Nonprofit Growing Pains: Study Breaks Down Internal Challenges
A new report finds that while most nonprofits plan to grow, risk factors and operational complexities raise challenges for growing organizations. The study points out a few things to consider as you develop your organization's own growth initiatives.
Four in five nonprofit officials say it’s important for their organization to keep growing. But growth comes with side effects that can dampen these efforts.
That’s a key finding from a survey of 300 nonprofit finance professionals by Abila, an association software and services provider. Respondents to the Abila Nonprofit Finance Study defined growth in a variety of ways, from adding new services to serving more people to increasing funding. But regardless of what growth entails, respondents had big concerns about the challenges that accompany it, particularly related to budget planning, risk management, and relationships and organizational culture.
Sixty-two percent of respondents said that organizational growth tends to make it harder to manage risk.
“Evaluating and managing risk are pivotal functions for nonprofit finance professionals at organizations looking to grow,” the report states. “Nonprofit managers at growing organizations look to build capacity for a number of risk management activities, such as creating contingency plans for future funding uncertainty, maintaining compliance with funding requirements, actively assessing internal controls, and training employees.”
Respondents also noted concerns about how growth changes internal and external relationships and affects organizational culture.
“During times of growth, relationships with major funders and the board appear to improve,” the report notes. “However, there can be a mixed impact on the morale of the organization.” Forty-four percent of respondents said relationships with major funders get better, and 38 percent cited improving board relations.
But 45 percent of respondents said growth has a mixed impact on morale, and four in 1o said it’s difficult to maintain an organization’s culture as it grows.
“Perceptions of difficulty increased with the size of the organization. No matter the size of an organization, change is the only constant,” the report notes. “Proactive planning and consistent communication are keys to maintaining an organization’s culture through a growth period.”
The report recommends that organizations looking to grow take a variety of steps to better navigate the process, including careful planning and revenue diversification. Launching a risk management framework, preparing staff, leveraging technology, and focusing on transparency are other key strategies, the report notes.
“Those nonprofits that understand and plan for growth now and in the near future will be primed for success,” Dan Murphy, Abila’s senior manager of fund accounting strategy and the study’s coauthor, said in a news release.
For more details, check out this infographic highlighting the findings.