Improving the project management performance of nonprofits

In the United States alone, there are about 1.5 million charity-based nonprofits employing 10% of the workforce and spending nearly $2.5 trillion U.S. dollars. Similar to for-profit companies, nonprofits can be heavily project-oriented, and yet, nonprofits struggle with project management. https://www.forbes.com/sites/forbesnonprofitcouncil/2022/11/30/why-the-nonprofit-sector-is-broken-and-how-to-start-fixing-it This can be especially acute for those who work in nonprofits, as project performance fails to meet their expectations. Worse, since nonprofits often serve vulnerable populations, failures can be more devastating. Practically every nonprofit executive I have spoken to or worked with recognizes this challenge and expresses the desire for improvement.  

Enhancing nonprofit project management requires adopting sound management discipline and customizing good and best practices for the organization. Yet what appears simple, conceptually, can be extraordinarily difficult in reality. There are many contributing factors, and this article analyzes the single most important factor – which is either the failure to recognize that projects as different from other types of work or the failure to provide projects with sufficient resources, management attention and leadership. This inadequacy leads to project challenges from the beginning. At best, dedicated nonprofit professionals can overcome these challenges through “heroic effort,” resulting in an overworked, overburdened and overstressed workforce. At worst, projects disappoint partially or completely. 

Over the past 30 years, I have worked in both for-profit and nonprofit organizations, and a profound insight is that if nonprofits can combine business disciplines of for-profit companies with the passion and enthusiasm of nonprofits, they can outshine all others.  In research I conducted in the late 2010s, the results showed that the top 10% of nonprofits that excel at business execution outperform all other sectors, including the more resourceful for-profit companies.  Yet, that was only 10%.  How can the other 90% of nonprofits improve their project outcomes?  Now, a dozen years after that initial study and with more workexperience, I believe I have found the answer. While there are many differences between for-profit and nonprofit projects and practices, the sharpest contrast is in the recognition of the various types of work and the associated approach to make them work. By blurring the lines between different types of work, nonprofits fail to prioritize, to make distinctions and to act differently on their projects versus their other nonprofit work.  

For the past 10 years, I have been championing a new way of thinking and classifying work.  It is called “Strategic Business Execution or “SBE.” (I delivered an hour-long lecture on the subject at Montclair State University, which you can view on YouTube.) In the SBE framework, work is organized within an outcome-based approach and contains only three categories — planning, operating and changing.  

All viable organizations, whether they are for-profit or nonprofit, plan. Planning includes the tactics and strategies of how to use resources best to achieve goals. It contains a wide range of activities such as developing company off-sites, creating zero-based budgeting and analyzing donors’ appetites for a new project.  Even the most uncomplicated companies perform planning, such as a corner grocery store counting which candies sold well and replenishing that candy. For larger organizations, planning activities can be significant, from annual executive off-sites to rethinking strategies to inventorying the sheer number of projects in accordance with financial and other resource use.  

The second category is operating, and its primary focus is on “keeping the lights on” by producing and delivering its mission. For a university such as Montclair State University, one of the operating activities is educating students to produce better citizens and more knowledgeable, skilled professionals. On the one end, students pay tuition through self-funding, loans, scholarships and grants. That funding is used to pay for the routine operation of universities, including salary for staff and faculty.  Faculty deliver quality education, and students become more marketable professionals and productive citizens. Eventually, students graduate and contribute back to society through taxes and other aids.  

This similar cycle of operational work exists in all organizations.  Operating is primarily concerned with performing the work in a consistent, repeatable and predictable manner. While operating can have projects such as continuous improvements, the projects are generally smaller and tactical. If the world were static, then operating would be sufficient. In higher education, many good courses will continue to be taught for decades even though there may be occasional updates. But the world is dynamic, and unless there are more significant improvements, eventually, operating alone is no longer sufficient. Organizations need to innovate. 

The third category, changing, is where innovation is introduced, either through new or improved products and services or creating new capabilities and practices. Changing is the riskiest of the three categories, even though not changing is perhaps the greatest risk.  Changing can be difficult, but it is where organizations are likely to invest much, if not most, of their brainpower, executive attention, talents,and other scarce resources. Unlike operating, in which the focus is maintaining the status quo with periodic improvements, changing concentrates on one-time endeavors to leapfrog the status quo or develop something altogether new. As such, change can be controversial and even political. Achieving difficult changes requires much more than good intentions and inspiration. Successful change requires perspiration and hard work. 

Nonprofits have an ample supply of dedicated, passionate people wanting to further their missions. For most of these professionals, many are willing to accept lower compensation to work on what they believe in. These highly dedicated professionals often “cannot wait to start” and “just want to do” the work.  But passion and good intentions only go so far.  By blurring the line between these three important and distinct categories, especially between operating and changing, nonprofits often fail to treat projects differently than other work, leading to poor prioritization and inadequate management attention and resource allocation.  Even in nonprofits that define projects as a different category of work, the definition is often superficial.  Projects often just become another work item on an already full plate, and the lack of prioritization and insufficient resources handicaps them.   

After seeing this phenomenon repeated many times over in nonprofits, I now define projects as “any important work that faces one or more of these constraints – time, budget, resources, scope, quality, communication, external partners or vendors, governance and conflicts,” when working with nonprofit executives. I believe this definition is much easier to digest, with emphasis on words like “important” and “constraints.” 

Projects, especially those that are large, complex and important, require an extra layer of management and the associated governance. And good project management can alleviate the many pain points felt by nonprofit employees, reduce the need for heroic effort,and result in their better well-being, and most important, project success.   

Te Wu, DPS, is CEO and CPO of PMO Advisory, a professional project management training and consulting firm. He is also an associate professor at Montclair State University and co-chair of Project Management Institute’s (PMI) Development Team on the portfolio management standard. Te is certified in Portfolio (PfMP), Program (PgMP), Project (PMP), and Risk Management (PMI-RMP).