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Essential
Characteristics of Effective Nonprofit Organizations
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Over
the past decade nonprofit institutions have generally
thrived: plentiful resources, high demand for services,
increased interest in and attention to programs and
services. Even with the steep declines in the capital
markets and rapidly slowing economies in both the
U.S. and Europe, most nonprofits—ranging across
all sectors in the field—are substantially better
situated than they were ten to twelve years ago.
But there has not yet been sustained analysis of either
the necessary preconditions for or the significant
characteristics of institutional effectiveness. What
ingredients drive continuing healthiness and success
in the nonprofit sector in varying economic, social
and political environments?
Recent research* undertaken by ANTHONY
KNERR & ASSOCIATES
provides an initial answer to the question. This research
suggests that there are a set of common characteristics
essential to institutional effectiveness and healthiness
that cut across differences in organizational mission,
culture, history, aspirations, program structure and
organization design, as follows:
| The
most essential characteristics of effective nonprofit
organizations are clarity of mission, strong leadership
and long-term strategic thinking. |
•
Mission:
a clear, concise and compelling mission that is well
understood by all parties, internally and externally,
and unrelenting and rigorous management to the realization
and execution of that mission
• Leadership:
continuing strong leadership at both the governance
and executive levels
• Strategic Thinking:
central and continuing attention to longer-term strategic
matters, manifest by strategic plans that are well
executed and reflected in sophisticated and successful
fundraising efforts
• Programs:
activities and services of the highest quality that
embody the mission and reflect the organization’s
strategic thinking, with results that are tangible,
easily measured and effectively communicated
• Communications: relentless emphasis
on communications and focus on branding and image,
both
internally and externally
• Technology: effective
use of technology for governance, communications,
visibility, fundraising,
financial management, evaluation and assessment and
general administration
• The Basics:
up-to-date by-laws, clear organization design, sound
budgeting and rigorous financial planning and reporting.
Aspects of These Key Characteristics
There
are significant differences in the relative importance
of these characteristics:
•
The most important are the first
three—clarity of mission, continuing strong leadership
and a longer term strategic perspective—for these
are central to an organization knowing what it is
about, having the leadership necessary to guide it
and internalizing a longer-term focus for achieving
its mission. Without strength in all three characteristics,
organizations appear to be significantly hampered
in effectiveness and overall vigor
•
The first five characteristics—mission, leadership,
strategic thinking, programs and communications—
are highly interrelated, with each one reinforcing
the others and the absence of any one of them diminishing
effectiveness and/or weakening an organization’s
overall stability and vigor
| Effective
organizations think strategically, understanding
that the realization of their missions is dependent
upon a longer view. |
•
Technology appears to be a characteristic of emerging
importance, but not as essential as the first
six. It is highly likely that technology will be increasingly
significant—perhaps within the next three
years or so
•
The basics of by-laws, organization design, communications
and strong financial management are essential but
not sufficient to ensure effectiveness. In particular,
the healthiest organizations manifest strong performance
in several of these characteristics.
Mission
These organizations have exceptionally clear missions
that, in different ways, speak to their essential
purpose and character. These organizations also measure
—and announce—their success in meeting their
missions, typically through explicit quantitative
results. Such quantitative results, which are related
to measurable programmatic accomplishments, are important
because they indicate the clarity, appeal, impact
and value of the mission to volunteers, funders and
others. Further, these organizations relentlessly
manage to the realization of their missions, recognizing
that all decisions, programs and activities are critical
paths in moving towards achievement of their primary
purpose and goal.
Leadership
These organizations pay particular, continuing attention
to ensuring that they are well-led and well-served
by their leadership at both the governance and executive
levels.
They have serious and thoughtful Board nominating
processes led by experienced volunteer leadership
that regularly evaluate overall Board performance
as well as that of individual Board members. Their
Boards seek a balance between continuing membership
and the addition of new members; younger and older
members; and representation of affiliates and outsiders.
They also seek a broad array of professional experience
and capabilities with common dedication to the mission
and core values of the organization.
Their Boards focus constantly on the articulation
and realization of longer-term strategic goals, pay
serious continuing attention to the overall vigor
of the organization, ensure strong analytic support
to all decisions and look to their chief executive
officers for effective realization of mission and
programs.
These
organizations also understand the importance of having
gifted chief executive officers and staff who are
responsible for realizing the mission and strategic
objectives on a day-to-day basis. They expect their
chief executive officers to be individuals of proven
capacity who are the “best in the field”,
capable of exceptional leadership and representation
and dedicated to the achievement of the organization’s
mission.
Strategic Thinking
These organizations think strategically, understanding
that the realization of their missions is dependent
upon a longer view that is periodically reassessed
and reset, informed by a set of clear three- to fiveyear
goals and objectives and embodied in a formal plan
that serves as a road-map for everything the organization
is doing.
They also use their strategic plans as key tools to
measure organization performance, support development
planning and management, inform external and internal
communications and branding and, in general, serve
as the “operational charter” for guiding
the organization.
Further, they see strategic thinking as critical to
successful fundraising—for they realize that
major
donors are interested in knowing about an organization’s
future aspirations, take comfort in a track
record of successful realization of prior strategic
plans and typically concern themselves about longer-term
issues.
Facing—and Anticipating—Threats to Viability
Within the past decade or so, some of the most effective
organizations have faced—or are now facing—a
serious problem (or problems) that has, in some cases,
fundamentally threatened its continued viability.
| Within
the past decade or so, some
of the most effective organizations
have faced a serious problem. |
Among
the challenges cited have been significant internal
conflicts over mission and/or program direction, declining
membership, ineffective and/or poorly managed affiliates
and inadequate governance and/or executive leadership.
Also noted are changing externalities that were not
adequately anticipated, serious new competition from
other organizations, poor communications and/or branding
and significant financial difficulties.
The
organizations report that these challenges tend to
multiply. Sometimes this directly causes other difficulties,
such as declining membership caused by unanticipated
externalities leading to serious financial problems.
At other times these challenges are manifestations
of deeper and less clear difficulties, such as internal
conflicts over mission that are representative of
unrecognized mission creep or declining membership
reflective of conflicts over program direction.
Each of the most effective organizations has chosen
a different approach to meeting its challenges. These
include fundamental rethinking of mission, redesign
or refocus of programs and services, changes in governance
and/or executive leadership, establishing or substantially
strengthening standards for affiliates and tightening
of financial planning and control.
The organizations that have been most successful in
meeting these challenges have strategically and/or
organizationally transformed themselves—rethinking
and adopting quite new or different approaches to
mission, program structure or focus, governance, affiliate
relationships and funding.
Such measures have led these organizations to rise
above their problems and enjoy a state of stability
and vigor far greater than they previously enjoyed—
as measured by their progress towards realization
of mission, strength of branding, general recognition
and visibility, membership growth, number and healthiness
of affiliates, size of operating budget and/or size
of asset base.
Significant
Challenges Ahead
The most effective organizations collectively anticipate
that they will face significant challenges over the
coming decade. Among the most frequently cited concerns
are changing or adverse economic circumstances, mission
creep and/or mission irrelevance, new demographics,
unbridled growth in membership and/or affiliates,
significant declines in membership and/or affiliates
and inability to stabilize funding.
Some
organizations are more confident than others about
their ability to thrive in the face of such challenges,
and these organizations are uniformly the ones that
appear to embody most robustly the first three characteristics
cited above—clarity of mission, strong leadership
and continuing strategic focus.
Several
organizations note that while they are uncertain as
to exactly what challenges they may confront, they
believe strongly that a continuous longer-term focus
provides both a way of ensuring an “early alert”
as well as flexibility in anticipating and meeting
changing circumstances and conditions.
Overall, the organizations surveyed believe that complexity
in the nonprofit world is increasing rapidly, with
serious implications for their stability and effectiveness.
Globalization, technology, increased competition,
rising unmet needs, changing public policy, different
public funding priorities and an accelerating rate
of change are among the reasons cited for this trend.
| The
most effective organizations collectively anticipate
that they will face significant challenges over
the coming decade. |
These
organizations anticipate that among the possible consequences
of this trend will be a need for even more effective
governance, stronger executive and managerial capability
and more thoughtful approaches to volunteer participation
and leadership. Tighter focus on mission and fundamental
purposes, new forms of organization design and more
strategic alliances and other forms of institutional
partnership and association are also possible implications
of this trend.
Some Implications
There are three powerful implications to this analysis.
The most effective nonprofit organizations share certain
common characteristics irrespective of their particular
sector, mission, size or focus. Secondly, effective
nonprofit organizations have successfully faced significant
challenges and emerged stronger and healthier not
simply by jumping to a single new program or communication
effort, but rather through sustained focus on strengthening
the deeper drivers of an organization: clarity of
mission, strong leadership and continuing strategic
focus. And thirdly, successful organizations do not
rest on their laurels but anticipate continuingcomplex
challenges and pressures and realize the importance
of sustained focus on institutional mission and role,
effective governance and executive leadership and
continuous long-term thinking.
—
Anthony Knerr
*
The research was undertaken on behalf of a client
and included an analysis of eleven major organizations
that are broadly similar to it in mission, size and
program focus as well as 15 case studies of affiliates
of the client organization—for a total of 26
in-depth analyses of very large to quite small organizations.
This research was subsequently augmented by an extensive
analysis of 15 other nonprofit institutions, including
universities and liberal arts colleges, arts and cultural
organizations, social service and volunteer organizations
and health and medical institutions. The objective
of this larger study—comprising a universe of
41 different institutions —was to determine whether
there are common characteristics across different
types of nonprofit organizations that contribute to
organizational effectiveness.
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