Social Impact and Economic Viability of NPOs during the COVID-19

Friday, 8 May, 2020 - 14:55

In consideration for social impact, economic viability and capacity to deliver, Non-Profit Organizations (NPOs) will have to remain more relevant and viable now and into the future.  The ability to continue a long-term service delivery and social impact has always been the core concern of the leadership in the Non-profit sector. But as the spread of COVID-19 causes upheaval in just about every aspect of society and highlights the deep social inequities many non-profits are faced with sustainability challenges. One of the core concerns is financial health to ensure continuity of services and organizations’ work in the months and years ahead of us. Experts with experience of working directly with hundreds of non-profits, shows the need to take a broader view. And their advise is that, before doubling down on financial health and organizational preservation, non-profits should first reflect on their social purpose. Getting clear on the impact they want to have will then help guide decisions about how to financially sustain the work and how to build the capacities needed to deliver impact.
 
First and foremost, make time to revisit your vision for social impact the impact you’re trying to create and how you plan to create it as context and needs change. In addition to informing decisions on finances and capacity, this helps ensure that your work remains relevant. Many organizations are shifting the way they deliver programs and services, forging new partnerships to extend their reach and impact, or using this moment to advocate for systemic change.
 
Another important consideration is how you frame the value of your work in the current context why your mission matters now to rally donors, engage partners, and motivate staff.

 

Non-profits need to be financially viable to deliver impact. One way of ensuring sustainability is to deliver services through the Social Enterprise Model. Sustainable organizations have predictable and reliable revenue, expenses that line up with expected revenue, sufficient cash on hand to cover routine and emergency needs, and processes in place to monitor finances and plan for contingencies. As NPOs, we are currently facing an increase in demand for services, coupled with significant disruptions to our funding streams. A recent survey from Nonprofit Finance Fund found that most non-profits (60 percent) are experiencing destabilizing conditions that threaten their long-term financial stability, and even more (64 percent) expect to experience continued threats in the months ahead.
 
Despite this destabilization and uncertainty, there are some things leaders can do right now:
 
Assess your current situation. Right now, cash management is critical. What are your monthly operating costs? How much cash do you have on hand? Look at the diversification of your donors. While now may not be the time to pursue new streams of funding, it’s important to understand your reliance on various revenue streams and individual donors so that you know how to respond if a major funding source goes away.
 
Create financial scenario plans. No one knows what the future holds for our economy or how it will affect their organizations. Create a best, a worst, and an expected case scenario with clear plans for how you’ll respond to each one if it happens. Use external data and prior experience to try to make a reasonable set of assumptions and focus on the things you can control to put your organization in the best possible position. In some scenarios, sustaining impact over the long term may mean scaling back in the short term or even merging, as many non-profits had to do after the 2008 recession.
 
Have honest conversations with your donors and stakeholders. Make sure your donors understand your needs. Ask them direct questions about their plans and intentions so that you can get some sense of the reliability of your contributed revenue streams. Similarly, to help gauge the predictability of earned revenue streams (such as fees for services, ticket sales, or memberships), consider talking to customers and/or members to better understand whether and how they plan to engage with your organization in the months ahead. Many organizations are finding success in asking customers or members to donate pre-paid fees for canceled services and events to help programs and services they care about continue in the future.
 
Delivering social impact requires talent, systems, and processes. In response to stay-at-home orders across the world, organizations have had to shift to virtual operations, make up for lost volunteers, and deal with other challenges to capacity. 
 
While different organizations have different capacity needs, these four are core to sustainability:
 
Leadership capacity. Organizations that remain resilient during challenging times tend to have strong and diffuse leadership that can make quick decisions in response to evolving challenges. Prioritizing a well-functioning executive team, frequent and transparent communications with staff, and good governance practices all help build and maintain the kind of trust a productive culture requires. This moment also demands that leadership recognize the full humanity of staff members, and model authenticity and vulnerability. Leaders who embrace authenticity now will also be better positioned to recruit, retain, and support their talent over the long-term.
 
Adaptive capacity. The importance of adaptability right now is apparent. Consider possible changes in client needs, behaviours, and the operating environment over the next six-12 months, and how your organization could respond. Set short-term financial and impact goals, along with plans for what you’ll do if you don’t meet them. As you consider creative new approaches or solutions, think about experimenting with rapid prototyping approaches, rather than launching major initiatives that require extensive analysis and proven track records.
 
Collaborative capacity. Many organizations are coming together in creative ways to boost social impact during this time. Human resources strategist Pratichi Shah recommends focusing on how collaboration shows up in three organizational pillars: 1) a culture that explicitly calls out the importance of collaboration, 2) a team with collaborative skillsets, and 3) leadership that models and incentivizes collaborative behaviours.
 
Technology capacity. A recent Salesforce survey found that 85 percent of non-profits say technology is important to their long-term success, yet only 23 percent have a long-term strategy or vision for how they will use technology. As non-profits have scrambled to shift to virtual operations, the need for strong systems and staff who can use them has become even more clear. Technology capacity is critical to business continuity now and will remain critical during recovery—both for data-informed decision-making, and as a method of delivering services at lower cost and greater scale.
 
SOURCES:
Amy Celep
Megan Coolidge
Lori Bartczac
(STANFORD SOCIAL INNOVATION REVIEW)

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