When we talk about not-for-profit organizations, it is commonly misunderstood that these organizations which are more focused on their mission for bringing better changes in the world, do not need any form of profit (surplus) for sustenance. But this is a misconception, as profits or surplus in any organization, help the organization to plan and sustain better for the future investments.

The majority of learning below are derived from the work in three books (arranged in order of relevance)

Understanding trade-offs: Impact vs profit

First things first, how should we think about profit or surplus when impact is driving the organisation - which decisions need to favored in terms of finance, when and how? Here, I find the the framework from Book by Bell [1] and the matrix structure, which looks as follows, to be helpful:

Impact vs profitability [Bell, Jeanne, 1]

This matrix basically helps decide which strategies to grow and in which direction, or when to act or stop a strategy based on their relative impact and profitability. While choosing any strategy or decision on , they need to be measured along the lines of this matrix. The stars with high impacts and profitability are most preferred, while those with low impact and profitability are mostly ignored. But how do we measure this impact for any strategy. Bell proposes a simple relative impact measure the strategies (to score them from 1-4) by looking at 7 criteria:

Alignment of strategies with core vision
Excellence in Execution
Scale or Volume (of people reached)
Depth (of impact)
Filling an important Gap
Helping Community Building
Leverage (while comparing all programs of the organization)

Finally, it is important to involve most of the stakeholders and the leadership team of the organization, to do weighting (relative scoring) on each criteria to derive the final score for each strategy. Once this matrix map is ready with all the strategies/ activities of the organisation, the business model of the organisation looks clear and the fields where the board should be investing for highest impact and profitability becomes clear. An example for a community center shows it below:

For the above given map, the strategies in the organisation are added to each quadrant, and based on where they lie, next strategy is decided to obtain a financial impactful plan for the organisation.

For high profitability, high impact or star strategies :It is quite straightforward to keep these strategies close to organisation and keep nurturing them
For high profitability, low impact strategies: It is important to grow these strategies and invest in them to increase the impact (depth or reach-wise)
With low profitability, high impact strategies are still preferred as they keep the organisation aligned with the mission of the organisation.
While for low profitability and impact, clearly the strategies need to stopped as they drain resources of the organisation without much in return.

Understanding missions via Objective Key Results (OKRs)

At Humane Warriors, we felt the lack of focus due to the various projects with high impact we were doing. Thus, to understand our priorities and vision-mission better, we decided to use the structure of defining our activities better using the OKR system, usually used in large startups or organisations e.g. Google. As provided by our OKR consultant, Davor Vidic, OKRs are

✓ A method to help organisations crystalise their priorities, enable everyone to align into them and to create a relentless focus on growth and innovation

✓ The fuel for creating a growth and learning culture within the organisation

✓ An agile approach to motivating and managing goals in line with organisation strategy

✓ A powerful way of writing your goals (i.e. your Objectives) and your measures of success for assessing the impact it had (i.e. your Key Results)

✓ This will lead to the creation of an outcome-focussed mindset, rather than an output focussed one

While OKRs are not

✓ OKRs are not KPIs and should not be used to measure BAU

✓ OKRs are not a way to micro-manage or cascade targets

✓ OKRs are not a ‘Set and Forget’ goal setting framework

✓ OKRs are not a new measure for reward and compensation

✓ OKRs are not an excuse to beat people up for missing targets

Basically, Objective in OKRs helps explain what is to be achieved and why, while Key Results help in quantifying the ways to achieve these objective. Using again the slides of Davor, OKRs are the first step for the organisation to re-pivot themselves and align their vision-mission and quantify their quarterly to yearly financial and other goals. An example of the stages to achieve this is shown below.

Steps to align everyday work from Big Moves to OKRs to KPIs

Understanding revenue streams

Once the organisation is more clear on the right strategies and its objectives clearly on periodic basis,it is important to understand what strategies can actually help bring more revenue to the organisation. Some of them are listed below, mostly focusing on donation streams.

Internet Fundraising : Social Media, Website, Email newsletters,
Major Gifts : Get loyal supporters including board members with significant financial means
Annual Appeals and membership
Direct Mail to a warm list
Foundation Grants
Corporate foundations
Charity Sales and Scrips
In-kind donations
Earned income business lines
1. Fees for Service
2. Consumer-Paid Fees
3. Government Contracts

Understanding impact best practices

As the last section of this blog, I would like to bring attention to the book by Crutchfield and Grant; Force for Good, where the authors interview 12 most impactful organisations and understand the practices which make them so impactful. Each one of them is discussed below:

Advocacy and serve: Additional to grassroot involvement, these organisations add policy advocacy to access government resources or change legislation, thus expanding impact
Nurture Nonprofit Networks: These organisations freely share wealth, expertise, talent and power with their peer (organisations), so that they can advance their field of impact.
Make markets work: These organisations influence business practices, build corporate partnerships, and develop earned-income ventures - all ways of leveraging market forces to achieve social change on a grander scale.
Inspire Evangelists: Great nonprofites see volunteers as much more than a source of free labor or membership dues. They create meaningful ways to engage indivdiuals in emotional experience that help them connect to the group’s mission and core values. They build and sustain strong communities to help them achieve their larger goals.
Master the art of adaptation: As these organisations are highly innovative and even after failures, they have adapted to listen from communities, learn and modify their approach in response to external cues.
Share leadership: The leaders of these organisations share leadership and build long tenures, and strong second-in-command to increase the overall impact from the organisation.