The Leadership Journal

Is your nonprofit stuck in the “nonprofit starvation cycle?” The starvation cycle is common among small nonprofits that face multiple challenges in raising funds and using them effectively to achieve their mission. They rely on donations and grants to fund all aspects of their operations. As a result, they have limited capacity to execute their mission over longer time horizons. The unpredictable nature of their funding constrains their ability to plan for the future adequately.

Like everyone else, these nonprofits face pressure to show tangible results, but they get stuck treading water to keep from drowning. Since funders are more interested in funding mission activities than organizational development, these nonprofits can end up in a cycle of constantly seeking additional funding just to stay afloat. When your nonprofit spends most of its time and resources looking for more resources, you have a serious problem.

Your job as a purpose-driven leader is to maximize your organization’s impact now and in the future. You are distracted from those goals when you are stuck in the nonprofit starvation cycle. Let’s explore five strategies to help you break out of the starvation cycle.

Strategy 1: Refine your focus

Employees, board members, donors, and other stakeholders need clarity about why your nonprofit exists and what precisely it is trying to accomplish. When that clarity is lacking, support for the organization declines, and getting out of the starvation cycle becomes much more difficult.

The purpose of a for-profit organization is often kept broad enough to keep the door open to new sources of revenue. As tastes change or competitors enter or leave the market, the company can shift its focus within the broad purpose to the best opportunity to turn a profit. In these organizations, there’s tension between building a unique brand that sets the company apart from its competitors (usually done by specializing in something) and maintaining the flexibility to pivot in response to market dynamics.

Your mission must be succinct and easily understood for your organization to be purpose-driven. Clarity of purpose promotes organizational focus. That focus drives efficient business development and operations. It encourages targeted investment, drives market awareness of the nonprofit and its goals, and serves to align the organization’s actions and employees.

It’s also noteworthy that a nonprofit’s “customers” are rarely the same people as those who provide the organization’s financial support. The needs of these two stakeholders can sometimes conflict. Entities providing financial support have their own objectives, priorities, and beliefs about what change is needed and the best ways to bring about that change. Nonprofits with a clear, carefully considered purpose are better positioned to frame the relationship with their financial supporters in a healthy way. They are also more attractive to those supporters because clarity breeds confidence.

Strategy 2: Build partnerships

Nonprofit organizations choose to collaborate or partner for many reasons, though they all come down to either furthering the mission or improving financial health and viability. When a nonprofit’s finances don’t match its aspirations, it faces recurring challenges. If you work in a small nonprofit, you are likely familiar with some of these challenges: cutting corners, exerting too much effort chasing funding, not having access to the necessary leadership or management talent, and not having the capacity to execute the mission or protect the organization adequately. Many of these issues can be partially remedied through collaboration or partnership.

Working with others is more complicated than working alone. We value independence and self-direction; partnering with others can compromise our identity and control. In for-profit companies, the benefits of partnering are typically based on the self-interests of the company—that is, how will the relationship increase profits? In nonprofit organizations, these decisions are not only guided by our organization’s self-interests but also by our mission interests. We must consider how a new relationship will benefit our organization and how it will benefit our cause. Nonprofit leaders should always view relationships through this broader lens. Are the risks acceptable given the benefits that accrue to the organization plus those that accrue directly to the organization’s mission?

Partnering can provide a path out of the starvation cycle by increasing your organization’s efficiency, effectiveness, and attractiveness to funders. Partnering demonstrates a genuine commitment to your mission and that you can work with others to accomplish that mission.

Collaboration and partnership are strategic tools to build scale, leverage, and reach. These concepts apply to the work of the nonprofit and also its ideas. Many nonprofits seek to address a problem by changing how stakeholders, policymakers, funders, or clients perceive it. They aim to do so by shaping opinions about the perceived urgency of a problem or the feasibility and relative attractiveness of a specific solution. Don’t just view partnering narrowly as a way to win more grant dollars; view partnering as building your team’s credibility and ideas.

Strategy 3: Right-size your team

The nonprofit starvation cycle, in essence, is about not having the resources necessary to progress as an organization. We, nonprofit leaders, prefer to view this problem as an external one. “We are stuck in this cycle because our funders don’t provide enough overhead dollars to break out of it.” While there can be plenty of truth to that sentiment, most nonprofits could also use their resources more efficiently and wisely.

You can break out of the starvation cycle by having the right strategy and ensuring your team can efficiently execute it. Building this strategy-aligned team requires candor about the fit of your current team to your strategic objectives. Assessing that fit is seldom straightforward. We all have colleagues and employees that we like and admire. An employee may have been particularly loyal to the organization, made significant contributions to executing a previous strategy, or may be central to the organization’s social fabric. The question is not whether the employee is capable, friendly, or even particularly loyal—the question is how well do their skills and motivations align with the organization’s strategic objectives. This is even harder in small nonprofits, where each employee is expected to contribute in multiple ways to the organization.

In large nonprofits, problems can arise when there is an abundance of employees with a particular skill. Even though that skill may align well with the strategy, the organization may have too many resources of a specific type, draining funding needed for other resources. Remember, you are not leading a jobs program; you are leading a purpose-driven organization that must be effective in its mission!

Building a strategy-aligned team requires shrewd leadership. Candidly assess the fit, efficiency, and effectiveness of your current team. Make any changes necessary, and move forward by aligning new labor investments with specific elements of your strategy. This strategic alignment not only includes attracting new talent but also retaining and developing the talent you have. The best nonprofit leaders work tirelessly to build an army of change agents—people deeply committed to the mission and inspired to work together to realize the organization’s vision.

After you’ve built a team aligned with your strategic objectives, ensure that performance feedback is delivered in the context of those objectives. Regularly delivering clear performance feedback will reinforce awareness of the strategy and demonstrate where each employee fits in. That creates the opportunity for candid discussion between manager and employee about skills gaps and the rationale behind strategic goals. Ultimately, it also helps to clarify employee expectations about the future.

Strategy 4: Dream big

Ambitious visionary goals inspire passion and commitment among stakeholders. These goals serve as a guiding light, motivating staff, volunteers, donors, and beneficiaries to work towards a greater purpose.

Big dreams translate into big impact. By aiming high, nonprofit leaders strive to create significant, wide-reaching change in their communities or in the world at large. Dreaming big encourages organizations to think beyond immediate needs and focus on long-term solutions that can address systemic issues.

Pursuing ambitious goals pushes nonprofits to think outside the box and innovate. It encourages experimentation with new approaches, technologies, and partnerships that can lead to more effective solutions. Dreaming big fosters a culture of creativity and adaptability within the organization.

Big dreams are more likely to attract the attention and support of donors, volunteers, and other stakeholders. People are drawn to bold visions and are more willing to invest their time, money, and expertise in causes that aim to achieve significant impact. Dreaming big can help nonprofits access the resources they need to bring their vision to life.

Having a big, audacious goal can inspire and motivate everyone involved with the nonprofit, from staff members to volunteers and supporters. It provides a sense of purpose and excitement, driving individuals to push themselves beyond their comfort zones and persevere in the face of challenges.

Dreaming big encourages teams to be resilient despite setbacks and obstacles. When organizations have a clear and compelling vision of what they’re working towards, they’re better equipped to pivot and adapt their strategies without losing sight of their ultimate goals.

In summary, dreaming big empowers nonprofits to push boundaries, challenge the status quo, and make a lasting difference. It’s not just about achieving specific objectives; it’s about envisioning a better future and working tirelessly to make that vision a reality.

Strategy 5: Define your value proposition

A value proposition is a clear statement of the specific benefits that your nonprofit delivers. It’s an essential part of your story and provides the primary reason why funders, supporters, and donors should support your nonprofit. Why is your nonprofit important? How are you different from others working on the same problem? Nonprofit leaders are prone to overestimating what differentiates their organization and its specific offerings in the marketplace (it is common to believe you are more unique than you actually are).

I don’t know why nonprofits discount the importance of marketing. Perhaps it’s because they perceive it as having a narrow function—to gain an advantage over competitors and attract customers to your product. Maybe it’s because something has to give in a highly resource-constrained environment, and marketing isn’t considered critical to mission success. Whatever the reason, nonprofit leaders tend to undervalue marketing.

We should view marketing and brand development as essential components of nonprofit business development. You are always competing with others for attention, donations, grants, members, patients, supporters, or partners. Whatever your mission, there is competition somewhere, and an effective marketing strategy that differentiates you to a target audience is how you mitigate its effects and accomplish your goals.

Competitive differentiation is essential to the success of any nonprofit, and yet true differentiation, relative to market competitors, can be elusive and hard to define. Often, what we think of as a differentiator is just an indication of our lack of knowledge about the competitive landscape. As I said, we are seldom as unique as we think. Focusing your nonprofit on one particular problem and developing real depth on your team offers differentiation potential. The more your team understands a specific challenge, the better equipped you are to develop, test, and provide new solutions.

As you grow, building a team that includes people with different life experiences and perspectives on the problem you are trying to solve is important. Varied viewpoints are vital to identifying effective solutions, yet it is also true that you seldom find nonprofits capable of truly differentiating themselves in multiple areas. I recommend building a diverse team focused on solving one or two problems. That provides the best odds of ultimately differentiating yourself in the market.

Influential nonprofit leaders continually describe why the problem they are trying to solve is important and how the organization is making progress in pursuit of that mission. Being effective isn’t just about doing good work; it’s about helping others develop an appreciation for the problem you are working to solve and for the impact your employees and volunteers are making. The better you can communicate those things, the more support you’ll receive from funders and donors, and the stronger your brand will become among partners, stakeholders, and clients.

Another piece of advice I’ll offer about communicating impact is particularly relevant to small nonprofits. When I compare the marketing collateral of a large organization with a small one, some common themes emerge. Most large organizations (nonprofit or otherwise) have figured out their story and have “productized” their offerings. They’ve clearly defined what they can deliver at different price points. Their marketing material is polished, and their solutions are standardized and sold as if they were individual products. This leads to increased confidence for the buyer (or grantor).

On the other hand, the marketing collateral of small organizations tends to drip with desperation (if they even have collateral). It may contain exaggerations of capabilities or previous engagements. Flexibility, or the customized nature of what the organization offers, tends to be overemphasized. The materials usually feel more aspirational rather than based on facts.

Positioning your small nonprofit as a partner willing to do what it takes is fine. However, the more you refine your story and define what you can commit to delivering at different price points, the more confidence you will engender. You don’t need a marketing department; you can do it yourself if you carefully (and honestly) consider how outsiders see your organization and its marketing materials.

As you improve upon your organization’s story and demonstrate your impact, your integrity as a leader and the perceived integrity of your nonprofit increases. A compelling and honest narrative fosters a culture of integrity, motivates employees and volunteers, and demonstrates your effectiveness and authenticity to external audiences. It creates a sense that you have a dream for a better world, are vigorously pursuing that dream, and are making admirable progress. Who doesn’t want to be a part of that?

Summary

We briefly explored five strategies to break out of the nonprofit starvation cycle: refine your focus, build partnerships, right-size your team, dream big, and define your value proposition. For more on these topics (and many others), check out my book, The Nonprofit Dilemma.

Let me leave you with a final thought. Action is necessary to advance the organization and cause that you care about. It is also required to break out of the starvation cycle. Whether you are a future leader, current manager, executive, or trustee, have the confidence to be bold and decisive, embrace risk, and take action. Don’t let the starvation cycle hold you down. Break out of its grasp!

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