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HomeUncategorizedMajor Challenges Facing Nonprofits

Information abstracted from regional and national studies concerning the challenges facing nonprofits indicates that several issues are shared as concerns for nonprofit leaders. Board development and fundraising and are the main issues for nonprofits with a secondary emphasis on difficulties related to improving operations and more effectively managing resources.


Some fundamental concerns were commonly identified in the studies, which surveyed nonprofit executive directors and board members. Five major themes clearly emerged from the various reports’ inventories of issues. These suggest areas of the most pressing needs as indicated by nonprofit leaders:

1. Board Development – Building an active and strategically oriented board of directors was the most frequent concern. Specific issues identified were:

· Recruiting high-impact board members

· Cultivating a dynamic and effective culture among board members

· Fostering a strategic orientation for boards

2. Marketing/Fundraising – Developing effective marketing programs to recruit and retain donors was also a high priority. In particular, respondents were concerned about:

· Applying marketing/communications techniques to donor contact activities

· Expanding their current donor base

· Increasing donations from current donors as well as enhancing donor loyalty and retention

3. Information Management – Utilizing effective information management for measuring and evaluating operations and programs was also very important.

· Establishing a clear set of quality benchmarks for assessing services

· Using IT to reduce costs and create value

· Evaluating programs/services against key performance measures

· Establishing a better model for measuring and reporting outcomes

· Measuring the real benefit of development and marketing investments

· Devising a consistent approach for measuring organizational performance and impact

4. Human Resources – Attracting, developing and retaining productive staff and volunteers was a critical concern:

· Attracting and retaining skilled staff

· Attracting skilled, motivated volunteers

· Developing a leadership transition and succession plan

· Improving workforce performance

· Providing ongoing training and skill building

5. Collaboration – Pursuing constructive alliances, partnerships, and mergers was also a significant issue.

· Developing collaborative partnerships with public sector agencies, including government

· Forging collaborative partnerships with the private sector

· Pursuing mergers with overlapping services/agencies

Extrapolating from these topics, a sixth theme is implied as a supplementary concern:

6. Business Proficiency – the need to embrace the business skills and processes essential to effectively addressing the needs identified in these five major themes.


Several changes in the operating environment of the nonprofit sector are impacting leaders’ perceptions of the issues facing them.

Funding Challenges – Many nonprofit organizations are simultaneously facing a rapidly changing funding environment and a steadily rising need for services from the communities they serve. Reduced or tightly focused government funding is placing great pressure on the sector, which has also experienced a proliferation of new nonprofits during the past decade, thus increasing the competition for a smaller pool of funds. Countless nonprofit organizations are feeling the impact of federal reductions to their core funding streams at the same time foundation endowments and giving are down and many state and municipal governments are experiencing deficits that are reflected in reductions in spending on social programs.

Accountability Pressures – As a result of a few high profile cases, nonprofits are facing powerful accountability pressures to provide measurable proof that the services they provide have an impact on the communities and populations they target. Funders and the public want to know in detail if the funded organization is effective in doing what it sets out to do and if it is also efficient at what it does. While gaining and keeping the pubic trust is absolutely essential, calls for accountability can lead nonprofits to spend more time searching for financial support and accounting for funded task performance in order to continue receiving funding from the source. This can cause nonprofits to be more business-like but may also draw attention from responding in innovative or distinctive ways to community and/or client needs.

Collaboration Fascination – Government and foundation funders are increasingly requiring the use of interorganizational relationships such as collaboration, partnerships, and alliances as an element of funded projects. However, while there is a growing body of knowledge about the factors that support effective negotiation and integration of strategic partnerships, much less is known about the actual outcomes nonprofits experience and how these compare to expected outcomes. Many nonprofits expend large amounts of organizational energy for questionable returns while pursuing interorganizational relationships. Nonprofits often encounter major barriers to collaboration, such as autonomy issues and “turfism,” conflicting organizational cultures, and trust-building among organizations.


Responding to these difficult circumstances necessitates adaptations that involve more than merely developing additional financial support.

Leadership Challenges – The health of the nonprofit sector depends on the quality of its executive leadership. Agency leadership, including board members, must be able to raise fundamental questions related to strategy, mission, and accountability, as well as the roles that their organizations play within their communities. For many nonprofits, being responsive to changes in the environment means a heighten need to:

· Determine the most effective way to serve a client population that may be growing or changing;

· Develop strategies and processes to access and manage new funding streams;

· Decide where and how to make budget cuts;

· Develop technology to capture information for reporting and billing;

· Manage cash flow challenges;

· Consider new partnerships, explore possible collaborations, and consider mergers or acquisitions.

Given the challenging changes in the typical nonprofit’s task environment, effective board leadership becomes particularly crucial. The issues facing the nonprofit sector underscore the need for responsive, skilled and effective board leadership in maintaining and improving the quality of organizational performance. It is appropriate that nonprofit boards take a leadership role in assisting agency management on critical issues such as mission definition and strategic planning, legal compliance and conflicts of interest, oversight of agency financial management, resource development, establishing interorganizational collaborations, cultivating community relationships, and opportunities for capacity-building training.

Management Challenges – Nonprofit managers are challenged to perform multiple functions and roles as they guide their organizations through today’s complex environment. They must be highly skilled not only in the technical aspects of their organizations’ mission, but also in management areas such as finance, human resources, information technology, program evaluation, resource development, and many other management responsibilities. Also, an organization’s human resources represent the collective capabilities and experiences of its people. Unfortunately, nonprofit organizations are often challenged when it comes to managing staff talent actively. Attracting and retaining skilled staff as well as heightened accountability and competition create a need to develop the specialized business skills and processes that are required of for-profit organizations. Consequently, like their counterparts in the business world, nonprofit managers need to continuously seek out and utilize the latest methods and techniques of organizational management and leadership.


Restating the six identified needs as positive attributes indicates that resilient nonprofits will have:

1. A strong governance structure and visionary board members with the right skills and access to resources.

2. Sufficient and flexible funding.

3. A defined set of best practices in service and management functions and an effective way to measure performance against these benchmarks.

4. A skilled workforce operating in a culture that facilitates opportunities for innovation and growth.

5. Effective community relationships that include collaborative partnerships with other providers, funders and other organizations and systems.

6. Management capacity to support services, including accounting, human resources, technology and marketing/development functions.


Seen from this perspective, there are seven actions that nonprofits can take to achieve these characteristics and address the challenges they face:

1. Undertake an organizational assessment and create a strategic plan to address any capacity deficits.

2. Engage board members to ensure quality governance structures, practices and oversight.

3. Embrace and adopt sound marketing and communications strategies.

4. Build business skill sets and integrate basic business practices and tools.

5. Identify and implement appropriate metrics and make better use of technology to enable evaluation of the success and impact of delivery of services and programs as well as internal operations.

6. Institute progressive human resource practices focusing on skills and team building.

7. Explore and adopt new collaborative business models with complementary organizations.

Source by Al Huntoon


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