by Andy Robinson,
How healthy is your organization?
What’s your trajectory? Are you growing, shrinking, or treading water? What’s the energy level among staff and board? Is your mission still relevant and inspiring?
More than a decade ago, I participated in volunteer training at our local hospice agency. As the Great Recession rolled through the economy, I found myself applying the lessons of hospice to my work with nonprofits.
Not every organization is meant to live forever—and that’s OK. In this post, we’ll discuss how to determine if your organization is dying and what to do about it. A future post will cover the board’s role in end-of-life decisions.
DIAGNOSIS: DOES YOUR ORGANIZATION HAVE A TERMINAL ILLNESS?
At a conference for the Alliance for Nonprofit Management, a team of consultants, funders, and nonprofit capacity-builders gathered to consider this question. We developed the following benchmarks to define an “end-stage” nonprofit.
- Chronic under-funding and cash flow problems (emphasis on chronic)
- Last-minute, crisis-driven attempts to diversify funding
- Greater-than-usual attrition of board, staff, volunteers, clients, and program participants
- Loss of programs or frantic adding of programs; one colleague calls this “desperate proliferation”
- A sense of obligation—“We must soldier on”—rather than a passion to fulfill the mission
- Organization-wide burnout: “Who cares?”
- Rumors, bad press, and external questions about your viability
You may be thinking, “Wow, our group would qualify on several of these points.” The encouraging news is that all nonprofits, even healthy ones, go through stages when some of these criteria apply, so you’re probably suffering the usual bumps and bruises.
However, if most of these apply and seem to be getting worse, it may be time for the end-of-life conversation.
EXIT STRATEGIES: OPTIONS FOR CLOSING SHOP
If you’re thinking about shutting down your organization, you have several options.
Declare victory. Not every organization has a perpetual mission; some are created to solve a problem and go out of business.
For example, the Toxics Action Center, which provides support for New Englanders fighting toxic pollution, works with a network of informal community groups that often declare victory and dissolve once the immediate health threats have been addressed. If other threats appear, participants can re-form their groups—and sometimes do.
Modify your mission and re-purpose your organization. A well-known example is the March of Dimes, which was founded to find a cure for polio. Once the polio vaccine was widely available, the organization shifted its mission to focus on maternal and infant health.
“Adopt out” programs that still have value. As part of any formal dissolution, you can find organizational homes for your orphan programs. Saying this differently: Many dying organizations have valuable assets—programs, clients, mailing lists, funder and donor relationships, and intellectual property—that might find a viable home elsewhere.
Merge with (or be acquired by) another organization. Sometimes two organizations with overlapping missions choose to merge. A smaller group might seek out a larger one to absorb its programs, staff, and perhaps even a portion of its board, not to mention its obligations—financial and otherwise.
In recent years, I have facilitated multiple merger processes. Some succeed; in other cases, after a lot of due diligence, the boards choose to remain independent organizations. Mergers are often difficult because of:
- A poor match: The mission, history, and organizational culture of two nonprofits may be incompatible.
- A poor dowry: Debts, obligations, and conflicts may exceed the available assets and good will.
- Ego: Leaders (especially founders) tend to experience mergers as both a personal and organizational failure.
- Inertia: Unless the status quo is intolerable or the end is near, it’s often easier to just keep doing the same thing.
Go into hibernation. Without formally dissolving the nonprofit corporation, the board may choose to shut down operations and wait for better days. Under this scenario, the organization is still required to file annual paperwork with the appropriate government agencies.
REGARDLESS OF THE DECISION, CELEBRATE
If you successfully merge two organizations, invite everyone to a big wedding party. If you close your nonprofit, celebrate your accomplishments and honor the ways that the work will go on, even without your organization.
Because the work will go on.
When a big tree falls in the forest, it creates light and space and nutrients for younger trees to grow to maturity. This is how forests renew themselves. If your work is valuable and the need remains, someone will come along to build on all that you and your colleagues have already achieved.
This post is reprinted from the Train Your Board (and Everyone Else) to Raise Money Blog.
Hospice Care for Nonprofits, Part 2: The Board’s Role
Because not every group is designed to last forever, I recently shared a post about end-of-life care for nonprofit organizations.
Regardless of your role—staff, volunteer, consultant, or supporter—it’s helpful to understand organizational life cycles. Board members have a unique responsibility for life-and-death decisions.
To my fellow trustees, this post is for just for you.
End-of-life horror story, board edition
In the 1990s, I served on the board of a small national organization. When our primary foundation grant wasn’t renewed, we faced a budget crisis. We discovered—gradually and painfully—that the executive director had used a variety of tricks to hide the financial truth from the board.
Our total debt exceeded $140,000, including $60,000 owed to the IRS and state tax agencies. (FYI, trustees are personally liable for unpaid payroll taxes.)
As the size and nature of the debt became clear, half the board melted away, perhaps on advice of their lawyers. Those of us who remained fired the executive director, developed a debt-management plan, raised enough money to pay the tax bill and settle with other creditors, “adopted out” the most important programs to other nonprofits, and closed the organization.
From emerging crisis to shutdown, the process took almost two years.
Board members—ask these questions!
This story illustrates several challenges trustees must consider when faced with a possible merger or dissolution. As you evaluate your options, ask yourselves the following questions:
Do we have a sustainable mix of income? If not, how soon can we create one?
As a board, we did a miserable job of enforcing financial controls, but we failed an even bigger test of fiduciary responsibility: we didn’t question the sustainability of a group that received more than half of its income from one funder.
Any of us could have asked, “Why are we relying on a single grant? If we lose that grant, we are in deep, deep trouble. What are we each willing to do—personally—to diversify our funding?”
Good board governance is not simply about financial controls and legal responsibilities. At a deeper level, it’s about building organizations that are fiscally sound and financially sustainable—and that includes a diverse mix of income.
Is everyone helping to raise money? In Fundraising in Times of Crisis, Kim Klein writes, “Most people’s instinct is to cut expenses rather than raise money. ... Resist this impulse as much as possible.”
In most fundraising programs, the weakest link is not a poor case, or a limited number of prospects, or an inadequate database; it’s a lack of askers. The more people who engage with donors, the more money you raise.
It astonishes me how many trustees would rather do anything—including allowing their organizations to decline and possibly die—before they’re willing to confront their fear of fundraising, get off the bench, and get in the game.
Is the lack of money a presenting symptom, rather than the disease itself? Is your mission unclear? Are you duplicating the work of others? Are you adapting to changing demographics? Do you have a marketing plan? Is everyone going through the motions but no longer passionate about the work?
Given any of these problems, fundraising becomes more difficult and the budget becomes unbalanced. As consultants like to say, organizational problems tend to show up first in the money. Faced with financial challenges, look more deeply to find the real causes.
What don’t we know? Talk with peers, read whatever you can, and consult with experts. Ask colleagues who’ve been through a merger or dissolution to talk with your board.
Be deliberate and thoughtful. As the old Chinese proverb states, “We have no time to waste, so we must move very slowly.”
Three keys to a successful transition
Create a “nonprofit will.” If you choose to shut down, what will happen to your assets, programs, database, obligations, staff, volunteers, and so on? Have you identified recipient organizations? Are they willing and able to accept what you plan to give them?
At Native Seeds/SEARCH, a regional seed bank for traditional Native American crops, the most important assets are the seeds themselves. Native Seeds has agreements with other seed banks to accept, store, and propagate these seeds should the organization shut down for any reason.
Finish your work. When half the board disappeared from our troubled organization, we were left with a fraction of the previous energy, time, and brain power.
Yes, board members serve as volunteers, and it’s a rare volunteer who’s willing to take on an end-of-life assignment. But remember: a commitment is a commitment, and each person who bails out leaves more work for those left behind.
Whatever path you choose, celebrate. If you close your nonprofit, treat it as an opportunity to celebrate your accomplishments. Imagine a New Orleans ragtime funeral parade—an exuberant affirmation of life.
If you successfully merge two organizations, invite everyone to the wedding party. Treat the next phase of your organizational life as an opportunity, rather than a failure. Be sure to honor everyone—board, staff, volunteers, donors—who carried your work forward to this moment.
This post is reprinted from the Train Your Board (and Everyone Else) to Raise Money Blog.
About: Andy Robinson is author of How to Raise $500 to $5000 from Almost Anyone; What Every Board Member Needs to Know, Do, and Avoid; Train Your Board (and Everyone Else) to Raise Money (co-authored with Andrea Kihlstedt); and The Board Member’s Easier Than You Think Guide to Nonprofit Finances (co-authored with Nancy Wasserman).
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