Chasing the Holy Grail of Sustainable Funding

One night at dinner, my son Alex and I were discussing the stock market.

I was boasting about a particular stock in my very modest retirement portfolio that had achieved significant growth over the last few years. “But how do you know,” he asked, “how long it will last?”

Of course, if I knew the answer to that question, I’d be sunning myself on a tropical island rather than pounding out client work at my computer on this cold wet day.

But, Alex’s question led me to ponder once again that age-old issue of “sustainability” that floats around our world of nonprofit organizations. We hear it all the time from institutional funders: “describe for us how you will sustain this program when grant funding ends.” We flock to workshops with titles such as “Creating a Sustainable Funding Stream for your Nonprofit Organization.”

But, I ask, what operational dollar in your organization doesn’t need to be re-earned every year? What dollar can you really count on receiving forever and forever?

• Individual giving? While individual giving is by far the overwhelming percentage of philanthropy (counting bequests), according to The New Nonprofit Almanac, private contributions make up about twenty percent of our sector’s total revenues. That means that individual donors account for around 16% of total nonprofit revenues — averaged across our sector. While many organizations thrive on individual giving, they still have to renew every donor every year and replace the ones that die, move away or move on to other causes.

• Foundations? We already know that most institutional funders loathe giving us funding for very long. And their grants represent a mere two percent of nonprofit revenues.

• Government? One might make a case that government is the least fickle of all of our funders, with its significant and overarching investment in this sector, accounting for at least a third of all nonprofit revenues.

• Endowment? Maybe. But even stock markets crash and too many cowardly boards are willing to spend down their nest eggs rather than exercising fiscal restraint or fundraising prowess.

In many ways, financial sustainability is the Holy Grail of our sector.

Today, earned income has become the new favored child of the sector, surprisingly since it is already the largest source of nonprofit revenues. But it is silly to think that this is some panacea of sustainability.

As our sector is frequently negatively compared to the for-profit world, I decided to do some quick research into the corporate sector. While the Kongo Gumi company of Japan has lasted through forty generations in family hands since A.D. 578, most for-profit companies don’t claim that type of track record. According to industry statistics, only 66% of US companies founded in the ‘90s lasted two years, and over 50% had failed within four.

But for the ones that did survive, a 2003 Industry Week article attributed their success to their resilience and adaptability.

Resilience is usually described as the ability to bounce back, to recover from adversity. You’ll find it frequently used in the health sector. Adaptability describes the ability to respond quickly to change and to adjust to new conditions.

These are intriguing concepts that need more attention. Luckily, we’re starting to hear more about them in our world.

Adaptability is one of the four core capacities in the capacity model developed by The Conservation Company. (Leadership, management and technical are the others).

In a brilliant paper, Supporting Financial Vibrancy in the Quest for Sustainability in the Nonprofit Sector, Marilyn Struthers of The Ontario Trillium Foundation suggests that we might develop a different understanding of sustainability by applying the ideas of resilience and adaptability. She offers us this new concept:

Financial vibrancy is the capacity of an organization to make the transition from one sustainable moment to the next.

I think this one of the most liberating concepts to emerge in our sector in a long time. While the statement sounds like a tautology, its brilliance lies in its ability to succinctly capture the complex and unfolding dynamic that each of our organizations negotiates over its lifetime.

Instead of flogging ourselves for our inability to live up to someone else’s ideal of how we should be funded, perhaps instead we can give ourselves credit for our agility and ability to survive and adapt in a rapidly changing landscape. The reality is that we’ll turn over our directors, our staff, our grants, our donors and yes, even our programs, countless times in the life of our nonprofit. And why shouldn’t we – whose community isn’t experiencing ongoing and rapid change?

Our organizations will rise and fall and rise again with the availability of and our ability to capture many different kinds of funding — even if only for a brief organizational moment.

Change is a surety. Our organizations will transform many times over their lifetimes. The viable organizations will be those with the courage to look forward, hold on to their core values, and nimbly negotiate the future as it happens. Good luck!

This article first appeared in Contributions Magazine, November 2, 2007 Vol 21

About the Author:

Gayle L. Gifford, ACFRE, is author of many books and articles on nonprofit management, including How are We Doing? A 1-Hour Guide to Evaluating the Performance of Your NonProfit Board and Meaningful Participation, an activist’s guide to collaborative policy-making. She is a regular columnist for Contributions Magazine. A consultant, facilitator and trainer with over 20 years of nonprofit experience and President of Cause & Effect Inc., Gayle helps nonprofits from the grassroots to international create strategic change for a more just and peaceful world. You can reach her at gayle@ceffect.com, www.ceffect.com, 401.331.2272.