For decades now, executives in the nonprofit world have debated the merits of running their organizations like for-profit businesses. In fact, many organizations have hired executives who previously worked in the for-profit world to help them build strategy and metrics for revenue as well as for dynamic tax and assurance requirements.
For these reasons (as well as the demand for more fiscal transparency among donors and other funders), the idea of business advisory for nonprofits is not so strange anymore. However, the cultural and social aspects of nonprofit organizations are different from for-profit organizations in the C-suite.
A 2006 report from McKinsey demonstrates that the same issues that plagued executives back then are still relevant today. They cited five top “underappreciated challenges of nonprofit leadership” that can benefit from outside advisory.
- Respect is earned
- Multiple stakeholders have a voice
- Impact measurement is sometimes elusive
- Communication is publicly scrutinized
- Resources are more limited
Given these challenges, how exactly can business advisory for nonprofits help in-house leaders and board members identify new opportunities and approaches to their mission? Here are a few areas where outside advisors can support your organization’s success.
Training
As staff and board members turn over, organizations have to educate the new people about laws, processes, accounting, tax issues and mission-based decisions. Often, an outside perspective on these issues can support consensus and understanding.
Whether you schedule board member training or lunch-and-learns for new staff, a consistent approach to knowledge sharing can free up your leaders to focus on other aspects of operations.
Internal Assessments
While audits provide a certain level of assurance for organizational compliance, there may be other issues that can be identified by a separate assessment.
For example, accounting systems may need updating to align with other technologies being used. A growing organization may also need to assess its internal controls or board governance structure. Outside business advisors with experience in nonprofit operations can bring forth opportunities where leaders may be too close to see them.
Strategic Planning
Planning can refer to many aspects of a nonprofit organization. Perhaps it involves new entity formation or the buying and selling of real estate holdings. Perhaps cash flow analysis is needed to identify goals for a capital campaign.
Perhaps the mission is shifting, with potential for tax or nonprofit status impacts. By bringing in outside guidance to discuss risks and opportunities, leaders have a wider field to address in their strategy. The outside advisor can also listen carefully and bridge differing viewpoints among leadership and board members.
Sometimes organizations also need to plan for sweeping changes in laws and funding. Although the changes may not take effect immediately, strategic planning can improve the organization’s success with compliance, communication and implementation.
Have you used business advisory for your nonprofit organization? It starts with a consultation to see how a knowledgeable and trusted advisor could remove the pressures of going it alone. Talk to our team at LvHJ.
