A Project Is Expected To Create Operating Cash Flows Of Major Challenges Facing Nonprofits

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Major Challenges Facing Nonprofits

Data from regional and national studies of the challenges facing nonprofits indicate that several issues are of concern to nonprofit leaders. Board development and fundraising are major issues for non-profit organizations with a secondary emphasis on the difficulties associated with improving operations and managing resources more effectively.


Some underlying issues have often been identified in studies that have surveyed nonprofit CEOs and board members. Five main themes emerged clearly from the problem inventories in the various reports. These suggest the areas of most urgent need according to nonprofit leaders:

1. Management development – Building an active and strategically oriented board of directors was the most common concern. The specific problems identified were:

· Hiring high-impact board members

· Cultivating a dynamic and effective culture among board members

· Encouraging the strategic orientation of the board

2. Marketing/Fundraising – Developing effective marketing programs to recruit and retain donors was also a high priority. Respondents were particularly concerned about:

· Application of marketing/communication techniques to donor contact activities

· Expanding the current donor base

· Increasing donations from current donors as well as increasing donor loyalty and retention

3. Information Management – Using effective information management to measure and evaluate operations and programs was also very important.

· Establishing a clear set of quality criteria for evaluating services

· Using IT to reduce costs and create value

· Evaluation of programs/services against key performance measures

· Establishing a better model for measuring and reporting results

· Measuring the real benefit of investments in development and marketing

· Designing a consistent approach to measuring organizational performance and performance

4. Human resources – Attracting, developing and retaining productive staff and volunteers was a key concern:

· Attracting and retaining qualified personnel

· Attracting qualified, motivated volunteers

· Developing a leadership transition and succession plan

· Improving workforce performance

· Providing ongoing training and skill building

5. Collaboration – Creating constructive alliances, partnerships and mergers was also a significant issue.

· Developing collaborative partnerships with public sector agencies, including government

· Creating collaborative partnerships with the private sector

· Implementing mergers with overlapping services/agencies

Extrapolating these themes, a sixth theme is implied as an additional concern:

6. Business capability – the need to adopt business skills and processes that are essential to effectively address the needs identified in these five main themes.


Several changes in the work environment of the non-profit sector affect leaders’ perceptions of the issues they face.

Funding Challenges – Many nonprofits face both a rapidly changing funding environment and an ever-increasing need to serve the communities they serve. Reduced or narrowly focused government funding is putting a lot of pressure on the sector, which has also seen a proliferation of new nonprofits over the past decade, increasing competition for a smaller pool of funds. Countless nonprofits are feeling the impact of federal cuts to their core funding streams at the same time that foundation grants and donations are cut and many state and local governments are experiencing deficits that are reflected in reduced spending on social programs.

Accountability Pressures – As a result of several high-profile cases, nonprofits face strong accountability pressures to provide measurable evidence that the services they provide are having an impact on the communities and populations they target. Funders and the public want to know in detail whether a funded organization is effective in doing what it sets out to do and whether it is also effective in what it does. While gaining and maintaining public trust is absolutely necessary, calls for accountability can lead nonprofits to spend more time seeking financial support and ensuring funded performance in order to continue receiving funding from sources. This can lead to nonprofits being more business-like, but it can also take attention away from innovative or distinctive ways in which they respond to community and/or client needs.

Fascination with collaboration – Government and funding foundations are increasingly demanding the use of inter-organizational relationships such as collaboration, partnerships and alliances as an element of funded projects. However, while there is increasing knowledge about the factors that support the effective negotiation and integration of strategic partnerships, much less is known about the actual outcomes of nonprofit organizations and how they compare to expected outcomes. Many nonprofits expend large amounts of organizational energy for questionable returns while pursuing inter-organizational relationships. Nonprofit organizations often face major barriers to collaboration, such as issues of autonomy and “turfism,” conflicting organizational cultures, and building trust between organizations.


Responding to these difficult circumstances requires adjustments that involve more than just developing additional financial support.

Leadership Challenges – The health of the nonprofit sector depends on the quality of its executive leadership. Agency leadership, including board members, must be able to ask fundamental questions related to strategy, mission, and accountability, as well as the roles their organizations play within their communities. For many nonprofit organizations, responding to changes in the environment means an increased need to:

· Determine the most efficient way to provide service to a client population that may grow or change;

· Develop strategies and processes for accessing and managing new funding streams;

· Decide where and how to cut the budget;

· Develop technology to collect information for reporting and billing;

· Managing cash flow challenges;

· Consider new partnerships, explore possible collaborations and consider mergers or acquisitions.

Given the challenging changes in the typical nonprofit operating environment, effective board leadership becomes especially critical. The issues facing the nonprofit sector underscore the need for appropriate, qualified, and effective board leadership in maintaining and improving the quality of organizational performance. It is appropriate for nonprofit boards to take a leadership role in assisting agency management with critical issues such as mission definition and strategic planning, legal compliance and conflicts of interest, oversight of agency financial management, resource development, establishing inter-organizational collaboration, fostering community relations and opportunities for capacity building training.

Management Challenges – Nonprofit managers are challenged to perform multiple functions and roles as they lead their organizations through today’s complex environment. They must be highly skilled not only in the technical aspects of their organization’s mission, but also in management areas such as finance, human resources, information technology, program evaluation, resource development, and many other management responsibilities. Also, the human resources of an organization represent the collective abilities and experiences of its people. Unfortunately, nonprofits often face a challenge when it comes to actively managing the talent of their staff. Attracting and retaining qualified personnel, as well as increased responsibility and competition create the need to develop the specialized business skills and processes required of for-profit organizations. Consequently, like their counterparts in the business world, managers of non-profit organizations should continuously seek and use the latest methods and techniques of organizational management and leadership.


Restating the six identified needs as positive attributes shows that resilient nonprofits will have:

1. A strong management structure and visionary board members with the right skills and access to resources.

2. Sufficient and flexible financing.

3. A defined set of best practices in service and management functions and an effective way to measure performance against those benchmarks.

4. A skilled workforce operating in a culture that facilitates opportunities for innovation and growth.

5. Effective community relations that include collaborative partnerships with other service providers, funders and other organizations and systems.

6. Management capacity to support services, including accounting, human resources, technology and marketing/development functions.


Seen from this perspective, there are seven actions nonprofits can take to achieve these characteristics and respond to the challenges they face:

1. Conduct an organizational assessment and develop a strategic plan to address capacity gaps.

2. Engage board members to ensure quality governance structures, practices and oversight.

3. Embrace and adopt good marketing and communication strategies.

4. Build a business skill set and integrate core business practices and tools.

5. Identify and implement appropriate metrics and better use technology to enable assessment of the success and impact of service and program delivery, as well as internal operations.

6. Implement advanced HR practices with a focus on skills and team building.

7. Research and adopt new business models of cooperation with complementary organizations.

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