Googled: Why Do Nonprofits Fail?

Philip Manzano • Nov 11, 2016

Sometimes bad things happen to good organizations. We’ve got the rundown on some of the reasons why.

Nonprofits exist to do good in the world. They see a problem and look to solve it. They are there to make the lives of vulnerable people or animals better, to protect the environment, to empower us with the knowledge to do better, and to give us access to the things we need for survival. So why would an organization – whose sole purpose is to do good in this world–fail? Well, there are a lot of things that may be holding back a nonprofit. Let’s look at a few.

1. They Are Not Holding Themselves Accountable to a Plan

Research by Concord Leadership Group of over 1000 nonprofits showed that over half didn’t have a strategic plan, or that if they did, it wasn’t in writing. Not off to a good start here. Why is it important to have a strategic plan

Well, here are a few reasons:

  • To set direction and priorities
  • To get everyone on the same page
  • To simplify decision-making
  • To drive alignment
  • To communicate the message

Without a clear strategy, your organization may start to suffer from mission drift. You take on more and more projects and opportunities and don’t actually fit into the scope of your organization. Before you know if your organization has no vision, strategy, or coherence. A nonprofit that has lost sight of its mission, either because the strategic plan was never formally written or followed, makes the organization much more susceptible to failure.

2. There Is No Transition Plan In Place

Did you know that 10,000 Baby Boomers reach retirement age every day? Key nonprofit leaders are retiring every single day. However, a study showed an estimated 77% of nonprofits do not have a clear transition plan in place to address this. With high retirement rates and no transition plans, organizations are left to flounder after the loss of key leaders.

In addition to not having a transition plan, nonprofits have the tendency to hire executive roles from outside of the organization. Only 21% of senior or executive-level positions in nonprofits are promoted from within. Bringing in fresh management can bring a great new perspective to an organization, but it doesn’t recognize the knowledge gained through organizational loyalty or offer the opportunity to engage employees in long-term, strategic transition periods. Nonprofits can help to reduce potential failure in a transition period by having a clear plan in place.

3. They Don’t Give Fundraising The Attention It Needs

If you can’t raise money effectively then your nonprofit cannot survive and thrive. A new nonprofit may suffer if the CEO or board does not have adequate fundraising experience or doesn’t give it the priority it needs. Not having the time or the resources to prioritize fundraising is not a valid excuse. If you do not prioritize fundraising your nonprofit will fail–no if’s, and’s, or but’s. 

What do you need to be a successful fundraiser? Peter Meyer interviewed 30 different donors to identify these negative characteristics of unsuccessful fundraisers:

  • Lack of personal relationships
  • Lack of sincerity and belief
  • Poor communication
  • Lack of clear goals
  • Lack of integrity
  • Perceived ungratefulness
  • Desperation letters
  • Pressure selling
  • Lack of knowledge
  • Inaction
  • Wastefulness
  • Lack of interest
  • Inappropriate appreciation
  • Forgetting the obvious
  • Wasting time

The resources to fund your nonprofit are out there. You just have to keep it at the top of your priority list and put the work in. It will take a lot of time and effort to become strong fundraisers, but the payoff will be what keeps the doors of your nonprofit open year after year.

4. They Are Not Leveraging the Power of Technology

Technology is there to help your nonprofit work more efficiently and effectively. There are tons of platforms out there that help you organize things like contacts, email campaigns, project donations, social media, grants, and graphic design.

Better yet, there are platforms out there that let you do a lot of this for free. Have you ever tried Hootsuite to manage your social media platforms? Canva to create your posters or email headers? Keela to manage your projects and donations? There are tons of great tech companies out there that want nonprofits to have access to the best technology needed to do their best work. Not leveraging this puts your organization behind those that are able to effectively use technology and benefit from it.

This is especially important as the percentage of charitable funds coming from millennials continues to increase. Millennials want quick access to your donation process and to see the clear impact of your projects through your web presence. Don’t fall behind–try out a new set of tools today!

But there are also systemic hurdles…

No matter how tight your strategic plan, how strong your passion, and experienced your leadership is, some reasons for nonprofit failure have been systematically put in place and there’s not a whole lot we can do about that.

For example, we’ve declared overhead as “bad”. Nonprofits are in a race to the bottom, trying to see who can implement projects at the lowest cost humanly possible. Donors have come to expect this. Why pay overhead costs for one organization if another organization can do it for less? While we can widely recognize the importance of “spending money to make money”, or the increased return on investment we receive when we invest in our staff and technology. Yet this systemic issue of seeing administrative or overhead costs in nonprofits as a negative thing remains. There are things your organization can do in order to make your resources go further, but it doesn’t address the issue at hand.

As donors, and especially millennial donors, start to look at projects from the perspective of impact we hope that the overhead burden can start to fade. The better we can communicate where our money is going and why more nonprofits can begin to overcome this stigma that is holding back so many.

So if you run a nonprofit the better question to ask here is “what can I do to make sure my nonprofit doesn’t fail?”. While there’s no “one size fits all” road to success that we can share, we can give some tips that have helped nonprofits to find success in the past.

  1. Have a strategic plan in place and hold your leaders accountable.
  2. Review your strategic plan quarterly, at a minimum.
  3. Have a plan for a leadership transition, especially if your organization is being run by baby boomers.
  4. Prioritize fundraising and embody the characteristics that make a great fundraiser.
  5. Bring along a co-founder or two to share your vision – don’t go about this alone.
  6. Build strong networks. When you are constantly competing for funds you need to build a reputable brand that is respected by your community and other nonprofits. Don’t tear other organizations down – promote them and go to them for approval.
  7. Get some mentors.
  8. Don’t lose sight of your mission.

Have any other tips that have helped your nonprofit avoid failure? We’d love to hear them in the comments below.