The Leadership Journal

The nonprofit sector is a challenging landscape dominated by small organizations wrestling with big missions. While small nonprofits can be creative and driven, most are shackled by limited resources and struggle to break free from the nonprofit starvation cycle. In this article, we’ll explore three challenges small nonprofits confront when trying to achieve mission success and financial stability simultaneously.

Do you know any leaders of small nonprofits?

If you’re reading this, I’m guessing that you do. What are the attributes you’d use to describe them? When I think of the leaders that I know, what comes to mind is that they are highly creative, hard-working, passionate, hopeful, resilient, and way overextended. While they may be hungry for mission success, that success is often just out of reach.
Let’s take a look at the challenges confronting these leaders.

Challenge 1: Balancing the mission with the need to stay in business

Every day, nonprofit leaders must balance two competing objectives: ensuring the financial well-being of their organization and maximizing its mission impact. Most every decision a nonprofit leader makes can be viewed through the lens of this fiduciary/impact trade-off. Some decisions will clearly advance fiduciary priorities, and others will advance the nonprofit’s mission. While some decisions offer the chance to do both simultaneously, most decisions show that one goal is being valued above the other.

For simplicity, I’ve labeled this challenge the nonprofit dilemma.

While all nonprofits face this tension between mission and financial health, it is especially pronounced among smaller organizations. Their limited resources and organizational capacity constrain the workable options in many decisions. Couple that with a lack of influential relationships and the desire or pressure to show tangible results, and you end up with an overwhelming focus on the short term.

This leads many small nonprofits to make inconsistent decisions. They are inclined to over-promise and under-deliver. Some even lose sight of their strategy and why they exist in the first place.

Compounding these issues is the nonprofit starvation cycle. This cycle refers to the chronic underinvestment in organizational capacity that plagues many small nonprofits. This is typically a byproduct of external pressure to maintain unrealistically low overhead costs.

Driven by a need to meet funders’ expectations, many small nonprofits find themselves in this perpetual cycle of seeking new funding sources to stay in business. This desperate focus on funding diverts attention away from identifying and executing the best strategies to advance the core mission of the nonprofit.

Breaking out of this cycle requires clarity, courage, strategic focus, and organizational development. We explore each of these issues in great depth in the book. Over time, we’ll explore each of them here as well.

Challenge 2: Knowing when to embrace agility and when to stay the course

Above, I mentioned that too much focus on the short term leads some small nonprofits to make inconsistent decisions. These leaders seldom have the time to figure out the most efficient and effective way to execute their mission. So, there is some experimentation going on…

Many leaders of small nonprofits execute without an overarching strategy, some of those appear to not know exactly what it is they are trying to accomplish or even why.

The path to mission achievement for small nonprofits is arduous and riddled with limitations, diversions, setbacks, and other distractions. As a result, one of the defining characteristics of small nonprofits is their agility. The leaders of these organizations must constantly adapt, adjust priorities, and navigate unforeseen challenges to ensure survival.

Strategy is about your desired destination and the best paths to get there. A good analogy is hopping in your car and using your GPS to get to your friend’s house across town. Along the way, when you alter your route to avoid road construction, highway congestion, or an accident, your helpful GPS offers up the next most efficient path to your destination. This responsiveness gives you the confidence to not worry about the best way to reach your destination. It frees your brain up for more enjoyable endeavors like singing along with the radio.

However, when faced with multiple constraints like one-way streets, road closures, and your commitment to pick up lunch—the guidance you receive becomes decidedly less helpful. It’s time to turn down the radio, ignore the voice telling you to “make a U-turn when possible,” and figure out where the heck you are and how you are going to get back on track.

When a nonprofit’s strategy begins to feel irrelevant, it gets tossed out the window. For leaders of small nonprofits, agility is a constant. Being agile, adjusting course, and altering priorities is necessary for survival—a way of life.

We usually consider being agile a good quality because of a few compelling rationales. Here are some examples:

• A learning organization intent on finding the best path to mission effectiveness shows agility when they change tactics in response to an improved understanding of the problem they are trying to solve.

• Similarly, a responsible organization that takes its fiduciary responsibilities seriously shows agility when it responds to existential threats and ensures the organization survives to carry out its mission in the future.

In an organization with clear goals and an intended strategy, agility is about being flexible enough to adapt that strategy in response to new information or a changing environment that is material to the nonprofit’s goals.

The problem with agility is that it usually involves making sacrifices.

When deciding to change direction, we are faced with abandoning the ideas, talent, and costs that were sunk into the previous direction. Individually, these sacrifices may seem small and acceptable as necessary trade-offs in the moment. However, when agile pivots are embraced frequently, these sacrifices tend to compound and deprive the nonprofit of much needed momentum, talent, and funds.

I’d characterize many small nonprofits as having low strategy and clarity quotients but highly passionate leaders. In these organizations, agility can become the de facto strategy.

Being open to change when change is warranted is far different from embracing change multiple times a year (or month) because you are desperate to reinvent your organization.

Over time, pivoting too frequently clouds the judgment of the nonprofit’s leaders and distracts their board and team from the organization’s ultimate mission. In these entities, rash decisions, a constant reframing of goals, and outsized changes in strategy triggered by minor changes in the environment lead to effectiveness drain and staff burnout.

Effective leadership of a small nonprofit requires balancing the need to respond to changes in your environment with the need to be steadfast in your strategy and mission objectives. That is, you must be consistent and agile at the same time. No easy feat!

Challenge 3: Championing strategic clarity by right-sizing your mission goals

The struggle to be impactful is a common challenge, especially for small nonprofits with limited resources.

Whether your nonprofit is small relative to your mission is, in some ways, inconsequential. When a nonprofit feels too small to be effective, the leader needs to pragmatically assess the organization’s strengths and weaknesses and adopt achievable interim mission goals. In addition to “right-sizing” mission goals, these leaders should look for practical ways to increase the organization’s scale over time.

How do you develop the strategic clarity and focus necessary to be effective?

Start by revisiting your nonprofit’s mission and refining your near-term objectives. What are the attributes of your mission that make it complex? Here are ten ways small nonprofits can assess their mission and identify achievable interim goals:

1. Scope: Can the nonprofit’s focus be limited geographically or to some other subpopulation of interest?
2. Community/Societal Values: How do community or societal values shape perceptions of the problem or your solution? Is there a fundamental misunderstanding? Are there conspiracy theories or bad actors influencing perception?
3. Capacity Development: Should the organization’s capacity be increased by developing staff and volunteers? What is most needed to enhance the team’s efficiency in carrying out the nonprofit’s activities?
4. Volunteers: Are there creative ways to more effectively engage or leverage more volunteers to supplement your workforce without increasing costs?
5. Entrenched Interests: Are there identifiable pressures to maintain the status quo? Do government or business interests impede progress? Is it possible to align interests in some way?
6. Behavior Change: How many individuals need convincing, and how can they be prioritized? Are there shared needs or values between those who need to change and those who benefit from change?
7. Stakeholder Interests: Where are the points of alignment or disconnect? Do stakeholders view your nonprofit favorably? Are you viewed as credible?
8. Potential partners and collaborators: Who shares your goals? Who benefits if you are successful? Can pooling resources and expertise lead to a more significant impact?
9. Upfront Investment: Are there aspects of the solution that require upfront investment with delayed returns? Who might be willing to make that investment?
10. Sustainability: Can your solution be sustained? Who has the incentive to finance it?

As you answer these questions, look for ways to break your overall mission into smaller and smaller components. Identify the most feasible aspects of your mission and focus on those. Concentrating your efforts on fewer areas increases your chances of success. Even small nonprofits must articulate what they aim to achieve in the near-term and the specific outcomes they are working towards over the long-run.

As you consider which interim goals to focus on, assess your organization’s core competencies and strengths as they exist today. Concentrate efforts on activities that align with these strengths or with changes that are relatively easy to make to your team. Consider partnering, outsourcing, or seeking pro-bono support for efforts outside your expertise. With focus, organizations can strategically allocate resources to best address issues within their scope. These steps allow your team to concentrate on what they do best and organically grow as the organization scales up to meet larger components of the problem.

In summary, instead of aiming for monumental change that feels out of reach, break your mission goals into smaller, more achievable tasks. This makes progress more manageable and provides a sense of accomplishment along the way. And that allows you to establish realistic milestones that your team, volunteers, partners, and supporters can celebrate, keeping them motivated and engaged.

This strategic clarity will help communicate your purpose and progress to potential donors and supporters, giving them confidence in your ability to ultimately succeed. Regularly reassess and adjust your approach based on evolving needs and circumstances. When you show tangible results, that enhances your credibility and attracts new supporters.

By reimagining goals and right-sizing initiatives, small organizations can chart a course that’s more impactful and likely to result in sustainable change. As you make that impact, you can craft a compelling story highlighting your nonprofit’s real-world impact. Such stories further build organizational momentum.

In this article, we explored three challenges facing small nonprofit organizations: balancing the mission with the need to stay in business, knowing when to embrace agility and when to stay the course, and championing strategic clarity by right-sizing your mission goals.

In the world of nonprofits, size presents many challenges.

Being a small nonprofit doesn’t mean you can’t make a big impact. By balancing the fiduciary/impact trade-off, knowing when to embrace agility, and right-sizing your mission goals, your organization can more effectively navigate challenges and contribute meaningfully to your cause.

For more on these topics (and many others), check out my book, The Nonprofit Dilemma. While the challenges of being a small nonprofit are undeniable, there are many insights and tools to help you become a better nonprofit leader. Whether you are trying to break out of the starvation cycle, struggling with strategic clarity, or just feeling ineffective, The Nonprofit Dilemma blog and book are resources created specifically to help YOU succeed.