The Third Sector Report By Jeffrey Wilcox

The Nonprofit Predicament: Valuing The Power Of People
Jeffrey Wilcox - The Third Sector Report

September 24th, 2013 – When nonprofit organizations are looking for money, most are asked, if not required, to submit some form of business or strategic plan – the road map that their leaders intend to follow to advance their cause, serve the community and produce tangible results. Like pieces of a puzzle, one would think that by lining up the strategic plans produced by major organizations in the arts, education, basic services and health, a holistic picture of the community’s future would begin to unfold.

Moreover, wouldn’t it make sense to simply add up all the financial projections contained in these strategic plans to get an idea of just how much money it’s going to take to produce a defined higher quality of life for us all?

If only it were that easy.

As a professional who has spent a major portion of his career reviewing strategic plans from worthy organizations seeking support, virtually every plan had one commonality with the other: The number of pages devoted to raising financial capital to serve the cause left very few pages, if any, devoted to raising human capital sufficient to advance the cause.

To understand the mindset and culture of any nonprofit organization, simply take a good look at its strategic plan and see where involving and vesting community people in its work, sustaining a pipeline of professional talent, and preparing for leadership succession fits into its overall equation for planned growth to serve the community.

Sadly, because the funding community hasn’t provided a lot of incentives for nonprofits to account for strategic human capital development in their long-term planning, the sector now faces four sobering realities:

  • The first reality is the large class of retirees who are now exiting their positions without anyone in the pipeline to take over. After years of service, many retirees will become victims of poorly planned transition strategies and will face futures without retirement benefits. For the boards who didn’t give any thought to this reality in their long-term planning, many aren’t in a position to afford a market-rate replacement and cover the associated costs of supporting a good transition.

  • A second reality is the decreasing number of people who are choosing to pursue careers in the nonprofit sector. One of the largest online marketplaces for nonprofit jobs has reported that site visits,” are plummeting” as a new generation of graduates prefer to work for social benefit corporations or start one of their own as opposed to working in traditional institutions.

  • A third reality is the number of board positions that remain unfilled each year, combined with those that are filled in name only. That reality is closely related to a fourth, and perhaps the most sobering of all, that a growing number of nonprofit organizations admit to not knowing what to do with volunteers when they’ve got them.

It seems that all those missing pages in so-called strategic plans that didn’t address human capital development for their long-term advancement are now starting to feel their detrimental effects. In truth, for most of these organizations, human capital was the only resource available to them when they first started.

The nonprofit organization is a different animal when it comes to equity. It’s an equation that doesn’t show up readily on a financial statement. The actual equity ratio in a nonprofit is the combined value of money with the value of people. The nonprofit organization with thousands of smaller contributors and thousands of hours of volunteered time may have an identical financial sum of money to report as the organization with only a handful of large contributors and a small overworked staff. But, in the end, which of the two organizations has the greater equity to build on for its future? Which of the two organizations has been more successful at proving they are truly “community-based?”

All business leaders understand equity. They also understand the goal of creating equity for the long-term good of the corporation. What is it going to take for business leaders to stop putting their good names on business plans for nonprofit organizations that don’t consider the value of people as part of the equity equation, yet believe that’s being “strategic?”

(Jeffrey R. Wilcox, CFRE, is president and chief executive officer of The Third Sector Company, Inc. Join in on the conversation about this article on Facebook or drop us a line at jwilcox@thirdsectorcompany.com)