There are seven components necessary to ensure a sustainable organization. This document provides guidance and direction on each of these components.
Every organization needs to distinguish and market its organizational identity. The organization’s identity is made up of its vision, mission, and values. It tells the “story” of the organization and why it exists. Organizational identity can also be distinguished by the organization’s look (branding) and message. Finally, an organization is often identified with its leadership. A charismatic, smart executive director or CEO can help distinguish an organization and set it apart. Following is a description of the components of organizational identity.
For an organization to be sustainable it must have a strategic plan that speaks to the mission, vision, goals and niche of the organization. The organization uses this strategic plan to create an annual operational plan. Every organization should regularly (every four to five years) engage its Board of Directors and staff in a strategic planning process. The strategic plan that results from such a process will provide the organization with a four- to five-year road map, identifying the goals towards which the organization will work to meet its mission and realize its vision. The strategic plan should include the following steps:
- An assessment of the external environment to answer: What are the trends in the field? What are the opportunities and threats for the organization and its work? How can the organization situate itself to take advantage of the opportunities and avoid the threats? How can the organization be poised to respond to/benefit from trends in the field?
- An assessment of the internal environment to analyze the strengths and weaknesses of the organization itself, including staffing, budget, morale, management, perception of the organization from colleagues and funders and any other issues that may affect the organization’s ability to take advantage of the opportunities or ward off the threats in the environment.
- The revisiting of the organization’s mission, vision and niche to assess whether they are still relevant. If they are not still relevant, they should be revised. Well crafted mission, vision and niche statements will serve the organization well into the future.
- The creation of long- term goals. Goals should be far-reaching but attainable, and should help the organization explain how it will move towards fulfilling its mission in accordance with its values and vision. For example, one long-term goal might be to increase the use of evaluated sexuality education curricula in after-school programs throughout the state. Another might be to encourage greater investment in science-based strategies by educating funders about evaluated adolescent pregnancy programs.
- The development of quantifiable, time-lined objectives to reach each goal. For example, one objective under the first goal above might be to work with the school boards in three counties in order to promote science-based sex education programs. Another objective might be to sponsor a pilot of a promising program in one school.
- The creation of benchmarks to measure progress toward accomplishing an objective. Benchmarks identify by when, how much, who, and where.
The annual operational plan identifies the work the organization will undertake in the coming year. An operational plan is a practical one-year plan of action that includes objectives, activities and timelines. It should be intimately tied to the strategic plan in that any activity the organization will undertake in the year ahead should move the organization towards meeting the goals and objectives identified in the strategic plan. To create an operational plan, start by identifying any work to which the organization is already obligated to conduct based on its current grants and contracts. Chart out the work, including what will need to be done to accomplish what was promised in the grant or contract, who will do the work, and by when will the work it get done. Then think through what new work the organization can take on, based on its niche, to move towards meeting the goals and objectives outlined in its strategic plan. Again identify the activities staff would undertake, who would conduct the work and by when would it be accomplished. Finally, try to identify where the organization might go for funding for these activities.
If an organization has more than one department or program/project, then an annual operational plan should be created for each. Senior staff should then work to join the individual plans in an overall organizational operational plan. It is this organizational plan that is then used to create an organizational budget and funding proposals.
The annual financial plan is the organization’s fiscal plan of action. It includes the creation of an organizational budget as well the conduct of a number of processes to monitor the financial health and well-being of the organization.
The Annual Budget
To create the annual budget, staff should sit down with the organization’s financial manager to create an activity budget for each department’s/project’s operational plan. To create the activity budget consider the work outlined in each operational plan. What activities will it take to complete this work? What resources will be needed to conduct these activities? Include travel, supplies, consultants, postage, telephone, etc. What staff will work on the program and for what percentage of their time? Include salaries and benefits.
Once each department/project has an activity budget, the financial manager can collapse these into an organizational or line item budget. Like activities across projects (such as staff travel) are collapsed into one line item. Line items might include staff, fringe, travel, supplies, meetings, consultants, telephone, postage, etc.
Now “burden” the activity budget with the non-program – or general and administrative – costs of running the organization, such as utilities, the receptionist’s and other support staff’s salaries and benefits, the cost of an annual audit, rent, web site hosting fees, etc. These general and administrative costs should be spread to the programs and should not equal more that 25 percent of the total program costs of each project or of the organization. That is, a sustainable organization spends more than 75 percent of its revenue on program activities and less than 25 percent on administration.
Once the budget is created, management should identify sources of revenue to meet the budgetary needs. Some funds may already be in hand from existing grants or contracts. Additional funds will probably need to be raised. Identify where the organization will go for these additional funds. Identify if these are “good bets” or if there is a low probability that the funding source will pan out. Do not spend above the organization’s means. Cut back on operational plans or put “holds” on activities that do not have a source of funding. The funding gap (the amount needed to fully fund the operational budget) drives the fund-raising plan described further below.
The Cash Flow Analysis
Another financial tool every organization should employ to be sustainable is the cash flow analysis. It is not enough to know that the organization will raise the funds it needs to meet its budget. It is essential to know if the funds will come into the organization in a timely manner to pay the bills and to meet the payroll as it comes due. Financial managers should create a spread sheet that identifies what funds are expected to come in each month and measure that by the anticipated expenditures for each month. The spreadsheet should anticipate the cash flow for at least a year, should be updated every month to reflect at least a year from that time point, and should be used to identify if a cash flow shortage will arise and when. Only through this process will management be able to anticipate a cash flow problem and take steps to fix it in time.
The annual audit is another important part of the annual financial plan and should be conducted by an independent certified public accountant (CPA). An annual audit will test for the accuracy and completeness of an organization’s financial statements and accounting practices and controls. The CPA will examine the organization’s financial records and statements and will issue an opinion stating whether or not these records accurately reflect the organization’s financial position. Further the audit will state whether or not the organization complies with generally accepted accounting principles. An audit can help the organization to find and repair important record-keeping errors and can help build confidence among funders of the organization’s financial health.
All charitable, non-profit organizations have to file certain forms with the Internal Revenue Service and, usually, with their state government as well. The annual financial plan identifies the officer responsible for filing these reports and helps to ensure that filing occurs correctly and on time.
Every organization needs a long-range fund-raising plan to maintain its sustainability. The long-range fund-raising plan helps the staff and board to ensure that the organization will have the funding necessary to conduct its annual operational plan and to fulfill its long-range strategic plan. A long-range fund-raising plan includes steps to identify the funding needs of the organization (often assessed through the creation of the annual budget and the growth trajectory of the organization) and the organization’s potential sources of income or support. Staff must then identify and cultivate potential donors, apply/ask for funding (write grants and/or solicit individual donors) and report the organization’s accomplishments on an on-going basis.
Identifying Potential Source of Support
To be sustainable, organizations need to identify and then cultivate a diverse pool of support. Sources of support might include:
- Government funding, including city, county, state and federal grants
- Foundation support, be it general funds or project support
- Corporations, both financial support or in-kind contributions, from local or national corporations,
- Individual donors, including volunteers and/or financial contributions
Staff should assess the organization’s current sources of support as well as its strengths to create a long-range fund-raising plan that will leverage the organization’s current assets. To create the long-range plan, staff should ask itself the following questions:
- Do we have an existing network of foundations that might put us in contact with other foundations?
- Do we have foundation supporters that might be willing to increase our grant level or provide multi-year funding?
- Do we have a list of foundations that provide support in our area of work, but we have not yet approached them or have been unsuccessful in our approach?
- Do we have the staff capacity to write effective grants and if not, who will be responsible and what training might be needed?
Regarding Government Funding:
- Are we aware of potential government funding sources?
- How well does our work lend itself to government contracts/grants?
- Do we have the staff expertise to write government grant applications? If not, what training will we need?
- What are the pros and cons of pursuing government funding?
- Does our cause lend itself naturally to corporate funding? In other words, is there a natural partnership between the business goals of a local or national corporation and our work?
- Do we have any contacts with local or national corporations, either through staff or the board of directors, that might provide us support?
Regarding Individual Donors:
- Do we already have a list of individuals who support our work either through financial contributions or volunteer hours? If so, what do we need to increase these individuals’ annual contributions? If not, do we have a board of directors that is willing to help develop a list of potential donors?
- What staff capacity do we have for individual fund-raising and what training or resources are needed?
Finally, staff should think about what type of funding is needed – project support, general funds, in-kind contributions – and which sources naturally lend themselves to this type of funding.
Answering these questions will help the organization determine its fund-raising focus. A plan should be created to allocate staff time and resources to each possible funding source based on its potential return.
Any sustainable organization knows that the secret of fund-raising is not in getting that donor’s first contribution; it is in getting second and third renewals from that donor. Developing a steady group of supportive donors is essential. Staff must pay as much attention to donors after they have given as before. Correspond regularly with donors, update them on the progress and achievements of the organization, and keep them aware of how much their support is helping the organization to accomplish. Find creative ways to say ‘thank you’ and to say it often!
A strong and sustainable organization has a Board of Directors that is engaged in the organization’s strategic vision and whose members are willing to help the organization meet its programmatic and fund-raising goals. Nurturing a board of directors is hard work and needs thought and intention. The creation of an annual board development plan can help the organization keep its current board members engaged while cultivating new board members to fit the ever-changing needs of the organization. Steps in board development follow:
Once a year, the executive director and a sub-committee of the board of directors should compare the strategic needs and objectives of the organization with the expertise and engagement of its current board members. This comparison allows the committee to create a plan to engage each current member to assist the organization in ways that will benefit both the board member and the organization. It will also help the committee begin to identify gaps in expertise – for example, do we have enough physicians on the board? Do we have enough fund-raisers?—and aid in the development of a recruitment plan.
Each year the board of directors should assess its own effectiveness to fulfill its responsibilities to the organization. Has the board helped with fund-raising? Has it monitored the financial health of the organization? Has it assisted the organization in creating a broad base of support? If so, how can it do even more in the year ahead? If not, what can it do to strengthen its effectiveness?
Board recruitment is an essential component of organizational sustainability. Board members should have limited terms and no more than one-quarter of the board should cycle off in any given year. This ensures that the board always consists of experienced as well as new members. A sub-committee of the board should be responsible for board recruitment. Board recruitment is an ongoing process and includes the identification of gaps in the board’s expertise based on the changing needs of the organization or on who is rotating off of the board. The committee must then identify a list of potential board members that can fill these gaps, assess their interest in and fit with the organization, and request their participation on the board of directors.
Every new board member needs an organizational orientation to be effective. The orientation is a way to bring new board members “up to speed” on the organization, its mission, its goals and objectives. It should also address the role and the responsibilities of the board as a whole and of the new member individually.
Maintenance and team building
Finally, for a board to be effective, it needs to be nurtured and cultivated. The board chair should work with the executive director to identify ways of ensuring that each board member is engaged in the work of the organization and that he/she feels needed and appreciated. It is also essential to plan board meetings that build the cohesion of the board (the feeling that they are part of a team) and that include training on issues of importance to the organization and to fulfilling the responsibilities of the board.
An organization’s staff is its bread and butter. If the staff is competent and well respected in the field, then the organization is more likely to be sustainable. Staff development is an on-going process of investing in the individuals that make up the organization and ensuring that each individual has the confidence and skills necessary to excel at his/her work. Staff development also means building an organizational culture that values each staff member and creates cohesion and a feeling of team among staff members. Sustainable organizations invest in their employees, reward initiative and competence, and provide transparency and flexibility. The components of good staff development include the conduct of a needs assessment, an annual employee evaluation and review, staff training, and team-building. Staff development costs money and should be included in the annual organizational budget.
Needs and assets assessment
Every organization should engage in a periodic needs and assets assessment. This includes a number of steps:
- Annually, management should compare current staff skills to the skills needed to complete the activities outlined in the operational plan. For example, if the operational plan for the coming year will require that a particular staff person upgrade and then maintain the Web site, she/he may also need additional and substantive Web development training. Plans, including the allocation of resources, must be made to acquire this training.
- Periodically, management should also take the “pulse” of the organization. This can be done by sitting down with each staff member to assess their perception of the health of the organizational culture (is the organization flexible, does it promote creativity, does it respect and foster diversity and professionalism, is the decision making process transparent?), the external reputation of the organization (what does staff think the reputation of the organization is and what components lend to that reputation?); and the satisfaction of each staff member (does his/her role within the organization advance his/her own career goals?). An organization can always improve on its culture. However, organizations in which employees feel valued and respected and part of something bigger than themselves are better situated to become sustainable than are other organizations.
Evaluation and review
Every staff member needs feedback about his/her performance. This feedback should be on-going and not saved only for the employee’s annual evaluation and review. If the employee isn’t meeting his/her responsibilities, sit down and discuss it in a timely manner. Make a plan to help the employee improve his/her work. If the employee is doing well, let him/her know this.
Even if managers provide on-going feedback, every member of the staff – from the executive director to the part-time administrative assistant should also have an annual performance evaluation and review. Supervisors should take the time to acknowledge work done well, discuss skills that could be improved, reflect upon successes as well as mistakes, assess the employee’s job satisfaction and make a plan that meets the goals of the organization and the employee for the year to come.
Training and continuing education
Staff training is integral to the work of an effective non-profit organization. Because non-profits usually pay less than the corporate or governmental sectors, they must find other ways to encourage, reward, and value staff. Training and continuing education not only helps the organization to acquire and hold highly qualified staff, but also rewards and encourages professional growth and development.
No organization is sustainable if the staff is not cohesive. Respect and appreciation for each other make the whole stronger than its individual parts. It is essential that management invest time in building a sense of team among the staff. This can be accomplished in many different ways. Each individual staff person should be encouraged to understand how he/she contributes to the whole. Further, each staff person should be encouraged to learn how the others contribute. Attend each other’s events. Shadow each other at trainings or in the clinic to gain a healthy respect for each other’s expertise. Finally, plan a few events/parties each year that build cohesion and team among the whole group. Shut the office and go bowling together, have dinner and plan to talk about cutting-edge issues. These are healthy investments in building a strong and sustainable organization.