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Description explain about getting back in shape guidelines for improving the fitness.
THE CONSERVATION COMPANY
Serving organizations that serve the public good.
A Briefing Paper
Getting Back in Shape:
GUIDELINES FOR IMPROVING THE FITNESS
OF ESTABLISHED NONPROFIT ORGANIZATIONS
I
n thenonprofit universe, longevityand rele-
vancearenot mutuallyexclusive. Even after
50 yearsor more, manyorganizationsaremore
dynamicand effectivethan ever. Yet thereisno
simpleformula for maintaininginstitutional
health over thelongterm. Regardlessof the
field – health and human services, education,
communitydevelopment, thearts– stableand
maturenonprofitsfacecontinual changeand
new challenges materializeat every turn.
Sooner or later, leadersof manyonce-thriving
organizationsrealizethat thingsarenot going
aswell astheyoncehad been: fundingsupport
and demand for servicesarewaning... the
volunteer baseisbeginningto shrink ... staff
moraleisgettinglow. Unlessit confrontsits
problems, theorganization mayslowlybegin
to stagnate. Other times, a downward spiral
beginsand descent israpid and destabilizing.
Clearly every nonprofit isaccountableto a
rangeof stakeholders, includingclients, vol-
unteers, collaborators, staff, board and funders.
All areobviouslyinvested in theorganization’s
survival and success– and loseout when the
organization doesn’t liveup to itspotential to
do good work.
In thisbriefingpaper fromTheConservation
Company, weoffer our perspectiveon how
nonprofitscan reversestagnation and decline
or, even better, prevent themin thefirst place.
Drawingon thefirm’snearlytwo decades’ ex-
periencehelpingnonprofitspreserveand regain
their health, it examinesthecharacteristicsof
both successful and troubled nonprofitsand the
risk factorsassociated with decline. Thepaper
also discusseswaysto repair problemsand main-
tain long-termvitalityand effectiveness.
BY PAUL CONNOLLY AND LAURA COLIN KLEIN
The Organizational Life
Cycle: What Do Nonprofits
Look Like as They Mature
and Decline?
INSIDE:
The Organizational Life Cycle:
What Do Nonprofits Look Like as
They Mature and Decline?
page1
When Is an Organization
at Risk?
page2
Strategic Planning:
Rx for Organizational Health
page3
Stagnation Checklist:
Warning Signs
of Organizational Atrophy
page3
Reversing Stagnation and
Decline: Other Remedies
page4
Stagnation and Decline:
Symptoms and Treatments
page5
Management Assistance
Resources
page6
Back fromthe Brink:
Engineering a Turnaround
page7
Increasing the Prospects
for Renewal
page8
A Final Word
page8
I
n most cases, an organization follows a
well-defi ned li fe cycle, from start-up,
through adolescence and into maturity. At
any given stage, the best yardstick for evalu-
ating the organization’s health is the degree
to which its components – including pro-
grams, management, governance and systems
– are in balance and help advance its mis-
sion. Although effectivenessdoesnot directly
depend on age or size, smaller and younger
groups usually go through “growing pains”
as they evolve. Growth and maturity gener-
ally imply track records, self-knowledge and
at least the beginnings of stable finances.
Successful, mature nonprofits share several
common characteristics. Among them:
• a vital mission
• hi gh-quali ty, well-regarded, relevant
programs
• capable and motivated management
and staff
• clear communicationsand accountability
• a well-organized board with able,
involved members
• efficient management support systems
• solid finances, including reliable and
diverse revenue streams
Yet even a mature nonprofit can gradually
begin to stagnate. In fact, sometimes the very
2
S
tagnating nonprofitstypically are in de-
ni al t hat t hey are becomi ng l ess
effecti ve. Therefore, leaders must be
continually on the lookout for internal and
external “risk factors” that can undermine
operations and thwart the fulfillment of a
worthwhile mission. These include:
Decreased Client Demand. Established
programs can outlive their relevance and
usefulness. Consider the recent history of
When Is an Organization
at Risk?
Outward Bound Inc. For three decades,
culminating in the 1980s, it wasthe domi-
nant player in what could be called the
“self-actualization-through-roughing-it”
market. At its peak, in 1986, more than
13,000 people a year were testing their
mettle, grit and survival skillsthrough Out-
ward Bound wilderness outings. Funding
growth – a mix of foundation, corporateand
government dollars – was robust. Since
then, however, enrollment hasdropped by
a third and revenues have leveled.
Although the group faces what appear to
be serious problems, the root causes are
relatively straightforward. For one thing,
it lost touch with its markets – the 16-21
set, for whom the personal growth mes-
sage has lost its luster, and the booming
corporate market, which demands shorter
sessions and a more behavioral orientation
than Outward Bound provides. Mean-
while, competitors like the National Out-
door Leadership School and Project Ad-
ventures, Inc. began offering attractive new
programs that have eroded Outward
Bound’s client base.
1
Increased Costs. As a result of inflation or
supply shortages, an effective program
sometimes becomes too expensive to con-
tinue. Consider an after-school program
that relies on volunteers from a local pri-
vate college. As their tuition costs have
soared in recent years, some volunteershave
had to withdraw from the program to take
paid jobs. The program will need to ad-
dress this change or make significant cut-
backs to its services.
Loss of Income. The pressure to constantly
prospect for new funding sourcesand gen-
erate earned income is a common fact of
life. Sometimes, the loss of a large govern-
ment contract or foundation grant can
hamstring a major program. But a healthy
nonprofit can often find ways to make up
the difference, do more with less or make
changesthat do not weaken core programs.
For example, the Atwater-Kent Museum,
an older city history museum that wasfaced
with the loss of public funding, moved
quickly to reassess its role in the commu-
nity. It launched an aggressive member-
ship campaign, set up a school outreach
program and transformed itself from a re-
attributesthat drive growth sometimeshas-
ten organizational dysfunction later on.
For example, the formal hierarchy and op-
erating systemsthat allow for extensive pro-
gramming for diverse constituents can
harden into a kind of organizational strait-
jacket – a rigid and outmoded structure
and set of procedures that get in the way
of effective operations.
As long as clients and funders continue to
provide at least minimum levelsof support,
organizations can languish for some time.
Such stagnant organizations can generally
be identified by these characteristics: [See
also “Stagnation Checklist: Warning Signs
of Organizational Atrophy,” p. 3]
• a fixed menu of long-standing and,
perhaps, obsolescent programs
• entrenched board and staff leadership
• fragmentation of staff into “fiefdoms”
focused primarily on individual
program goals, rather than overall
mission
• few or no new revenue sources
• outdated systems and procedures
• inadequate planning
All it takes is one significant change, in-
ternal or external, to send a stagnating op-
eration into a downward spiral. Market
needs stop being met; programs lose cred-
ibility. Key staff and board members start
to leave – one by one at first and then in
droves; turf battles drain the energy of
those who remain. As long-time funders
pull out, cash flow slows to a trickle and
then dries up altogether. By the end, all
hope of achieving the organization’s origi-
nal mission is lost.
pository of artifacts into a true cultural re-
source. Itseffortsresulted in attracting new
private sector support. A less flexible and
motivated institution might well have been
forced to close its doors.
Heightened Competition. Competition
was once associated principally with the
private sector; today, it is a reality for
nonprofits, which often vie with each
other for funding, volunteers, fee-paying
customers and even “market share.”
Consider WQED, a public television sta-
tion in Pittsburgh. In the early and mid-
1990s, WQED was blind-sided by the up-
and-coming cable industry, which was
able to provide seemingly similar services
at a lower cost to sponsors. “Local com-
panies... that put up money to sponsor
nationally produced public TV shows ...
have found such plugs to be costly. Many
viewers can tune in to cable networks like
the Discovery Channel to see the kind of
programming once exclusive to public
television,” The Wall Street Journal re-
ported. While WQED’s problems were
complex, its failure to recognize and ad-
dress competition certainly contributed to
its difficulties.
2
Stale Leadership. A nonprofit may lose
its way when its chief executive stays on
past the point of providing fresh insights
and approaches. This situation can prove
disastrous when the leader is unaware of
the need to chart – or isincapable of chart-
ing – a plan to address some compelling
crisis, such as new competition or a loss
of funding. The problems arising from
l eadershi p burnout can become even
worse in the absence of a succession plan.
For example, a well-established educational
organization was beset by a number of on-
going problems. Its situation deteriorated
rapidly when the frustrated executive di-
rector resigned suddenly without a suitable
successor in the wings. Board and funders
had had little interaction with other staff
members and consequently saw no basis
for promoting from within. That the or-
ganization exists today can be attributed
to the quick recruitment of a dynamic new
executive who, by sharing control with staff
and board and restoring confidence, was
able to revive the operation.
3
S
ome nonprofitsbecome so focused on
daily operations – program participa-
tion rates, accountspayable, hoursof op-
eration – that they give short shrift to long-
range planning. Provided revenue streams
continue to flow and some viable purpose
continuesto be served, these organizations
can idlein neutral almost indefinitely. How-
ever, by occupying themselves exclusively
with current activitiesand the minutia of
internal operations, such nonprofits lose
sight of their missionsand forfeit opportu-
nitiesto serve clientsbetter.
Other organizations do attend to plan-
ning, but base future projections on past
revenue and service levels. To an extent,
this approach makes sense; there is often
much to be learned from history. But
trend is not destiny, and managers who
take their cues mainly from the past can
undermine their organization’s short- and
long-term effectiveness.
The truth i s that the most successful
nonprofits look to the past and the fu-
ture, all the while keeping close watch on
what’s happening now. They understand
that no enterprise can afford to follow the
same course in perpetuity, no matter how
sound its original mission. Each year, the
ground shifts a little, the marketplace im-
poses new demands, new players emerge
in the field, and staffing and systems need
to change. To stay relevant, an organiza-
tion must continually monitor itself and
the outside world for developments that
could affect its operations, viability and
effectiveness, readjusting programs and
priorities accordingly.
Strategic planning gives a nonprofit the
chance to take stock of its environment
Strategic Planning:
Rx for Organizational
Health
Program
Demand for long-standing
programs has declined
Few new programs are
developed
Services become increasingly
difficult to deliver
Focus is on operations rather
than outcomes; objectives are
unmet
Management and Staffing
Morale is poor; top performers
consider leaving while poor
performers are entrenched
Communications among staff
members and with the board
are poor
“Turf battles” crop up
Board
Decision-making is stalled by
excessive process
Board members are
unenthusiastic and minimally
involved
Board giving is low
Systems
Well-developed systems
deteriorate into “red tape”
The organization is slow to
modify systems and adapt new
technologies
Finances
Long-term supporters are
cutting back or pulling out
The organization is falling
behind on its financial
obligations
Cash reserves are insufficient
Stagnation Checklist:
Warning Signs
of Organizational
Atrophy
and activities and create a realistic blue-
print for the future. Ideally, the process
will include key staff and board members,
giving them a better fix on their operat-
ing environment, impending challenges
and unexplored opportunities.
It sheds light on the organization’s unique
strengthsand relevant weaknesses, enabling
it to identify the causes of current or po-
tential problems related to mission, pro-
gram, board, staff, systems, finances, etc.
The process should also provide a struc-
ture for defining goalsand making the most
effective and efficient use of resources. A
good plan includes clear objectives, strate-
gies, action steps, time frames and desig-
nated responsibilities. The planning pro-
cess itself often has a galvanizing affect on
teamwork, staff commitment, morale and
overall momentum – particularly when it
includes a well-designed planning retreat
away from the workplace. An effective way
to heighten involvement is by creating
multidisciplinary staff and board teams to
address specific problems.
Well-managed organizations often con-
duct strategic planning on an ongoing
basis to be prepared to better manage the
future; this“maintenance” approach keeps
them from ever getting too out-of-touch.
A case in point is Voices for Illinois Chil-
dren. Hailed as influential and highly
skilled, this advocacy organization was
nonetheless aware that its staff and re-
sources were gradually being stretched
across too many issues and constituencies.
To remain vital and gain new effective-
ness, Voices worked with The Conserva-
tion Company to draft a strategic plan.
The plan identified a limited number of
high-impact initiatives and outlined new
approachesfor mobilizing community sup-
port more effectively. Among the top pri-
“Tostay relevant, an organization must continuall y monitor itself
andtheoutsidew orldf or developmentsthat couldaff ect its
operations, viability andeff ectiveness, readjustingpro gramsand
prioritiesaccordingl y. ”
4
N
otwithstanding the efficacy of stra-
tegic planning, an organization in
crisis may need to resolve its most pressing
problems before creating a strategic plan.
As noted, organizations in decline often
suffer from outdated programs, poor mo-
rale and funding shortfalls. Although,
sometimes, specific treatments can be de-
layed until a strategic plan is in place, ad-
dressing these symptomsisnot infrequently
a necessary precursor to stabilization and
long-range planning.
In all cases, of course, the timing, extent
and intensity of the treatment must be
suited to the gravity of the condition.
Whatever the situation, the following
techni ques can be hel pful . [ Al so see
“Stagnation and Decline: Symptoms and
Treatments”, p. 5]:
Executive Search. Getting things back on
track often requires the objectivity and
fresh insights of new leadership at the ex-
ecutive director and senior staff levels. Suc-
cessful searches proceed from a clear and
carefully drafted job description, which is
then widely circulated. To streamline de-
cision-making, search committees – gen-
erally composed of board members – of-
ten create a profile of the ideal candidate
against which to evaluate prospects.
Program Assessment and Development.
To improve future prospects, it will most
likely be necessary to develop new pro-
gramsor revise or eliminate existing efforts.
This process might reasonably begin with
an assessment of market need. Programs
can then be evaluated in light of their util-
ity in serving important constituenciesand
their performance. What are the outcomes,
and are these sufficient? Which elements
contribute to the program’ssuccess– or fail-
ure?The findings can lay the foundations
of a plan for reshaping programs to better
meet market needs and ful fi l t he
organization’s mission.
Organizational Development. Program-
matic shifts are likely to require new skills
and operational support – which may mean
changes in staffing, organizational struc-
ture and administrative systems. Retrain-
ing or reconfiguring existing personnel is
often a viable option; other times, it may
make most sense to start from scratch in
some areas. New staff may have to be re-
cruited and new procedures suited to the
revised agenda.
Fundraising. Most organi zat i ons i n
trouble suffer from financial problems
that make it difficult to address short-
comings in other areas. The aim of a
fund-raising plan when an organization
is in trouble should be to capitalize on
plans for changes and improvements and
engage long-term supporters who have
already made a significant investment.
The best time to scout new opportuni-
ties is after the worst is over. Reason:
prior and prospective funders might look
favorabl y on an appl i cant that has a
worthwhile mission and has moved de-
cisively to pull things together.
Increasing Earned Income. New fee-
based services or nonprofit business ven-
tures can also be an effective source of
needed revenues. However, a financially
troubled organization needs to proceed
cautiously and to avoid viewing this strat-
egy as a panacea. Generally, it is best for a
group to wait until it has “turned the cor-
ner” and stabilized before pursuing new
earned income activities.
Board Development. In times of trouble,
governance might not seem an urgent is-
sue. But formal board development can
be of immeasurable benefit in the long
run. “If we can improve the level of fi-
duciary responsibility practiced by non-
profi t boards ... we can comfortabl y
handle many of the problems we will face
in the future,” says Russell A. Cargo, di-
rector of the Nonprofi t Management
Program at George Mason University in
Fairfax, Virginia.
3
A competent and committed board can
generate new energy by working with staff
to identify new program strategies, raising
the organization’s profile to potential con-
stituents, improving financial management
and raising funds. As a rule, board devel-
opment should be directed toward bridg-
ing skill gaps, removing unproductive
members and creating new structures and
processes to improve decision-making and
outcomes.
Reversing Stagnation and
Decline: Other Remedies
orities of the newly refocused Voices was
itsmuch-acclaimed “Start Early” education
campaign, which publicizes the learning
needs of children from birth. A year after
the strategic plan was adopted Voices re-
tained The Conservation Company to
perform a follow-up assessment. In the
i nteri m, The Conservati on Company
found, Voices had obtained a multimil-
lion-dollar foundation grant in support of
“Start Early;” another grant underwrote
the cost of significant upgrades in Voices’
communications and information tech-
nology systems. Voices’ lobbying efforts
were also acknowledged to be a factor in
the passage of important state legislation
related to education and children’shealth
insurance.
“While Voices was starting from a posi-
tion of strength,” says a Conservation
Company consultant, “there was a recog-
nition that planning for the future and
sharpening its focus would make Voices
an even better advocate for children.”
To be sure, not all organizations are so
farsighted. Often, planning is prompted
by a wake-up call. Little or no planning
is even contemplated until some precipi-
tating crisis – a devastating funding cut,
a drop in usership, or the departure of a
key executive [see “When Is an Organi-
zation at Risk?” p. 2].
For example, The Conservation Company
worked with a nonprofit theater that, af-
ter almost 15 years of steady audience
growth and critical acclaim, purchased
and renovated a building to serve as its
new home. But, the capital project even-
tually saddled the theater with a $2.4
million debt and chronic operating defi-
cits, hampering ongoing operations and
undermining its success.
As a first step toward renewal, the theater
retained The Conservation Company to
conduct a performance evaluation and
create a strategic plan. The plan concen-
trated on improving marketing and fund
development efforts and enabled the the-
atre to stabilize its financial situation and
set a course for the future. Today, the the-
ater is thriving.
5
Program
Symptom: Demand has declined and capacity to deliver ser-
vices is under-utilized.
Treatment: The needs of target clients or audiences are reas-
sessed and programs are revised to meet current needs. Or,
new offerings are added to the program mix and outmoded
ones eliminated. Restaffing or retraining may be required
to deliver new or revised services.
Management
Symptom: Management is unable to think creatively about the
agency’s mission or approach.
Treatment: Help from external advisors is enlisted to generate
fresh alternatives and provide objective perspectives. A
change in leadership may be appropriate.
Staffing
Symptom: The staff is torn by infighting and turf wars.
Treatment: Reorganizing staffing structure – including reallo-
cation of responsibility and retraining – is considered. If
necessary, consultants are retained to help clarify disputed
issues and assess staff members’ capabilities.
Board
Symptom: The same few board membersshow up at every meet-
ing to rehash familiar issues.
Treatment: Each board member needsto be contacted to discuss
hisor her commitment to the organization. The board’sstruc-
ture and processes should be revised to reflect present-day
needs. Aspart of thisprocess, some board membersmay re-
sign voluntarily and new memberswith critical skillsrecruited.
Systems
Symptom: Administrative systems are needlessly complex, con-
fusing and outmoded.
Treatment: New procedures are often added to existing ones as
the organization grows. At some point leaders need to com-
prehensively review their systems requirements in light of
changing programs and technologies. This may require the
expertise of outside management and/or information tech-
nology consultants.
Stagnation and Decline: Symptoms and Treatments
The signs of organizational distress are not difficult to identify. Here are some of the most
typical and some practical responses:
Fundraising
Symptom: The organization is “chasing dollars” by invent-
ing new initiatives primarily to attract available funding,
contorting existing programs to match funders’ special
interests, or responding to Requests for Proposals indis-
criminately.
Treatment: After clarifying the mission and revising programs
to make them more relevant, the development staff concen-
trates on funding opportunities that clearly fit with the new
direction. The approach to funders becomes less reactive
and more proactive.
Financial Management
Symptom: Cash flow problems and projected budget deficits
are chronic.
Treatment: Expenses are pared by dropping or curtailing non-
essential services. At the same time, new sources of earned
or contributed income are developed based on revised
programs.
Internal Communications
Symptom: Staff members do not willingly speak out on critical
problems and feel disconnected from important decision-
making.
Treatment: The organization createsan operational policy that
outlinesproceduresfor involving staff in decisionsthat affect
their work. Thiswill help foster a culture in which employees
can feel comfortable voicing their concerns. Senior staff mem-
bersalso need opportunitiesto work with the board.
External Relations
Symptom: The organization’s reputation has diminished;
there is confusion among outsiders about its mission and
programs.
Treatment: As goals and programs are
revised, funders and other constitu-
ents must be regularly informed of
progress. Messages about newswor-
thy activities and accomplishments
need to be clarified and conveyed
more effectively to key audiences.
6
Management Assistance Resources
I. Readings on Nonprofit Management
Drucker, Peter. ManagingtheNonprofit Organization. New York:
Harper Collins, 1990.
Eadie, Douglas C. ChangingbyDesign. San Francisco: Jossey-
Bass, 1997.
Firstenberg, Paul B. The21st CenturyNonprofit: Remakingthe
Organization in thePost-Government Era. New York: The
Foundation Center, 1996.
Hesselbein, et al, eds. TheOrganization of theFu-
ture. San Francisco: Jossey-Bass, 1997.
Kibbe, Barbara and Fred Setterberg. Succeed-
ingWith Consultants: Self-Assessment for the
ChangingNonprofits. New York: The Foun-
dation Center, 1992.
Kotter, John P. Leading Change. Boston:
Harvard Business School Press, 1996.
Management Assistance Group. “Steering
Nonprofits: Advice for Board and Staff.”
Hi stori c Preservati on Forum: Nati onal
Trust for Historic Preservation, 1991.
Oster, Sharon. Strategic Management for Non-
profit Organizations: Theoryand Cases. New York: Oxford Uni-
versity Press, 1995.
II. Readings on Organizational Change and Decline
Estelle, James. “How Nonprofits Grow: A Model.” Journal of
PolicyAnalysisand Management (Spring 1983), 350-368.
Guthrie, Kevin. TheNew-York Historical Society: Lessonsfrom
OneNonprofit’sLongStrugglefor Survival. San Francisco:
Jossey-Bass, 1996.
Passages: Organizational LifeCycles. Washington D.C.: Manage-
ment Assistance Group, 1982.
Silver, A. David. TheTurnaround Survival Guide: Strategiesfor
theCompanyin Crisis. Chicago: Dearborn Financial Publish-
ing, 1992.
Stevens Group, The. “Growing Up Nonprofit: An Essay on Non-
profit Life Cycle Development.” Minneapolis: The Stevens
Group, 1993.
Wagner, Lilya & Mark Hager. “Board Members Beware! Warn-
ing Signs of a Dysfunctional Organization.” Nonprofit World
(March/April 1998) 18-21.
III. National Organizations Offering Written
Resources, Courses, Technical Assistance and/ or
Consulting Services
Amherst Wilder Foundation – Community Services Group, 919
Lafond Avenue, St. Paul, MN 55104, (612) 642-4053
Center for Strategic Communications, 72 Spring Street, Suite
208, New York, NY 10012, (212) 967-2843
The Conservation Company, 50 East 42nd Street, 19
th
Floor,
New York, NY 10017, (212) 949-0990 and One Penn
Center, Suite 1550, Philadelphia, PA 19103, (215) 568-
0399
Foundation Center, 79 Fifth Avenue, 8
th
Floor, New York, NY 10003, (800) 424-
9836
Indiana University Center on Philanthropy,
550 West North Street, Suite 301, Indianapo-
lis, IN 46202, (317) 274-4200
Indiana University Fund Raising School, 550
West North Street, Suite 301, Indianapolis, IN
46202, (317) 864-8934
National Alliance for Nonprofit Management
(formerly Nonprofit Management Association
and Support Centers of America), c/o Points of Light Foun-
dation, 1737 H Street NW, Washington D.C. 20006, (202)
549-6943
National Center for Nonprofit Boards, 2000 L Street, NW, Suite
510, Washington D.C. 20036, (202) 452-6262
National Executive Service Corps (NY), 257 Park Avenue South,
New York, NY 10010, (212) 529-6660
National Society of Fund Raising Executives, 1101 King Street,
Suite 700, Alexandria, VA 22314, (800) 666-FUND
Nonprofit Facilities Fund, 70 W 36th Street, 11th Floor, New
York, NY 10018, (212) 868-6710
United Way Services – Management Assistance Program, PO
Box 12209, 224 E. Broad Street, Richmond, VA 23241, (804)
771-5870
7
T
housands of nonprofits across the
nation close their doors each year.
In a few rare situations, a group dis-
bands because it has fulfilled its mis-
si on: for example, an organi zati on
whose sole purpose is to eradicate a dis-
ease may well become defunct after a
cure is discovered. More commonly,
however, groupsshut down for lessposi-
tive reasons, such as a chronic inability
to operate effectively or to advance to-
ward their goals.
Not every drifting organization can get
itself back on course. Sometimes, the
situation deterioratesto the point where
attempting to repair it is unrealistic.
If any of the following problems are
chronic and irreversible, the wisest
course may well be to shut down:
Image: The organization’s reputation
is very low and beyond rehabilitation.
Programs: Programs are widely con-
sidered to be ineffective and substan-
dard in quality.
Management: Crisismanagement pre-
vails.
Human Resources: Valuable staff and
board members have “jumped ship;” of
those who remain, many are not highly
regarded.
Systems: Systems do not properly sup-
port, reflect or track the organization’s
work; internal controls are poor.
Finances: Bankruptcy is imminent.
Although senior staff and board mem-
bers may lack enthusiasm for continu-
ing, the dissolution process needs to
be managed strategically and consci-
entiously. Shutting down in a respon-
si bl e manner i nvol ves i nformi ng
funders, notifying clients and staff, set-
tling outstanding contractual and fi-
nancial obligations, and fulfilling all
legal requirements.
When Is It Better
to Pull the Plug?
A
n organization in an acutestateof crisismay requirea full-scaleturnaround,
which involvesorchestrating a combination of thetreatmentsand techniques
described in thispaper. A turnaround isbest led by an energetic new CEO with fresh
ideasand skillsin crisismanagement. In themost successful turnarounds, staff and
board candidly assessthemission and plansfor achieving their goals. Programsare
overhauled, staffing and board revamped, administrativesystemsupgraded and new
funding secured. In somecases, joint venturesor mergersareconsidered.
In 1993, the 188-year-old New-York Historical Society closed its doors, cancel-
ing all public programs and dismissing more than half of its 41-person staff. The
Society’s vast collection of books, manuscripts, maps, photographs and docu-
ments had been a key resource for pre-Civil War national history, as well as for
New York City and State history.
Yet its physical plant was dilapidated, library items were inadequately catalogued,
and works of art and artifacts were neglected. Funding to maintain operations
could not be found. The only possible course of action was to close the museum
to the public, severely restrict library hours and continue other operations with
bare bones staffing.
It seemed like the end of the line for this venerable – but notoriously cash poor
and inadequately governed – institution, which encompassed a library, museum
collections and an historical archive. The Society’s salvation came in the form of
capable new administrative leadership and a series of major changes – some of
them controversial.
In particular, the Society raised $16 million by de-accessioning duplicate materi-
als and pieces unrelated to its more focused mission in order to build an endow-
ment that would support ongoing operations. Betsy Gotbaum, the Society’s new
chief executive, cut the annual operating budget while acquiring capital develop-
ment funds. With $12.6 million from the City and State she initiated structural
improvements on the Society’s landmark building on Central Park West, includ-
ing the renovation of the main exhibition galleries.
A $7.5 million grant from the Henry Luce Foundation is financing the public
display, in the year 2000, of the now warehoused museum collection. In addi-
tion, the Andrew W. Mellon Foundation is funding a collaborative effort be-
tween the Society’s library and that of New York University to rapidly expand an
on-line cataloguing project. The Mellon grant has permitted the library to re-
store its public hours to 30 per week.
The New-York Historical Society was able to begin its turnaround by bringing
in a talented new Executive Director, honestly evaluating its problems, refocus-
ing its mission, revising programs to meet market needs, mobilizing resources,
and restoring the confidence of funders. While much work remains to be done,
the society’s future is the brightest it has been in years.
4
“TheSociety’ssalvation camein theformof capablenew
administrativeleadership and a seriesof major changes– some
of themcontroversial.”
Back from the Brink: Engineering a Turnaround
8
I
sit possible for conditionsto deteriorate to the point where no
choice is left but to shut down?Certainly. [See “When Is It
Better to Pull the Plug?” p. 7] But by dint of expertise, hard work
and imagination, it isalmost alwayspossible for even seriously ail-
ing organizationsto renew themselves. Consider these guidelines:
Use Outside Resources. In some instances, unaided revivals are
possible. But more often, some outside agent or resource – guide-
books, courses, peers, or a consultant – can add real value. An
outsider’s perspective is especially helpful when a stagnating or-
ganization is in denial about its problems. In particular, a con-
sultant can relieve an already overextended work force from the
time-consuming effort of gathering data, diagnosing the prob-
lem and developing a clear action plan. Also, as an outside ob-
server, a consultant can bring impartiality and accuracy to what,
handled internally, might be a subjective, agenda-driven process.
An advisor’scandor often providesthe impetusfor positive change,
even if staff and board don’t particularly like what they hear. [A
list of relevant publicationsand resourcesthat can help nonprofits
address critical issues appears on p. 6]
Encourage Funder Participation. Organizations sometimes try
to conceal problems from funders who might be truly interested
in helping. Rather than act as “beat cop,” a funder, especially one
with a long-term commitment, can be an effective ally, offering
advice drawn from experience with other grantees, referrals to
technical assistance providers and grants for consulting or plan-
ning services. In some cases, an especially supportive funder can
champion an organization’s plan for rejuvenation and encourage
other funders to give support.
Be Patient. Once a plan for renewal is in place, it is important to
develop a realistic schedule. Remember, the decline of most orga-
nizations takes place over a long period. There is no reason to
expect that reversing the process should happen overnight.
Increasing the Prospects for Renewal
O
rganizations most often lose their way through neglect
and denial. They tune out external changes or internal dif-
ficulties, ignoring problems in the hope they will go away. Stay-
ing on the cutting edge of relevance and effectiveness takes con-
stant vigilance: leaders of successful nonprofits make a practice of
continually scanning the horizon for change, responding quickly
to new challenges and addressing internal problems. They know
that organizations can evolve and thrive only when they adapt to
change – not when they shrink from it.
Paul Connolly isa Senior VicePresident at TheConservation
Companyand Laura Colin Klein isan AffiliateConsultant.
June, 1999
A Final Word
The Conservation Company
For more than two decades, The Conservation Company
has provided strategic planning, program development,
evaluation and management consulting services to non-
profit organizations, foundations, corporate community
involvement programs and government agencies. In this
time, the firm has developed substantive knowledge and
diverse expertise in fields such as arts and culture, educa-
tion, children and family issues, human services, healthcare
and the environment.
From offices in New York, Philadelphia, and Chicago,
the firm works with local, national and international cli-
ents. Our services include:
• Strategic Planning
• Evaluation
• Organizational Assessment and Development
• Board Development
• Feasibility Studies
Our team approach is designed to provide maximum ben-
efit to our clients through the multidisciplinary expertise
and diverse backgrounds of our professional staff. The
combined experience and skill of our principals and asso-
ciates - who have held senior positions in nonprofit orga-
nizations, foundations, and government agencies - enable
us to successfully complete assignments requiring both
an outsider’s perspective and an insider’s expertise.
REACH US AT:
Chicago: 888-222-0474
New York: 888-222-2283
Philadelphia: 888-222-2281
www.consco.com
1. Joseph Pereira, “Leader of the Pack in WildernessTraining isPushed to
the Wall,” TheWall Street Journal (July 7, 1997): 1.
2. ValerieReitman, “Missed Signal: Pittsburgh’sWQED Failed to SeeChange
in Public-TV Industry,” TheWall Street Journal (January 17, 1994): 1.
3. Ted Hughes, “Creativity, New FeaturesWatchwordsfor Nonprofits,” Vil-
lageLife(November 4, 1996).
4. David Dunlap, “Historical Society Shuts Its Doors but Still Hopes,”
TheNew York Times(February 20, 1993) and Paul Goldberger, “To the
Rescue of a Grande Dame of Museums,” The New York Times(June 12,
1997): C9-10.
Endnotes
doc_213796045.pdf
Description explain about getting back in shape guidelines for improving the fitness.
THE CONSERVATION COMPANY
Serving organizations that serve the public good.
A Briefing Paper
Getting Back in Shape:
GUIDELINES FOR IMPROVING THE FITNESS
OF ESTABLISHED NONPROFIT ORGANIZATIONS
I
n thenonprofit universe, longevityand rele-
vancearenot mutuallyexclusive. Even after
50 yearsor more, manyorganizationsaremore
dynamicand effectivethan ever. Yet thereisno
simpleformula for maintaininginstitutional
health over thelongterm. Regardlessof the
field – health and human services, education,
communitydevelopment, thearts– stableand
maturenonprofitsfacecontinual changeand
new challenges materializeat every turn.
Sooner or later, leadersof manyonce-thriving
organizationsrealizethat thingsarenot going
aswell astheyoncehad been: fundingsupport
and demand for servicesarewaning... the
volunteer baseisbeginningto shrink ... staff
moraleisgettinglow. Unlessit confrontsits
problems, theorganization mayslowlybegin
to stagnate. Other times, a downward spiral
beginsand descent israpid and destabilizing.
Clearly every nonprofit isaccountableto a
rangeof stakeholders, includingclients, vol-
unteers, collaborators, staff, board and funders.
All areobviouslyinvested in theorganization’s
survival and success– and loseout when the
organization doesn’t liveup to itspotential to
do good work.
In thisbriefingpaper fromTheConservation
Company, weoffer our perspectiveon how
nonprofitscan reversestagnation and decline
or, even better, prevent themin thefirst place.
Drawingon thefirm’snearlytwo decades’ ex-
periencehelpingnonprofitspreserveand regain
their health, it examinesthecharacteristicsof
both successful and troubled nonprofitsand the
risk factorsassociated with decline. Thepaper
also discusseswaysto repair problemsand main-
tain long-termvitalityand effectiveness.
BY PAUL CONNOLLY AND LAURA COLIN KLEIN
The Organizational Life
Cycle: What Do Nonprofits
Look Like as They Mature
and Decline?
INSIDE:
The Organizational Life Cycle:
What Do Nonprofits Look Like as
They Mature and Decline?
page1
When Is an Organization
at Risk?
page2
Strategic Planning:
Rx for Organizational Health
page3
Stagnation Checklist:
Warning Signs
of Organizational Atrophy
page3
Reversing Stagnation and
Decline: Other Remedies
page4
Stagnation and Decline:
Symptoms and Treatments
page5
Management Assistance
Resources
page6
Back fromthe Brink:
Engineering a Turnaround
page7
Increasing the Prospects
for Renewal
page8
A Final Word
page8
I
n most cases, an organization follows a
well-defi ned li fe cycle, from start-up,
through adolescence and into maturity. At
any given stage, the best yardstick for evalu-
ating the organization’s health is the degree
to which its components – including pro-
grams, management, governance and systems
– are in balance and help advance its mis-
sion. Although effectivenessdoesnot directly
depend on age or size, smaller and younger
groups usually go through “growing pains”
as they evolve. Growth and maturity gener-
ally imply track records, self-knowledge and
at least the beginnings of stable finances.
Successful, mature nonprofits share several
common characteristics. Among them:
• a vital mission
• hi gh-quali ty, well-regarded, relevant
programs
• capable and motivated management
and staff
• clear communicationsand accountability
• a well-organized board with able,
involved members
• efficient management support systems
• solid finances, including reliable and
diverse revenue streams
Yet even a mature nonprofit can gradually
begin to stagnate. In fact, sometimes the very
2
S
tagnating nonprofitstypically are in de-
ni al t hat t hey are becomi ng l ess
effecti ve. Therefore, leaders must be
continually on the lookout for internal and
external “risk factors” that can undermine
operations and thwart the fulfillment of a
worthwhile mission. These include:
Decreased Client Demand. Established
programs can outlive their relevance and
usefulness. Consider the recent history of
When Is an Organization
at Risk?
Outward Bound Inc. For three decades,
culminating in the 1980s, it wasthe domi-
nant player in what could be called the
“self-actualization-through-roughing-it”
market. At its peak, in 1986, more than
13,000 people a year were testing their
mettle, grit and survival skillsthrough Out-
ward Bound wilderness outings. Funding
growth – a mix of foundation, corporateand
government dollars – was robust. Since
then, however, enrollment hasdropped by
a third and revenues have leveled.
Although the group faces what appear to
be serious problems, the root causes are
relatively straightforward. For one thing,
it lost touch with its markets – the 16-21
set, for whom the personal growth mes-
sage has lost its luster, and the booming
corporate market, which demands shorter
sessions and a more behavioral orientation
than Outward Bound provides. Mean-
while, competitors like the National Out-
door Leadership School and Project Ad-
ventures, Inc. began offering attractive new
programs that have eroded Outward
Bound’s client base.
1
Increased Costs. As a result of inflation or
supply shortages, an effective program
sometimes becomes too expensive to con-
tinue. Consider an after-school program
that relies on volunteers from a local pri-
vate college. As their tuition costs have
soared in recent years, some volunteershave
had to withdraw from the program to take
paid jobs. The program will need to ad-
dress this change or make significant cut-
backs to its services.
Loss of Income. The pressure to constantly
prospect for new funding sourcesand gen-
erate earned income is a common fact of
life. Sometimes, the loss of a large govern-
ment contract or foundation grant can
hamstring a major program. But a healthy
nonprofit can often find ways to make up
the difference, do more with less or make
changesthat do not weaken core programs.
For example, the Atwater-Kent Museum,
an older city history museum that wasfaced
with the loss of public funding, moved
quickly to reassess its role in the commu-
nity. It launched an aggressive member-
ship campaign, set up a school outreach
program and transformed itself from a re-
attributesthat drive growth sometimeshas-
ten organizational dysfunction later on.
For example, the formal hierarchy and op-
erating systemsthat allow for extensive pro-
gramming for diverse constituents can
harden into a kind of organizational strait-
jacket – a rigid and outmoded structure
and set of procedures that get in the way
of effective operations.
As long as clients and funders continue to
provide at least minimum levelsof support,
organizations can languish for some time.
Such stagnant organizations can generally
be identified by these characteristics: [See
also “Stagnation Checklist: Warning Signs
of Organizational Atrophy,” p. 3]
• a fixed menu of long-standing and,
perhaps, obsolescent programs
• entrenched board and staff leadership
• fragmentation of staff into “fiefdoms”
focused primarily on individual
program goals, rather than overall
mission
• few or no new revenue sources
• outdated systems and procedures
• inadequate planning
All it takes is one significant change, in-
ternal or external, to send a stagnating op-
eration into a downward spiral. Market
needs stop being met; programs lose cred-
ibility. Key staff and board members start
to leave – one by one at first and then in
droves; turf battles drain the energy of
those who remain. As long-time funders
pull out, cash flow slows to a trickle and
then dries up altogether. By the end, all
hope of achieving the organization’s origi-
nal mission is lost.
pository of artifacts into a true cultural re-
source. Itseffortsresulted in attracting new
private sector support. A less flexible and
motivated institution might well have been
forced to close its doors.
Heightened Competition. Competition
was once associated principally with the
private sector; today, it is a reality for
nonprofits, which often vie with each
other for funding, volunteers, fee-paying
customers and even “market share.”
Consider WQED, a public television sta-
tion in Pittsburgh. In the early and mid-
1990s, WQED was blind-sided by the up-
and-coming cable industry, which was
able to provide seemingly similar services
at a lower cost to sponsors. “Local com-
panies... that put up money to sponsor
nationally produced public TV shows ...
have found such plugs to be costly. Many
viewers can tune in to cable networks like
the Discovery Channel to see the kind of
programming once exclusive to public
television,” The Wall Street Journal re-
ported. While WQED’s problems were
complex, its failure to recognize and ad-
dress competition certainly contributed to
its difficulties.
2
Stale Leadership. A nonprofit may lose
its way when its chief executive stays on
past the point of providing fresh insights
and approaches. This situation can prove
disastrous when the leader is unaware of
the need to chart – or isincapable of chart-
ing – a plan to address some compelling
crisis, such as new competition or a loss
of funding. The problems arising from
l eadershi p burnout can become even
worse in the absence of a succession plan.
For example, a well-established educational
organization was beset by a number of on-
going problems. Its situation deteriorated
rapidly when the frustrated executive di-
rector resigned suddenly without a suitable
successor in the wings. Board and funders
had had little interaction with other staff
members and consequently saw no basis
for promoting from within. That the or-
ganization exists today can be attributed
to the quick recruitment of a dynamic new
executive who, by sharing control with staff
and board and restoring confidence, was
able to revive the operation.
3
S
ome nonprofitsbecome so focused on
daily operations – program participa-
tion rates, accountspayable, hoursof op-
eration – that they give short shrift to long-
range planning. Provided revenue streams
continue to flow and some viable purpose
continuesto be served, these organizations
can idlein neutral almost indefinitely. How-
ever, by occupying themselves exclusively
with current activitiesand the minutia of
internal operations, such nonprofits lose
sight of their missionsand forfeit opportu-
nitiesto serve clientsbetter.
Other organizations do attend to plan-
ning, but base future projections on past
revenue and service levels. To an extent,
this approach makes sense; there is often
much to be learned from history. But
trend is not destiny, and managers who
take their cues mainly from the past can
undermine their organization’s short- and
long-term effectiveness.
The truth i s that the most successful
nonprofits look to the past and the fu-
ture, all the while keeping close watch on
what’s happening now. They understand
that no enterprise can afford to follow the
same course in perpetuity, no matter how
sound its original mission. Each year, the
ground shifts a little, the marketplace im-
poses new demands, new players emerge
in the field, and staffing and systems need
to change. To stay relevant, an organiza-
tion must continually monitor itself and
the outside world for developments that
could affect its operations, viability and
effectiveness, readjusting programs and
priorities accordingly.
Strategic planning gives a nonprofit the
chance to take stock of its environment
Strategic Planning:
Rx for Organizational
Health
Program
Demand for long-standing
programs has declined
Few new programs are
developed
Services become increasingly
difficult to deliver
Focus is on operations rather
than outcomes; objectives are
unmet
Management and Staffing
Morale is poor; top performers
consider leaving while poor
performers are entrenched
Communications among staff
members and with the board
are poor
“Turf battles” crop up
Board
Decision-making is stalled by
excessive process
Board members are
unenthusiastic and minimally
involved
Board giving is low
Systems
Well-developed systems
deteriorate into “red tape”
The organization is slow to
modify systems and adapt new
technologies
Finances
Long-term supporters are
cutting back or pulling out
The organization is falling
behind on its financial
obligations
Cash reserves are insufficient
Stagnation Checklist:
Warning Signs
of Organizational
Atrophy
and activities and create a realistic blue-
print for the future. Ideally, the process
will include key staff and board members,
giving them a better fix on their operat-
ing environment, impending challenges
and unexplored opportunities.
It sheds light on the organization’s unique
strengthsand relevant weaknesses, enabling
it to identify the causes of current or po-
tential problems related to mission, pro-
gram, board, staff, systems, finances, etc.
The process should also provide a struc-
ture for defining goalsand making the most
effective and efficient use of resources. A
good plan includes clear objectives, strate-
gies, action steps, time frames and desig-
nated responsibilities. The planning pro-
cess itself often has a galvanizing affect on
teamwork, staff commitment, morale and
overall momentum – particularly when it
includes a well-designed planning retreat
away from the workplace. An effective way
to heighten involvement is by creating
multidisciplinary staff and board teams to
address specific problems.
Well-managed organizations often con-
duct strategic planning on an ongoing
basis to be prepared to better manage the
future; this“maintenance” approach keeps
them from ever getting too out-of-touch.
A case in point is Voices for Illinois Chil-
dren. Hailed as influential and highly
skilled, this advocacy organization was
nonetheless aware that its staff and re-
sources were gradually being stretched
across too many issues and constituencies.
To remain vital and gain new effective-
ness, Voices worked with The Conserva-
tion Company to draft a strategic plan.
The plan identified a limited number of
high-impact initiatives and outlined new
approachesfor mobilizing community sup-
port more effectively. Among the top pri-
“Tostay relevant, an organization must continuall y monitor itself
andtheoutsidew orldf or developmentsthat couldaff ect its
operations, viability andeff ectiveness, readjustingpro gramsand
prioritiesaccordingl y. ”
4
N
otwithstanding the efficacy of stra-
tegic planning, an organization in
crisis may need to resolve its most pressing
problems before creating a strategic plan.
As noted, organizations in decline often
suffer from outdated programs, poor mo-
rale and funding shortfalls. Although,
sometimes, specific treatments can be de-
layed until a strategic plan is in place, ad-
dressing these symptomsisnot infrequently
a necessary precursor to stabilization and
long-range planning.
In all cases, of course, the timing, extent
and intensity of the treatment must be
suited to the gravity of the condition.
Whatever the situation, the following
techni ques can be hel pful . [ Al so see
“Stagnation and Decline: Symptoms and
Treatments”, p. 5]:
Executive Search. Getting things back on
track often requires the objectivity and
fresh insights of new leadership at the ex-
ecutive director and senior staff levels. Suc-
cessful searches proceed from a clear and
carefully drafted job description, which is
then widely circulated. To streamline de-
cision-making, search committees – gen-
erally composed of board members – of-
ten create a profile of the ideal candidate
against which to evaluate prospects.
Program Assessment and Development.
To improve future prospects, it will most
likely be necessary to develop new pro-
gramsor revise or eliminate existing efforts.
This process might reasonably begin with
an assessment of market need. Programs
can then be evaluated in light of their util-
ity in serving important constituenciesand
their performance. What are the outcomes,
and are these sufficient? Which elements
contribute to the program’ssuccess– or fail-
ure?The findings can lay the foundations
of a plan for reshaping programs to better
meet market needs and ful fi l t he
organization’s mission.
Organizational Development. Program-
matic shifts are likely to require new skills
and operational support – which may mean
changes in staffing, organizational struc-
ture and administrative systems. Retrain-
ing or reconfiguring existing personnel is
often a viable option; other times, it may
make most sense to start from scratch in
some areas. New staff may have to be re-
cruited and new procedures suited to the
revised agenda.
Fundraising. Most organi zat i ons i n
trouble suffer from financial problems
that make it difficult to address short-
comings in other areas. The aim of a
fund-raising plan when an organization
is in trouble should be to capitalize on
plans for changes and improvements and
engage long-term supporters who have
already made a significant investment.
The best time to scout new opportuni-
ties is after the worst is over. Reason:
prior and prospective funders might look
favorabl y on an appl i cant that has a
worthwhile mission and has moved de-
cisively to pull things together.
Increasing Earned Income. New fee-
based services or nonprofit business ven-
tures can also be an effective source of
needed revenues. However, a financially
troubled organization needs to proceed
cautiously and to avoid viewing this strat-
egy as a panacea. Generally, it is best for a
group to wait until it has “turned the cor-
ner” and stabilized before pursuing new
earned income activities.
Board Development. In times of trouble,
governance might not seem an urgent is-
sue. But formal board development can
be of immeasurable benefit in the long
run. “If we can improve the level of fi-
duciary responsibility practiced by non-
profi t boards ... we can comfortabl y
handle many of the problems we will face
in the future,” says Russell A. Cargo, di-
rector of the Nonprofi t Management
Program at George Mason University in
Fairfax, Virginia.
3
A competent and committed board can
generate new energy by working with staff
to identify new program strategies, raising
the organization’s profile to potential con-
stituents, improving financial management
and raising funds. As a rule, board devel-
opment should be directed toward bridg-
ing skill gaps, removing unproductive
members and creating new structures and
processes to improve decision-making and
outcomes.
Reversing Stagnation and
Decline: Other Remedies
orities of the newly refocused Voices was
itsmuch-acclaimed “Start Early” education
campaign, which publicizes the learning
needs of children from birth. A year after
the strategic plan was adopted Voices re-
tained The Conservation Company to
perform a follow-up assessment. In the
i nteri m, The Conservati on Company
found, Voices had obtained a multimil-
lion-dollar foundation grant in support of
“Start Early;” another grant underwrote
the cost of significant upgrades in Voices’
communications and information tech-
nology systems. Voices’ lobbying efforts
were also acknowledged to be a factor in
the passage of important state legislation
related to education and children’shealth
insurance.
“While Voices was starting from a posi-
tion of strength,” says a Conservation
Company consultant, “there was a recog-
nition that planning for the future and
sharpening its focus would make Voices
an even better advocate for children.”
To be sure, not all organizations are so
farsighted. Often, planning is prompted
by a wake-up call. Little or no planning
is even contemplated until some precipi-
tating crisis – a devastating funding cut,
a drop in usership, or the departure of a
key executive [see “When Is an Organi-
zation at Risk?” p. 2].
For example, The Conservation Company
worked with a nonprofit theater that, af-
ter almost 15 years of steady audience
growth and critical acclaim, purchased
and renovated a building to serve as its
new home. But, the capital project even-
tually saddled the theater with a $2.4
million debt and chronic operating defi-
cits, hampering ongoing operations and
undermining its success.
As a first step toward renewal, the theater
retained The Conservation Company to
conduct a performance evaluation and
create a strategic plan. The plan concen-
trated on improving marketing and fund
development efforts and enabled the the-
atre to stabilize its financial situation and
set a course for the future. Today, the the-
ater is thriving.
5
Program
Symptom: Demand has declined and capacity to deliver ser-
vices is under-utilized.
Treatment: The needs of target clients or audiences are reas-
sessed and programs are revised to meet current needs. Or,
new offerings are added to the program mix and outmoded
ones eliminated. Restaffing or retraining may be required
to deliver new or revised services.
Management
Symptom: Management is unable to think creatively about the
agency’s mission or approach.
Treatment: Help from external advisors is enlisted to generate
fresh alternatives and provide objective perspectives. A
change in leadership may be appropriate.
Staffing
Symptom: The staff is torn by infighting and turf wars.
Treatment: Reorganizing staffing structure – including reallo-
cation of responsibility and retraining – is considered. If
necessary, consultants are retained to help clarify disputed
issues and assess staff members’ capabilities.
Board
Symptom: The same few board membersshow up at every meet-
ing to rehash familiar issues.
Treatment: Each board member needsto be contacted to discuss
hisor her commitment to the organization. The board’sstruc-
ture and processes should be revised to reflect present-day
needs. Aspart of thisprocess, some board membersmay re-
sign voluntarily and new memberswith critical skillsrecruited.
Systems
Symptom: Administrative systems are needlessly complex, con-
fusing and outmoded.
Treatment: New procedures are often added to existing ones as
the organization grows. At some point leaders need to com-
prehensively review their systems requirements in light of
changing programs and technologies. This may require the
expertise of outside management and/or information tech-
nology consultants.
Stagnation and Decline: Symptoms and Treatments
The signs of organizational distress are not difficult to identify. Here are some of the most
typical and some practical responses:
Fundraising
Symptom: The organization is “chasing dollars” by invent-
ing new initiatives primarily to attract available funding,
contorting existing programs to match funders’ special
interests, or responding to Requests for Proposals indis-
criminately.
Treatment: After clarifying the mission and revising programs
to make them more relevant, the development staff concen-
trates on funding opportunities that clearly fit with the new
direction. The approach to funders becomes less reactive
and more proactive.
Financial Management
Symptom: Cash flow problems and projected budget deficits
are chronic.
Treatment: Expenses are pared by dropping or curtailing non-
essential services. At the same time, new sources of earned
or contributed income are developed based on revised
programs.
Internal Communications
Symptom: Staff members do not willingly speak out on critical
problems and feel disconnected from important decision-
making.
Treatment: The organization createsan operational policy that
outlinesproceduresfor involving staff in decisionsthat affect
their work. Thiswill help foster a culture in which employees
can feel comfortable voicing their concerns. Senior staff mem-
bersalso need opportunitiesto work with the board.
External Relations
Symptom: The organization’s reputation has diminished;
there is confusion among outsiders about its mission and
programs.
Treatment: As goals and programs are
revised, funders and other constitu-
ents must be regularly informed of
progress. Messages about newswor-
thy activities and accomplishments
need to be clarified and conveyed
more effectively to key audiences.
6
Management Assistance Resources
I. Readings on Nonprofit Management
Drucker, Peter. ManagingtheNonprofit Organization. New York:
Harper Collins, 1990.
Eadie, Douglas C. ChangingbyDesign. San Francisco: Jossey-
Bass, 1997.
Firstenberg, Paul B. The21st CenturyNonprofit: Remakingthe
Organization in thePost-Government Era. New York: The
Foundation Center, 1996.
Hesselbein, et al, eds. TheOrganization of theFu-
ture. San Francisco: Jossey-Bass, 1997.
Kibbe, Barbara and Fred Setterberg. Succeed-
ingWith Consultants: Self-Assessment for the
ChangingNonprofits. New York: The Foun-
dation Center, 1992.
Kotter, John P. Leading Change. Boston:
Harvard Business School Press, 1996.
Management Assistance Group. “Steering
Nonprofits: Advice for Board and Staff.”
Hi stori c Preservati on Forum: Nati onal
Trust for Historic Preservation, 1991.
Oster, Sharon. Strategic Management for Non-
profit Organizations: Theoryand Cases. New York: Oxford Uni-
versity Press, 1995.
II. Readings on Organizational Change and Decline
Estelle, James. “How Nonprofits Grow: A Model.” Journal of
PolicyAnalysisand Management (Spring 1983), 350-368.
Guthrie, Kevin. TheNew-York Historical Society: Lessonsfrom
OneNonprofit’sLongStrugglefor Survival. San Francisco:
Jossey-Bass, 1996.
Passages: Organizational LifeCycles. Washington D.C.: Manage-
ment Assistance Group, 1982.
Silver, A. David. TheTurnaround Survival Guide: Strategiesfor
theCompanyin Crisis. Chicago: Dearborn Financial Publish-
ing, 1992.
Stevens Group, The. “Growing Up Nonprofit: An Essay on Non-
profit Life Cycle Development.” Minneapolis: The Stevens
Group, 1993.
Wagner, Lilya & Mark Hager. “Board Members Beware! Warn-
ing Signs of a Dysfunctional Organization.” Nonprofit World
(March/April 1998) 18-21.
III. National Organizations Offering Written
Resources, Courses, Technical Assistance and/ or
Consulting Services
Amherst Wilder Foundation – Community Services Group, 919
Lafond Avenue, St. Paul, MN 55104, (612) 642-4053
Center for Strategic Communications, 72 Spring Street, Suite
208, New York, NY 10012, (212) 967-2843
The Conservation Company, 50 East 42nd Street, 19
th
Floor,
New York, NY 10017, (212) 949-0990 and One Penn
Center, Suite 1550, Philadelphia, PA 19103, (215) 568-
0399
Foundation Center, 79 Fifth Avenue, 8
th
Floor, New York, NY 10003, (800) 424-
9836
Indiana University Center on Philanthropy,
550 West North Street, Suite 301, Indianapo-
lis, IN 46202, (317) 274-4200
Indiana University Fund Raising School, 550
West North Street, Suite 301, Indianapolis, IN
46202, (317) 864-8934
National Alliance for Nonprofit Management
(formerly Nonprofit Management Association
and Support Centers of America), c/o Points of Light Foun-
dation, 1737 H Street NW, Washington D.C. 20006, (202)
549-6943
National Center for Nonprofit Boards, 2000 L Street, NW, Suite
510, Washington D.C. 20036, (202) 452-6262
National Executive Service Corps (NY), 257 Park Avenue South,
New York, NY 10010, (212) 529-6660
National Society of Fund Raising Executives, 1101 King Street,
Suite 700, Alexandria, VA 22314, (800) 666-FUND
Nonprofit Facilities Fund, 70 W 36th Street, 11th Floor, New
York, NY 10018, (212) 868-6710
United Way Services – Management Assistance Program, PO
Box 12209, 224 E. Broad Street, Richmond, VA 23241, (804)
771-5870
7
T
housands of nonprofits across the
nation close their doors each year.
In a few rare situations, a group dis-
bands because it has fulfilled its mis-
si on: for example, an organi zati on
whose sole purpose is to eradicate a dis-
ease may well become defunct after a
cure is discovered. More commonly,
however, groupsshut down for lessposi-
tive reasons, such as a chronic inability
to operate effectively or to advance to-
ward their goals.
Not every drifting organization can get
itself back on course. Sometimes, the
situation deterioratesto the point where
attempting to repair it is unrealistic.
If any of the following problems are
chronic and irreversible, the wisest
course may well be to shut down:
Image: The organization’s reputation
is very low and beyond rehabilitation.
Programs: Programs are widely con-
sidered to be ineffective and substan-
dard in quality.
Management: Crisismanagement pre-
vails.
Human Resources: Valuable staff and
board members have “jumped ship;” of
those who remain, many are not highly
regarded.
Systems: Systems do not properly sup-
port, reflect or track the organization’s
work; internal controls are poor.
Finances: Bankruptcy is imminent.
Although senior staff and board mem-
bers may lack enthusiasm for continu-
ing, the dissolution process needs to
be managed strategically and consci-
entiously. Shutting down in a respon-
si bl e manner i nvol ves i nformi ng
funders, notifying clients and staff, set-
tling outstanding contractual and fi-
nancial obligations, and fulfilling all
legal requirements.
When Is It Better
to Pull the Plug?
A
n organization in an acutestateof crisismay requirea full-scaleturnaround,
which involvesorchestrating a combination of thetreatmentsand techniques
described in thispaper. A turnaround isbest led by an energetic new CEO with fresh
ideasand skillsin crisismanagement. In themost successful turnarounds, staff and
board candidly assessthemission and plansfor achieving their goals. Programsare
overhauled, staffing and board revamped, administrativesystemsupgraded and new
funding secured. In somecases, joint venturesor mergersareconsidered.
In 1993, the 188-year-old New-York Historical Society closed its doors, cancel-
ing all public programs and dismissing more than half of its 41-person staff. The
Society’s vast collection of books, manuscripts, maps, photographs and docu-
ments had been a key resource for pre-Civil War national history, as well as for
New York City and State history.
Yet its physical plant was dilapidated, library items were inadequately catalogued,
and works of art and artifacts were neglected. Funding to maintain operations
could not be found. The only possible course of action was to close the museum
to the public, severely restrict library hours and continue other operations with
bare bones staffing.
It seemed like the end of the line for this venerable – but notoriously cash poor
and inadequately governed – institution, which encompassed a library, museum
collections and an historical archive. The Society’s salvation came in the form of
capable new administrative leadership and a series of major changes – some of
them controversial.
In particular, the Society raised $16 million by de-accessioning duplicate materi-
als and pieces unrelated to its more focused mission in order to build an endow-
ment that would support ongoing operations. Betsy Gotbaum, the Society’s new
chief executive, cut the annual operating budget while acquiring capital develop-
ment funds. With $12.6 million from the City and State she initiated structural
improvements on the Society’s landmark building on Central Park West, includ-
ing the renovation of the main exhibition galleries.
A $7.5 million grant from the Henry Luce Foundation is financing the public
display, in the year 2000, of the now warehoused museum collection. In addi-
tion, the Andrew W. Mellon Foundation is funding a collaborative effort be-
tween the Society’s library and that of New York University to rapidly expand an
on-line cataloguing project. The Mellon grant has permitted the library to re-
store its public hours to 30 per week.
The New-York Historical Society was able to begin its turnaround by bringing
in a talented new Executive Director, honestly evaluating its problems, refocus-
ing its mission, revising programs to meet market needs, mobilizing resources,
and restoring the confidence of funders. While much work remains to be done,
the society’s future is the brightest it has been in years.
4
“TheSociety’ssalvation camein theformof capablenew
administrativeleadership and a seriesof major changes– some
of themcontroversial.”
Back from the Brink: Engineering a Turnaround
8
I
sit possible for conditionsto deteriorate to the point where no
choice is left but to shut down?Certainly. [See “When Is It
Better to Pull the Plug?” p. 7] But by dint of expertise, hard work
and imagination, it isalmost alwayspossible for even seriously ail-
ing organizationsto renew themselves. Consider these guidelines:
Use Outside Resources. In some instances, unaided revivals are
possible. But more often, some outside agent or resource – guide-
books, courses, peers, or a consultant – can add real value. An
outsider’s perspective is especially helpful when a stagnating or-
ganization is in denial about its problems. In particular, a con-
sultant can relieve an already overextended work force from the
time-consuming effort of gathering data, diagnosing the prob-
lem and developing a clear action plan. Also, as an outside ob-
server, a consultant can bring impartiality and accuracy to what,
handled internally, might be a subjective, agenda-driven process.
An advisor’scandor often providesthe impetusfor positive change,
even if staff and board don’t particularly like what they hear. [A
list of relevant publicationsand resourcesthat can help nonprofits
address critical issues appears on p. 6]
Encourage Funder Participation. Organizations sometimes try
to conceal problems from funders who might be truly interested
in helping. Rather than act as “beat cop,” a funder, especially one
with a long-term commitment, can be an effective ally, offering
advice drawn from experience with other grantees, referrals to
technical assistance providers and grants for consulting or plan-
ning services. In some cases, an especially supportive funder can
champion an organization’s plan for rejuvenation and encourage
other funders to give support.
Be Patient. Once a plan for renewal is in place, it is important to
develop a realistic schedule. Remember, the decline of most orga-
nizations takes place over a long period. There is no reason to
expect that reversing the process should happen overnight.
Increasing the Prospects for Renewal
O
rganizations most often lose their way through neglect
and denial. They tune out external changes or internal dif-
ficulties, ignoring problems in the hope they will go away. Stay-
ing on the cutting edge of relevance and effectiveness takes con-
stant vigilance: leaders of successful nonprofits make a practice of
continually scanning the horizon for change, responding quickly
to new challenges and addressing internal problems. They know
that organizations can evolve and thrive only when they adapt to
change – not when they shrink from it.
Paul Connolly isa Senior VicePresident at TheConservation
Companyand Laura Colin Klein isan AffiliateConsultant.
June, 1999
A Final Word
The Conservation Company
For more than two decades, The Conservation Company
has provided strategic planning, program development,
evaluation and management consulting services to non-
profit organizations, foundations, corporate community
involvement programs and government agencies. In this
time, the firm has developed substantive knowledge and
diverse expertise in fields such as arts and culture, educa-
tion, children and family issues, human services, healthcare
and the environment.
From offices in New York, Philadelphia, and Chicago,
the firm works with local, national and international cli-
ents. Our services include:
• Strategic Planning
• Evaluation
• Organizational Assessment and Development
• Board Development
• Feasibility Studies
Our team approach is designed to provide maximum ben-
efit to our clients through the multidisciplinary expertise
and diverse backgrounds of our professional staff. The
combined experience and skill of our principals and asso-
ciates - who have held senior positions in nonprofit orga-
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us to successfully complete assignments requiring both
an outsider’s perspective and an insider’s expertise.
REACH US AT:
Chicago: 888-222-0474
New York: 888-222-2283
Philadelphia: 888-222-2281
www.consco.com
1. Joseph Pereira, “Leader of the Pack in WildernessTraining isPushed to
the Wall,” TheWall Street Journal (July 7, 1997): 1.
2. ValerieReitman, “Missed Signal: Pittsburgh’sWQED Failed to SeeChange
in Public-TV Industry,” TheWall Street Journal (January 17, 1994): 1.
3. Ted Hughes, “Creativity, New FeaturesWatchwordsfor Nonprofits,” Vil-
lageLife(November 4, 1996).
4. David Dunlap, “Historical Society Shuts Its Doors but Still Hopes,”
TheNew York Times(February 20, 1993) and Paul Goldberger, “To the
Rescue of a Grande Dame of Museums,” The New York Times(June 12,
1997): C9-10.
Endnotes
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