Introduction & Research
A little bit about what I was doing. I was originally working with a startup NPO called Empty Boots. Well it wasn’t exactly an NPO as we had just started to be founded but then it folded without getting any of the documentation in order or getting anything going. With that it was a struggle for me to complete the writings in this term and so now I am doing my final on why NPO’s fail and why they succeed. Some of it has to deal with talent and some is just how it’s ran. Within that I decided to take a closer look at it all and found some interesting newer articles on it all.
One of those articles being titled “Talent Philanthropy: Investing in Nonprofit People to Advance Nonprofit Performance” from The Foundation Review touches on advancing the people you have working for you. Not advancing their title or position but advancing them as a person, making then feel important and retaining them. This is one reason why NPO’s fail mainly, the people don’t feel that they are important or valued for what they do.
Another great one that I found that proves to be on the spot with fundraising and how certain things affect this is from Temple University and is written by Steven Balsam and Erica Harris titled “The Impact of CEO Compensation on Nonprofit Donations”. This article deals with the higher officials in these NPO’s getting compensation and how that can look to the outsider and how that can affect donation levels to the NPO. This specifically mentions the Red Cross and how their CEO makes a salary of over a million dollars a year even though they are labeled as an NPO.
The last one that I want to mention deals with the tax deductions and charities. It is from University of California, Davis and is titled “How Does the Incentive Effect of the Charitable Deduction Vary across Charities?” by Michelle and Robert Yetman. It looks at how the tax deduction in federal taxes can swing donations from year to year depending on what is going on and how the donors are feeling or how much they get that year in order to lower the tax bracket. All in all its kind of a racket but it shows how things work with it. All in all this article is very scientifically done and also encompasses a lot accounting features. It can be hard to read if you’re not used to those types of writing.
Stahl, Rusty Morgen (2013) “Talent Philanthropy: Investing in Nonprofit People to Advance Nonprofit Performance,” The Foundation Review: Vol. 5: Iss. 3, Article 6.
Balsam, S., & Harris, E. E. (2014). The Impact of CEO Compensation on Nonprofit Donations. Accounting Review, 89(2), 425-450. doi:10.2308/accr-50631
Yetman, M. H., & Yetman, R. J. (2013). How Does the Incentive Effect of the Charitable Deduction Vary across Charities?. Accounting Review, 88(3), 1069-1094. doi:10.2308/accr-50370
The Public Writing
Many people see nonprofits as groups that help a specific section of people, animals or of the global environmental welfare. In the recent years since the Global War on Terrorism has started there has been a surge in Veterans support groups, such groups as the Wounded Warrior Project(WWP), the Iraq and Afghanistans Veterans Association(IAVA) and Special Operations Warrior Foundation. There has also been a lot of groups that have come and gone like Vets for Freedom and Friends of the Vietnam Veterans Memorial. First we will define what a nonprofit is according to the federal laws and then we will look into reasons on why they fail or succeed, leading into what are some of the reasons that groups go defunct while others prosper?
Lets actually define what a Nonprofit Organization(NPO) is. This will help us get a better understanding of what we are actually talking about and also some people are not aware of what one is. A nonprofit is “….a group organized for purposes other than generating profit and in which no part of the organization’s income is distributed to its members, directors, or officers”(Cornell). NPO’s are managed mostly by state laws but overall are governed by Federal Internal Revenue Code 26 U.S.C Section 501(C)(3). To be qualified for this the organization must fall under certain titles according to the IRS they must “..be tax exempt, an organization must have one or more exempt purposes, stated in its organizing document. Section 501(c)(3) of the IRC lists the following exempt purposes: “…charitable, educational, religious, scientific, literary, fostering national or international sports competition, preventing cruelty to children or animals, and testing for public safety”(IRS). Yes in there you do see national and international sports competition so groups like the NBA, NFL, NHL and the IOC are classified as Nonprofits. One of the things that NPO’s are forbidden to do is to get involved in politics or political giving.
What are some of the reasons that nonprofits succeed? Why is it that some groups that have the same or close plans of action fail? Let’s look some of the traits that make a them succeed. One of the things that every group needs to succeed is a qualified leader. Within this the leader needs to be sincere, confident, great organization skills and a head for business. Let’s take a quick look at each of these.
Let’s start with being sincere and confident first as I believe these pretty much go hand in hand. Being sincere and confident in what you are doing or the thing you are representing makes a tremendous impact on the people that you have working for you and will also directly affect public and private giving. If people see or feel that you aren’t being sincere or are confident in what you are portraying then they are not going to be apt to giving or volunteering their time with your organization.
A head for business. What does this mean? This is one of those things that aren’t clearly defined on what this means. Some people have an innate knack for running a business without thinking too much of it, some run a business and have a little trouble doing it but make it work. While some make and run a business and it fails tremendously, even with the best planning and advice they can get. I believe this is one thing that it neither can be learned nor taught, but more like a sixth sense.
Organization skills is something that I think everyone needs no matter what they are doing. Look at students no matter if they are in elementary school or college. They have to plan their time around other activities like class, work/chores, and other activities they may have. Some need a little help or a little push to get it done but they do or they fail at something. When you’re running a business with it being either a for-profit or a NPO though you need great organization skills. This is needed due to the fact that in the beginning you will usually be the only one doing it. You will need to plan meetings, work time, family time and personal time. I’ve seen a lot of people start up business’ that fail mainly because they don’t plan their time well and usually leave out an important part, usually family or personal time leaving them being stressed out and eventually failing the business.
Now what are some of the reasons that they fail. I have found some of the more common reasons that they fail, most seem to be no brainers and others often overlooked. I have already mentioned one of them so let’s look at others like perfection, keeping it simple, networking and others.
A couple of the big reasons for NPO’s and companies failing is that people think that it takes a long process and/or long plans of actions. In this I think that two things go hand in hand again, K.I.S.S and under promise, I know under promise? It seems counterintuitive but read on. People forget the one big thing of K.I.S.S, Keep It Simple Stupid! You don’t need a long plan of action or process to get things started and running. It only takes one page not a book. Many people go into a bank to get a loan and they have hundreds of pages of documents of what they want to do and to the bank it looks good but in reality it isn’t reality to get it completed. Also with this it has all of these promises within it and often they fail at reaching those major goals. A lot of people think that they need to make some over the top promises or to make a lot of them, instead of keeping them simple, again K.I.S.S, and then over performing on the ones that they do make. Remember that ”There is nothing that donors, stakeholders and coalition partners like better than working with people and organizations that get the job done. Fancy promises are only counter-productive”(Mizrahi).
Marketing. Why do NPO’s need to worry about marketing? Marketing is only for companies that want to make money! False! Every organization no matter what it’s for needs to market themselves! In today’s world it doesn’t take much to market the organization, as marketing can take on many forms. Many nonprofit organizations have been marketing themselves for almost 100 years! Make-A-Wish has been marketing themselves for 34 years(Barry). Organizations don’t need to spend a lot or any at all on marketing, I say any at all because in today’s world with the advent of social media and other internet sites like YouTube, there are many ways of free marketing. After you become established you can use money or increase the amount you use. Some groups have used money before but have switched to mainly either user generated content or social media. Big Brothers Big Sisters of America used to use mainly TV and word of mouth advertising for their services but have switched to mainly using YouTube as their main source of advertising(Barry). Another issue that people have with using marketing is that they don’t want to overdo it to people, but take a look at some of the more popular NPO’s like the ASPCA or Wounded Warrior Project. Both use extensive marketing tools like TV, partnering with for-profit companies and employing celebrities to market them.
Last item that I want to touch on, on why NPO’s fail is what is looked and most commonly called the “Lone Ranger effect”. Let’s take a look at it and what it means. The Lone Ranger effect is easy to explain and see when it happens but so many fall into this pitfall. This means that the group is trying to go at alone without any outside relationships or having a relationship with other groups and relying mainly on personal donations. They don’t look for partnerships with big corporations or with local leaders like that with churches or other organizations(Barry). This can seem like a great thing to do if you’re going into an area that is unknown but it isn’t. We all need help from other sources and it a sign that you’re folding or can’t maintain it but that you want to get others involved, it helps you and it can help them in some aspects. For you it can bring in more donations and get your name out there and it can help them get more business.
I hope that some of this can help you and the groups you are volunteering with or thinking about starting up or getting involved with. We have looked at some of the reasons for success and some for failure hopefully it can give you ideas to use and some of the things to stay away from. Remember stay away from the lone ranger attitude, use marketing instead of shying away from it and remember to keep it simple! Organize your time, be sincere and confident in what you are doing and remember to take time for yourself and take a vacation every now and then as this will keep your stress down!
“Non-profit Organizations.” LII / Legal Information Institute. Cornell Law School, n.d. Web. 13 Aug. 2014
United States. Department of the Treasury. Internal Revenue Service. Publication 4220. N.p., July 2014. Web. 13 Aug. 2014.
Barry, Frank. “Content Marketing: 5 Non-Profit Success Stories to Learn From.” Mashable. Mashable.com, n.d. Web. 13 Aug. 2014.
Mizrahi, Jennifer Laszlo. “10 Tips for Running a Successful Non-Profit
Organization.” The Huffington Post. TheHuffingtonPost.com, 27 June 2012. Web. 13 Aug. 2014.
Jewell, Jim. “7 Reasons Nonprofits Flounder or Fail – Valcort – Strategic Marketing & Brand Building.” Valcort Strategic Marketing Brand Building. Valcort Group, n.d. Web. 10 Aug. 2014.