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(originally published by Booz & Company)


Getting to "No"

How nonprofit organizations can stretch their limited resources by focusing on priorities and avoiding mission creep.

Nongovernmental organizations (NGOs) are threatened by their own collective success. They have become the helpers of first resort for communities in trouble — communities dealing with the aftermath of a military or terrorist attack, recovering from an environmental disaster, or facing a pandemic or medical crisis. The number of nonprofit organizations and the total funds they disburse has risen dramatically during the past two decades, and some experts predict far more extensive increases to come. This trend has been driven by highly visible donors such as Bill Gates and Warren Buffett, the deep-pocketed baby boom generation as it enters its mature years, and the new fund-raising capabilities of the Internet. By meeting so many needs so well and mobilizing money so effectively, these organizations are gaining in prominence and political influence. Yet, with the U.S. government cutting back emergency funding even as the demand for emergency services continues to climb, NGOs now face the riskiest decade in their history.

This isn’t hyperbole: A survey of major U.S. nonprofits conducted by Johns Hopkins University in 2004 found that nearly 90 percent were experiencing some degree of fiscal distress, with 51 percent describing their distress as “severe.” Although the study blamed their financial problems on government budget cuts and the rising cost of employee benefits, the deeper cause is complexity.

Because the mission of most nonprofit organizations, no matter how well-defined, must be interpreted afresh in the face of every new catastrophe or demand for help, the leaders of these organizations can’t avoid asking Whom will we help? The answer is never obvious, but the more complicated events become, the more the demand for help seems unlimited.

One easy answer, and the most natural response in some ways, is to help everybody. Many large nonprofits, especially as they grow, have a humane and healthy tendency to try to be all-embracing. Often led by an energetic and empathetic executive team eager to take on new missions, new constituencies, and new funding streams, the reach of a large nonprofit organization can easily extend itself into many new areas of activity.

Unfortunately, as noble as this tendency toward “mission creep” might seem in the beginning, it can lead to counterproductive and even cruel results. The first stresses typically occur internally. Decisions to start new programs are made haphazardly. In an aid organization, for instance, the head office may make new commitments without first gaining an understanding of how much their expenses will contribute to total operational costs. Or field officers may act on their own initiative, not realizing that their actions have consequences for the organization as a whole, beyond the local communities they serve.

As this haphazard evolution continues, the organizations grow increasingly unwieldy. Frontline managers begin to see the head office not as a source of support, but as a bureaucracy that issues endless and often conflicting directives, which they must work around and even ignore to get something accomplished. Ultimately, the “clients” — people served by the organization — start to notice a decline in the quality of help, and in responsiveness. Complaints drift back to the donors, who may add overseers and rules (“strings”) to ensure that their gifts don’t vanish into administrative overhead. This move exacerbates the organizational complexities, and thus further weakens an organization’s ability to fulfill its mission.

One of the world’s largest global relief and development organizations fell into this pattern several years ago. The organization was structured to give field offices independence in pursuing development projects, as long as those offices raised their funding — even in sectors where the organization lacked the scale and coordination to have an impact commensurate with the resources it was expending. As a result, field offices favored their pet projects; some solicited money for projects that they were not capable of completing. The organization had to return grant money after failing to deliver on an infrastructure project; in another instance, it was forced to withdraw from two countries because it could not align fund raising with the overall development aspirations.

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  1. Alan J. Abramson and Lester M. Salamon, “The Nonprofit Sector and the Federal Budget: Fiscal Year 2006 and Beyond,” Aspen Institute, 2005: Research report suggesting that the rate of U.S. government funding for nonprofits is heading for decline. Click here.
  2. “Doing Well and Doing Good,” Economist, July 29, 2004: If you read only one article on philanthropic trends, this overview is it. Click here. 
  3. Katherine Fulton and Andrew Blau, “Looking Out for the Future: An Orientation for Twenty-first Century Philanthropists,” Global Business Network and Monitor Institute, 2005: Scenario approach shows why changes in long-term trends raise the stakes for philanthropists. Click here. 
  4. Tom Hansson, Jürgen Ringbeck and Markus Franke, “Flight for Survival: A New Business Model for the Airline Industry,” s+b, Summer 2003: Could the airlines, as they struggle for focus, provide a model of good and bad Smart Customization strategy for NGOs? Click here.
  5. Leslie Moeller, Matthew Egol, and Karla Martin, “Smart Customization: Profitable Growth Through Tailored Business Streams,” s+b Resilience Report, 11/11/03: More concise version of the Oliver, Moeller, Lakenan article (see below). Click here. 
  6. Keith Oliver, Leslie H. Moeller, and Bill Lakenan: “Smart Customization: Profitable Growth Through Tailored Business Streams,” s+b, Spring 2004: How such companies as Unilever, BP, Hearst Magazines, Campbell Soup, and Time Warner find “virtuous variety.” Click here. 
  7. Loren Renz and Josefina Atienza, “International Grantmaking Update: A Snapshot of U.S. Foundation Trends,” Foundation Center, October 2006 Click here.: and Loren Renz, Steven Lawrence, and Josefina Atienza, “Foundation Growth and Giving Estimates: Current Outlook,” 2006 edition, Foundation Center: Click here. Authoritative sources (along with other Foundation Center publications) for statistics on and analysis of foundation growth and support, particularly in the U.S.
  8. Lester M. Salamon and Richard O’Sullivan, “Stressed but Coping: Nonprofit Organizations and the Current Fiscal Crisis,” Johns Hopkins University Center for Civil Society Studies, Listening Post Project, January 19, 2004: This survey of American nonprofits finds them “entrepreneurial organizations, responding actively and creatively to new fiscal pressures.” Click here. 
  9. Paul G. Schervish, “Today’s Wealth Holder and Tomorrow’s Giving: The New Dynamics of Wealth and Philanthropy,” Journal of Gift Planning, 3rd Quarter 2005, available through Boston College Center on Wealth and Philanthropy: Current estimates (as of 2006) of the forthcoming “largest intergenerational transfer of wealth in history,” the anticipated billions in individual legacies. Click here.
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