Column: The business of nonprofits

BY RHONNA GOODMAN

A foundation runs into a cash flow problem so it delays dispersing grant money. A small organization that deals with homelessness doesn”™t receive its expected funds in time to meet its payroll, and no bank will extend a line of credit. A dialysis center wants to open franchises but is worried about keeping up its high standards in remote locations. A well-respected religious-based organization has not done a careful analysis of its contributors and takes an extremely unpopular political stance. A local orchestra is not meeting its expenses and debates whether it should merge with the orchestra in a neighboring city. A city, in desperate need of money, wants to sell off the valuable art in its renowned museum.

All organizations in the independent sector want to change the world around them. They build social movements, they save lives; they make us creative, literate and cultured. They defend rights, the environment and the homeless. The people that work in nonprofits are passionate, committed and work for far less than those in for-profit companies. But as committed as the staff, the volunteers and the boards of nonprofits are, they need to be effective and not wasteful; they need to be vibrant and relevant to society; they need to use their money wisely; and they need to have well-structured internal organizations.

The situations depicted above are real-life examples of business issues faced by nonprofits. Some of the organizations actually closed, while others were able to withstand the pressures because they had systems in place that could weather the crisis. The ones that succeeded had operational excellence. They knew how to match their capabilities with their market and had structures that protected their agencies”™ processes, principles, and values.

Moreover, they had effective leaders ”“ motivated leadership with strong decision-making skills; they knew the best ways to reach and communicate with the public, and understood how to gather support.

They learned that a nonprofit ”“ no matter how well motivated ”“ is not necessarily forever. Diseases can be treated or cured. New, better-funded organizations can take up a cause, cities can drop or delay funding, investments can fail and causes that were once important, can suddenly find themselves without popular support. Problems such as natural disasters, sex trafficking, education for women, sanitation in developing countries, can suddenly become significant, and a small agency whose mission it is to help can find itself unprepared to meet the needs.

It is important to recognize that a nonprofit organization can only be as good as its staff. Passion is crucial, but excellent business skills are essential.

As nonprofit organizations evolve and find themselves engaged in more complex activities, as they interact more closely with the traditional corporate environment, it becomes increasingly important for their employees to be formally trained in the business skills required for organizational success.

The nonprofit sector is a driving force that employs millions of people and accounts for an important part of the gross national product. It is a concept that is based on economic, political and legal reality.

There are nearly 1.4 million nonprofit organizations in the United States including colleges, libraries, museums, social service agencies, public radio and television stations, orchestras, hospitals, and those with specific disease-related concerns. There are another 137,000 organizations that are tax exempt, but donations to them are not. These groups are allowed to “participate in politics,” as long as politics is not their primary focus. Included in this category are political think tanks like Crossroads GPS (conservative), Organizing for Action (liberal), or lobbying groups such as The National Rifle Association and The Sierra Club.

The School of Business at Manhattanville College in Purchase has recently developed a certificate program in nonprofit leadership, designed precisely to provide those working, or those inclined to work, in the nonprofit sector with key business strategies and philosophies needed to succeed.

Rhonna Goodman is the former director of the Manhattanville College Library. She is on the boards of several nonprofit organizations and is the program director of the Nonprofit Leadership Certificate, Manhattanville College School of Business. She can be reached at 914-323-5150 or via email: rhonna.goodman@mville.edu.