Nonprofits Fail – Here’s Seven Reasons Why (NANOE)

Reference: Tracy Ebarb: National Director of the National Association of Nonprofit Organizations & Executives (NANOE) 

I recently came across this article (see link above, and it’s posted on the NGO section of my website, along with other resources) and wanted to share it here, as well. While much of it I agree with, I have a few small points of possible disagreement (although it may be a misinterpretation of wording, not content).

The real data from National Center on Charitable Statistics reveals that approximately 30% of nonprofits fail to exist after 10 years, and according to Forbes, over half of all nonprofits that are chartered are destined to fail or stall within a few years due to leadership issues and the lack of a strategic plan, among other things.

Nanoe

Within in the NGO world, there is a lot of great work being done. At the same time, the cycle above (new NGOs starting, failing, and opening up a spot for the next one to open and then fail) is a significant problem. In my experience, it’s a problem that is not being talked about enough, and I think we can change that. So, let’s talk. 🙂

Reason #1: Empty Optimism – or Pie in the Sky Dreams (without the proper ingredients to bake a pie)
I’ve seen some of the best, most needed (in my view), and earnest efforts falter and fail because the leaders simply did not accurately calculate the amount of support that would be available and the alliances and partnerships that they would need to support their humble beginnings. In other words – they lacked a sound business plan upon which to build a platform for success. The old saying ‘to fail to plan is to plan to fail’ is so very, very true. (Bold mine).

Nanoe

Many of the reasons given are clear, and I have no disagreement. Lack of strategic plans, failure to develop a strong organizational leadership team (outside of the founding CEO) and others are clearly top of the list for why countless small NGOs fail to make it through the first few years, and the transition to a new CEO. I have some disagreement with point #6:

Misplacing Priority #1 – or forgetting who the ‘real boss’ is
At the end of the day, for nonprofit organizations – Money is more important than Mission. Nonprofits exist to serve and to meet needs on a global scale, and we care deeply for the causes we embrace, often to the detriment of our funders. A successful nonprofit knows that their #1 Customer is their donors, period. Without the donors, there would be no impact, no people served, no mouths fed, no backs clothed. Those we serve are important, but if we really want to have an impact, we must take care of our donors first, we must make sure that our programs are designed to give our donors an opportunity to fulfill the goals they have for their philanthropy, and then constantly communicate to them the impact their dollars are having. And when it comes to taking care of donors, relationships, personal relationships are KING! No fancy CRM or automated gift response mechanism will ever trump a personal relationship.

Nanoe

I agree that NGOs need money to operate, and that NGOs need to be clear, open and transparent with donors about what they are doing, why they are doing it, and how the money is being spent. I do not agree, however, that as non-profits, we are here to serve the donors. Rather, the organization and the donors together are working together for greater good, and to serve the communities in which we work. We share a common goal, and are on the same time to reach our goals.

Here is the author’s summary, along with the items earlier in the article (Nanoe) of the primary reasons NGOs fail:

• Not Having a Qualified Leader.
• No Website Or Poorly Designed Website.
• Poor Planning and Record Keeping
• Poor Accounting and Money Management
• Marketing Only to Large Donors and Not Thinking Smaller Donors are Just As Important
• Nonprofit Doesn’t Mean Tax Exempt.
• Ultimately, the real reason nonprofits fail is because they shouldn’t have existed in the first place. (Bold mine).

One that I would add (perhaps as a subset of leadership or money management) is the expectation that goods and services (rent, IT support, computers, staff time, experts/consultants, advertising, pro bono work etc etc) are somehow automatically “owed” to the org, by virtue of the fact that the org is trying to do something good or is a registered non-profit. Volunteer recruitment is important, but does not substitute for a budget to cover the basic costs of running an organization and paying for the goods, services and skills that you need to get the job done. If you don’t have the money (or a plan to get money) to pay for any of the basic items or staff that are required to run an organization, you don’t have a viable plan yet.

And, further to his first point(s), I would emphasize that failure to plan (essentially variations on “I have never run an NGO and have no idea how to do it. I have a different full-time job, no strategic plans, no website and no money, but I’m sure that if I just start, everyone will hand me money, computers, a building and their expertise for free and it will all work out, because I’m such a nice person and I have a nice goal…”) is one of the most common mistakes I’ve seen. Failure to plan also includes lack of plans for how to successfully hand over the project from the founding CEO, in a reasonable time frame. (Considering starting a new NGO? Start at the end with your planning: Do you have a viable plan to hand the org to a new CEO in 10-15 years?)

On a related note, failure to seriously support other existing orgs that are already working in the same space (before starting a new org), is one of the biggest failures that I have come across.

For those of you in the non-profit world, do you have anything to add? Any adjustments you would make to the list?