Amid the blur of the past two and a half years, this is a perfect time to revisit the popular subject of best (and not so best) nonprofit management practices. Let’s look back on a still-relevant applied research study by Public Interest Management Group in partnership with Nonprofit Association of Oregon and The Impact Foundry. We set out to test prevailing assumptions about best practices: which ones appear to be true, which ones appear not to be, and which need more study?
For reference, we published this white paper called “Best Practices, Fact or Myth” on the results of the study. It’s a quick read.
Later on, we partnered with NAO to do a comprehensive survey of nonprofit leaders on the pandemic’s effects on nonprofits. (Here’s an article, a report and a data appendix, for those interested.)
Now, after events have shaken up the world, let’s re-examine some of our field’s conventional wisdom and see how it holds up… Can you distinguish the truths from the myths?
To Tell the Truth, American Broadcasting Company, c. 1968
CEOs should be externally focused.
As a generalization, this cliché does not hold up. We found no correlation between the internal vs. external focus of CEOs and success of their organizations. (Success was quantified with an aggregate index gauging mission-related impact, financial performance and growth.)
Many externally-focused CEOs are clearly successful, but the same can be said of many more internally-focused leaders, and pandemic conditions may have favored the latter. (Interestingly, the study behind the book Good to Great found that internally-focused CEOs are more likely to succeed.)
Rather than falling back on a generalization, a more useful way to think about CEO candidates and performance is to consider how the organization can tap into their unique talents and how this can influence the team we build around them.
Externally-focused organizations are more successful.
This nugget of conventional wisdom proved to be largely true in the study population. Further, our survey of nonprofit leaders suggests that an organization’s external focus may be even more essential in the Covid era. Nonprofits that communicate effectively and often have tended to do well.
An organization’s mission is the essence of a culture of success.
Sounds pretty obvious, right? It’s not true, according to the research. We found no correlation between a strong mission focus in an organization’s culture and that organization’s success.
To be clear, the study did not find that commitment to the mission is unimportant. It simply found that nearly all nonprofits, successful or otherwise, demonstrated strong mission commitment. This means that the distinctions between the stronger and poorer performers derive from other factors.
What the study did find is that successful nonprofit cultures generally show a strong commitment to elements of the organization’s business—not at the expense of mission commitment, but rather alongside it as a co-equal. We call this the balanced culture.
In other words, mission commitment may be important but its true value must be understood in context. A big heart alone does not ensure an organization will be strong or effective.
Investing in revenue development should be a top priority.
True. This practice showed a high positive correlation with success. The pandemic survey results backed this up. The most successful nonprofits of this era have been able to pivot to different types of communication and engagement. They capitalized on existing capacity to be nimble and tap into newly available resources.
Strategic planning is of utmost importance.
Whether you are inclined to agree or disagree with this assertion may be a factor of how many times you’ve been through a strategic planning process. More experience may leave you feeling jaded, and for good reason.
The study showed that good strategy correlates with success. But most strategic plans failed to meet the criteria for “good,” which involves clear goals of certain types with measurable outcomes. It didn’t matter much whether a strategy was called a “strategic plan” or not. Some planning was better than none, but unless it met the criteria, not by much.
Again, as a generalization, this “wisdom” does not hold up. But robust planning is a different matter. Unfortunately only about half of studied nonprofits did this.
An engaged board is a good board.
Wrong! One of the few strong negative correlations in the study was between the level of engagement of board members, on the one hand, and the organization’s performance, on the other. Read this article about “The Worst Practice,” what I call the over-engaged board.
In general, I believe one of the biggest drains on nonprofits is board management. This is not to say that there aren’t great board members or effective boards—there are. But boards apparently make less impact than we’re all conditioned to believe.
Interestingly, board disengagement didn’t show much of a negative effect on success. A bit of engagement of the right kind seems to be the sweet spot. Too much of a good thing is bad, however, and the transition point appears to be lower than most assume.
Diversity, equity and inclusion are among the keys to a nonprofit’s success.
Diversity correlates with success. But not the sort you were thinking of. I’m referring to diversity of revenue streams. Organizations with two or more streams accounting for 20% or more of their revenues tended to be more successful than those without. But I digress…
What about DEI (or EDI, JEDI, etc.)? The study did not turn up a correlation between level of focus on these issues and organizational success. This isn’t to say they aren’t important in their own right, but simply that nonprofits’ performance didn’t rise or fall with priority placed on DEI. The statement therefore doesn’t hold up as a “truth.”
Taking care of the organization’s staff is a key to success.
This assertion was true when we did the study and may be even more so now. Various factors point to staff-centered practices as contributors to high performance: a strong staff model of leadership, adoption of prevailing best HR management practices and solid systems for supporting staff members. The pandemic era survey suggests that successful nonprofits tend to provide better compensation, experience lower turnover and place higher priority on meeting staff needs.
Looking at all of this together, the research is affirming in some respects and humbling in others. My major takeaway is that we all should gather lots of information and listen to what people have to say, wile maintaining healthy skepticism and open minds. Profound truths can sometimes be hiding right in front of us.