away from other activities that would benefit the organization, or those they serve. Think of what could be accomplished if time could be spent on serving more clients, raising more money, etc., rather than chasing and cleaning data.

As every nonprofit is different,

each organization will have a unique analysis of the real costs of modern technology versus the opportunity costs of not having this technology. I would be very surprised if, for the vast majority of nonprofits, the cost of not automating is significantly higher than the hard costs of securing these tools.

Empower Employees Through Technology

There are many tools available to reduce strain on employees. Cloud-based computing makes it possible, and cost-effective, to create and maintain a single source of truth for data management. Shared calendars, spreadsheets, and databases (such as donor management systems) are often considered appropriate for a nonprofit organization. There are other software tools that are usually not on a nonprofit’s radar that should also be considered.
The information system known as ERP, or Enterprise Resource Planning system, has become commonplace in the business world, yet is rarely mentioned in the nonprofit sector. How many nonprofits do you know that think of themselves as an “enterprise?” However, this term can apply as easily to the soup kitchen discussed above as it can be to a Fortune 500 company.

At its most basic, an ERP is an inventory and order management system, often associated with businesses that have manufacturing and distribution operations. Now think about that soup kitchen. The kitchen maintains inventory, in the form of foodstuffs, utensils, paper products. etc. As it serves more meals to clients, the need for inventory grows (and vice versa). A system that tracks inventory, the “manufacturing” of meals, and the “distribution” of meals to clients on a real time basis will allow the enterprise to operate at peak efficiency, since all data needed to run the operation is recorded, aggregated, and analyzed in real time.

I encourage you to think about “inventory,” “manufacturing,” and “distribution”

within your nonprofit organization. Inventory can take the form of tangible items such as food, clothing, affordable housing units, or medical supplies. Inventory can also be intangible, like jobs for veterans, wishes for sick children, or phone bank volunteers. Each of these items are used in manufacturing and/or distributing a product or service to your clients. And the data related to any one of these impact the manner in which the other two are managed – this interrelationship among all three elements can be customized into the ERP. An ERP, by definition, runs the enterprise, and allows for optimized delivery of programs and services.

Also, one of the biggest attributes

of any off-the-shelf system is the business intelligence already built into it. Because an ERP is intended to optimize operational efficiency, an organization can take this intelligence and build a set of procedures for employees to follow, and, as well, a formal policy guide for the “enterprise.” Many nonprofits struggle with establishing or, more often, updating policies and procedures over time to meet the needs of a changing organization and an ERP can help with this critical governance responsibility.

I hope this article has caused you to think about efficiency, automation, and information systems differently. Up-to-date, optimized systems:

• Ensure that your data is correct and current
• Enable real-time decision making
• Allow for the recapture of opportunity costs
• Create an advantage in the competition for employees
• Provide business intelligence for the establishment of up-to-date policies and procedures
• Optimize operations for maximum impact

As you rethink spending on technology, you will find that this proposition has an extremely compelling return on investment. If you’d like to learn more or ask me about related topics, please connect with me on LinkedIn.