The Real Value of a Nonprofit Organization

Nonprofit organizations are entities that serve needs; needs that no one else would otherwise be willing, capable, or even interested in solving. Health, poverty, domestic violence, the environment, animal cruelty, hunger, and homelessness are just some of the many worthy causes that need to be addressed.

Ironically, we live in a time where our society has reached levels of economic prosperity and wealth accumulation unseen before in human history, but the gap between the privileged and the underserved is wider than ever before. Something is fundamentally wrong: we are creating wealth, and with that, wealthy people, but are we creating value?

For instance, how is the overall financial health of the most powerful country on earth? The recent news of Detroit’s bankruptcy is just a preview of what is coming next. Something is not working and it needs to be fixed before it is way too late…

While the above is a much larger issue, there are critical areas of nonprofit operations that need our attention, but before we attempt to address them, I would like to call your attention to one simple concept: Value.

This term holds significant importance in nonprofit organizations. As you may know, it is often difficult to measure the economic value that nonprofits add to our society, simply because the end product of our organizational processes are not tangible products or services, but rather intangible outcomes such as behavioral changes, reduced rates, or improved results of some sort. However, there is true economic value that we add to our society, and, to mankind.

The question is: “How do we convince our donors, funders, and the government, that what we do is far more valuable than spending trillions of dollars (financed mostly by debt) to produce weapons, or fund meaningless “research projects” that lead nowhere, etc.?”

Let’s also ask ourselves where we can find the drivers that create value in our organizations.

Yes, there are unknown, hidden drivers that generate true economic value in each and every nonprofit organization. When ignored, these drivers can also destroy value. Here are some questions to ask:

  • How is your staff perceived and treated in your organization? Are they considered an expense, such as ‘Personnel’, or are they considered to be an investment, such as ‘Human Capital’? If you consider your staff to be an investment, then what are the long-term strategies that you have implemented to increase the value of this investment? Do you have an assessment tool to measure the economic value of your Human Capital?
  • When was the last time that your organization conducted a benchmark analysis? Are you performing below or above the national standards?
  • Does your Board have an Annual Work Plan, and actually achieve the objectives and goals of this work plan, or do they usually attend a monthly meeting just to hear what you have to report and say “aye” to approve the minutes?
  • How often do you make financial decisions based on what your Budget vs. Actual Statement reveals? Do you actually have a budget and review it?
  • Are you using solutions of information technologies to drastically reduce your operational expenses and boost productivity? Or do you just outsource your IT needs to a contractor that charges a handsome monthly fee for ‘managed services’? How do you measure the value of Information Technologies in your organization?

The answer to these five simple questions could mean the difference between creating and destroying economic value in any nonprofit organization. But these are not the only topics that need to be addressed. Whether you lead a small or large organization, the internal processes that lead to economic value are the same; the only difference is the level of complexity of these processes.

As leaders in the fight against cancer and other chronic diseases in the District of Columbia, we must make sure that our organizations are healthy internally, too. It is far less expensive to take smart steps to identify the drivers that create economic value, than to wait until an auditor finds material weaknesses in your organization.

With this article, we are starting a new series of topics around EVA for nonprofit organizations, which are part of our popular trainings on capacity building. We welcome questions and comments from our membership to help enrich these discussions. A new interactive EVA training workshop designed for nonprofit leaders will be announced in upcoming months.

 

This post was written by David Castañeda Díaz. For more information, contact him at dcastaneda@dccanceranswers.org