Nonprofits face a number of unique challenges that differentiate these organizations from others—limited resources, daunting challenges, volunteer motivation, and complex interdependence with other external partners. These challenges can turn into insurmountable obstacles if a nonprofit organization doesn’t realize the impact of its culture on the performance.
Why is culture important for nonprofits? Basically, for three reasons: one, to keep the energy flowing when the final reward of the work is almost entirely intrinsic; two, to engage the donors to ensure continuity and sufficiency of funds to implement programs; and three, to have an effective decision-making process that leads to impactful outcomes.
What does it take to cultivate an enabling culture for a nonprofit organization? Here are three key building blocks:
For nonprofits, a worthy “mission” is critical. Donors donate for a mission; volunteers put in effort because of it; executives and staff are driven by the satisfaction they seek in furthering a cause. Consider Khan Academy, a nonprofit with an inspiring and ambitious mission of “Providing free, world-class education to anyone, anywhere.” In just eight years, its impact has been remarkable: helping 18 million learners each month and attracting some very prestigious donors (including Gates Foundation) and highly competent employees.
Clearly, the challenge for the leadership is to articulate an inspiring and meaningful mission, communicate it effectively to all the stakeholders, and finally, translate it into day-to-day actions.
Donors are the lifeline of a nonprofit organization. If they are satisfied, the organization can not only achieve its core objectives but also enhance its scope of work—and the impact on the society. The challenge here is to set measurable goals and then objectively measure the organizational performance—efforts and results—which is not easy given the nature of non-profit work.
But forming a culture where every project has a measurable outcome and periodic measurements are a routine process, can help an organization to prove its credibility to the donors. For instance, in its early years, Bill & Melinda Gates Foundation’s challenge was to select projects with a minimum payout of $1 billion in a year from amongst the competing causes. Notes Bill Gates, “There were two cases where I turned down the grant in the end because the goals weren’t clear enough.” Gates’ view is instructive of how donors think; they want to see tangible results from their contributions.
Trust and transparency
Trust and transparency are the key cultural attributes for enhancing the quality of decision-making, whether for for-profit organizations or nonprofits. However, nonprofits need even greater focus on upholding the values of trust and transparency to make the right decisions, considering the obligations towards donors and importance of nonprofit work on the society at large.
A culture that places high value on trust and transparency also motivates people to actively participate in the meeting the challenges, seek solutions, and push themselves towards higher performance.
To operate an effective nonprofit organization on a sustainable basis, its leadership bears an enormous responsibility to cultivate a culture that stands firmly on the following three pillars: strong mission, performance orientation, and trust and transparency.