Why is Running a Non-Profit so Hard?

Non-profits employ over 7% of the global workforce, and closer to home in the USA, they represent over 5.7% of US GDP. They earn annual revenues of $2.62B, and yet, nearly every non-profit worries about the state of operations, cash flow, and ensuring they have operational continuity year to year.

Uncertain Government Funding

How does an industry that works on helping people work on so much uncertainty? Funding models certainly play a role. Government funding is at best year to year. Even some multi-year funds are not guaranteed. This undependable funding model is akin to working a contract job, with it being up for renewal each year. You may have some months of certainty, but one-third to one-half of your year is spent in a constant state of worry. Government funding also tends to not provide operational funding. This means you are constantly stretched for resources and trying to make do in an insecure environment. Unless you secure multi-year funding, you will be having this same struggle, year to year.

Working With Limited Resources

The next piece is related, but slightly different, and that is working with limited resources. There are very few non-profits that have zero budgetary concerns. Most are stretched financially and operationally, consistently making do with less each day. Leaders have to wear multiple hats and learn how to operate within the financial and regulatory framework of the non-profit sector. Those who can make a dollar stretch further are more successful than those who do not.

Increased Sector Competition

One of the other pieces we rarely talk about in the sector is the increased competition. There are more and more non-profits each day, all fighting for the same limited resources. Non-profits have to become more efficient, improve their grant and donor requests, and become more competitive to be successful at getting those limited grant dollars. Improving service delivery, getting better results, and increasing efficacy are ways that you can stand out. Successful non-profits have by now learned storytelling and how important it is. Having good metrics and data will help you go far with funders to demonstrate impact and good results.

Adapting to Change

Successful leaders and organizations have become adept at adapting to change. As social needs, funding priorities, and politics change, the industry must also change and adapt to the changing infrastructure around it. How to balance changing funding regimes is a delicate balance and one that not many non-profits do well, to be honest. To do this well requires continuous learning, innovation, and flexibility in order to remain relevant and effective.

Managing Volunteers and Staff

The labor market over the last year has been anything but stable. Add to this changing demographic trends that leave fewer younger people actively volunteering, and you have a turbulent environment indeed. Trying to get a board of directors, for example, is nearly impossible. In fact, many groups have started getting non-finance people to take on the treasurer’s role as a way of adapting. There are just fewer qualified employees and volunteers out there, so organizations need to be more creative with whom they hire and take on as volunteers. Great leaders are looking to alternative labor sources and implementing strategies such as remote work, job sharing, and more as ways to earn back those individuals. They are merging with other groups to share boards of directors and overall, finding more creative ways to address these chronic shortages.

Balancing Mission & Sustainability

Finally, non-profits walk this tightrope of balancing mission with their overall sustainability. Non-profits often have a dual focus on fulfilling their mission and achieving sustainability. Striking a balance between delivering impactful programs and generating enough revenue to sustain the organization can be a constant challenge. Good leaders know this and are artists at political networking and building press for their organizations. Additionally, they need to ensure ongoing collaboration with other groups, diversify their funding sources, and do annual strategic planning with their boards.

So, in short, running a non-profit is hard. Why individuals choose to continue demonstrates the depth of their heart, caring, and dedication to their chosen causes. However, it is time to recognize the contributions of this sector and begin to move it forward by creating tools and resources that strengthen, build capacity, and grow our non-profit organizations.

My name is Carmen and I have worked in and with this sector for over 15 years as a staff member, Management Consultant and dedicated advisor. I am currently Co-Founder at Pharo Non-Profit, where we build tools and resources to scale impact in this sector.

If you found value in this blog, we would love to hear from you. Please feel free to contact hello@pharononprofit.com to give us feedback, ask questions or leave your comments.
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