The 7 Most Valuable Assets of a Nonprofit Organization
When you turn to the financial statements of a nonprofit organization, one of first reports is titled Assets and Liabilities. I know this an important report, but as a longtime non-financial manager of NPOs, I’ve always been less interested in this report than the statement of annual revenues and expenses and the break out of these results. However, as important as any of these corporate financial assets may be, for the nonprofit organization millions of dollars worth of buildings and cash reserves are far less important than at least seven other tangible and intangible assets that will strongly influence the future success and viability of the organization and its mission.
Here are 7 most valuable assets of a nonprofit organization:
1. The formula for program effectiveness
There aren’t any magic elixirs in charity work. But the most successful organizations have devised a formula for making a difference in an affordable way over a long period of time. Even If every other asset is in place, if there is not a formula for this kind of success, the mission will not be able to last the test of time and scrutiny. To create the formula will require expertise in the area of work, a realistic view of what can be done and a calculation of the funds that will be necessary to succeed. The organization will need an effective (and sustainable) program delivery system, and the ability to measure effectiveness. Long-term effectiveness is enhanced through the involvement of recipients in ongoing programming and decision-making.
2. Widespread trust
Everyone wants to be trusted, but not enough organizations make trust-building a top-level point of planning and measurement. For the NPO, this means putting a priority on building internal trust—by employees, members, board members, volunteers, etc.—and at assuring trust at every external point of contact—including donors, program recipients and partners.
I wrote earlier on the NPOutlook Blog:
“Trust is not a soft virtue. Gaining and keeping trust is tough, gritty, engaged, in-your-face work. Listening hard. Making difficult choices. Fortitude, sacrifice, sweat and tears are often required to make and to deliver on promises and to be unfailingly truthful.”
The Valcort Group’s Chuck Thomas wrote that “the bedrock of trust is shared values, common heart-motivations and beliefs like honesty, fairness, generosity, hard work, and integrity. Sadly, in recent years we have seen the erosion of these values within organizations, institutions and companies that we have trusted for decades, or even for centuries.”
One result of trust lost is that donor loyalty is at an all-time low. Although donor retention has many layers and complexities, vibrant earned trust nurtured as personally as possible is the most effective path to retaining friends and donors.
Trust will evaporate overnight if is not earned faithfully in the way fundraising and programming are conducted. This includes:
- Demonstrated commitment to being good stewards of entrusted funds
- Care and respect for employees, volunteers, supporters and program recipients
- Innovation as necessary to enhance effectiveness as conditions change
- Avoiding activities that are not in keeping with the organizational purposes and the promises that you’ve made to your stakeholders.
3. Leadership culture
Organizational leaders come and go, both at board and management levels. One strong leader can make an enormous difference at an NPO, and many tremendous organizations are started and led for years by passionate, entrepreneurial founders. (Many of whom, it must be said, are too emotionally invested in the mission to treat employees well, to avoid unethical means to support their “baby,” and don’t understand the need to retire. But many of these visionaries have taken philanthropy and service to unimaginable heights.)
Conversely, weak, untrained, abusive, and unimaginative leaders cause immeasurable damage to an organization during their tenure. (I have had contact with many NPO leaders in both categories). Strong leaders are a great advantage during their time, but it is a culture of servant leadership, of meritocracy and roving leadership, that is an organization’s enduring asset. Leaders and staff and volunteers nurtured in this deeply embedded culture will enable organizational strength for another generation.
4. Strong and clear brand
Most people know the organizations with the strongest brand identity in the U.S. By most measures today they are The Salvation Army, United Way, Habitat for Humanity, and American Red Cross. Strong brands are great assets for these organizations, but they did not acquire them by spending a great deal of money to increase brand awareness. Their identity comes primarily from their fundraising communications, their on-the-ground presence in communities around the country, and from news reports on their work—particularly in times of disaster. Their internal communications solidifies their brand with supporters and insiders.
Even these gargantuan organizations haven’t totally conquered the branding challenge, however. Try this exercise: for each of these five brand leaders, jot down a phrase that identifies their primary mission or service. Not so easy, is it?
We will take a more complete look at nonprofit branding in a separate post, but I need to point out here that, increasingly, large and small nonprofits are recognizing the importance of a strong brand. This is not only as a tool for fundraising and communication, but also strategically, anchored in vision and values and critical in decision making and change.
Nathalie Kylander, a research fellow at Harvard’s Hauser Center for Nonprofit Organizations, and co-creator of the Nonprofit Brand IDEA Framework, said in an Forbes interview:
“We have found that the role that brand played internally was as critical to many of the organizations we interviewed, as the external role of the brand. Internally, a strong brand drives cohesion and helps an organization build the capacity and skills to implement its social mission. Externally a strong brand results in trust among its many constituents, be they donors, beneficiaries, partners, or otherwise, which enables the organization to have greater impact. What makes a brand strong though is the close alignment between internal brand identity and external brand image, what we call brand Integrity.
“The role of the brand in both [profit and nonprofit sectors] is very similar. A brand is a psychological construct held in the minds of all brand audiences, a promise, a short-cut for decision making if you will. Strong brands in both sectors enable organizations to build trust, gain resources, and establish partnerships and access. But it is the complexity of both the goals and the audiences that nonprofits have to address that makes the brand perhaps even more critical in the nonprofit sector.”
5. Strong message delivery system
If you have found a method through which a large group of friends tunes into your messages and frequently engages with these messages, you have an intellectual property that is a valuable asset to the organization. This may seem obvious, but even as communications channels multiply, the competition in those channels is exploding and the rejection of our missives is increasing exponentially.
It takes hard work to move the needle a percentage point or two on response to email newsletters. It’s agonizing to watch financial response to a radio fundraiser increase incrementally, or not at all. Having your news releases or PR calls ignored in large numbers is a now a common occurrence. Indeed, finding delivery systems that work requires perseverance and creativity, and when you find a system that begins to work for you, it is gold.
6. Body of loyal donors
The mother lode of the nonprofit organization is not its headquarters complex or its bank account but its donor list. These are the people who have at some time, the more recently the more valuable, donated to the organization. The strongest donor list includes names, mailing address, telephone number and, increasingly, current email address. Additional information on the passions and preferences of these people is gravy. As you join an NPO as an employee, your first day will include—as with any employer—a mountain of paperwork, but unique to a nonprofit is a form through which you pledge to maintain the fidelity and secrecy of the organization’s donors. Not only does an organization not want you to share this list with its competitors, it wants to protect itself against any personal, outside use of this list of supporters.
7. Relevance meter
Leading organizations constantly maintain their relevance, ensuring ownership of clear points of difference and significance compared with others doing the same work or seeking the attention of the same group of stakeholders. They sustain their credibility by increasing trust and loyalty internally and at every point of external contact, and use that as a base for program and communication innovation. But how do you stay relevant?
One of your greatest assets is what I call a “relevance meter”—the management means that you devise to measure your current relevance, and an alarm of sorts that will sound in your executive suite when you are slipping out of touch. Organizations can stay relevant by focusing on innovation,readily listening, learning and adapting to changing conditions, and modifying their strategies as needed. This allows them to sustain impact by staying relevant.
I have been amazed by the number of very good organizations that we’ve watched slip from greatness to virtual irrelevance because they lose contact with trends, communications, cultural factors, and next generation turmoil. They were committed, mission oriented, hard working, and supported by a core of donors and friends. But they did not have a relevance meter. Today, they are a shadow of their former greatness.
Do you agree? Are these the 7 most valuable assets of a nonprofit organization? Let us know what you think.
Tags: nonprofit management, nonprofit organizations, Valcort