4 Things Every Nonprofit Needs

If the leaders of a nonprofit organization are really serious about creating change, there are some things they must have in place. I spend my days talking with a variety of nonprofit organizations, and all of those conversations revolve around the same basic problems:

• An inability to raise enough money
• A lack of strategic direction
• An inability to "move the needle" on a social problem
• A disconnected, disengaged, ineffective board of directors
• Lack of sufficient organization infrastructure

In my mind, the solution is so simple. If every nonprofit had four key things in place, those problems would go away. Here's what I think every nonprofit needs:

1. A theory of change
Nonprofit organizations exist to meet some sort of social need. Unlike for-profit organizations, nonprofits can't simply use their financial bottom line as a barometer of success. Rather, a nonprofit must articulate what it exists to do.

A theory of change, or logic model, allows a nonprofit to state (to internal board and staff, and to external funders, volunteers, supporters) how it takes community resources and turn them into social change. Without a theory of change, a nonprofit cannot persuade anyone to be part of it work, let alone measure whether that work is actually resulting in anything.

2. A strategic plan
And I don't mean a "pretend" strategic plan where board and staff go through the motions to create something they could show to funders and put up on their walls. I mean a real strategic plan that is built on the logic model and guides the day-to-day work of the organization, is compelling and inspiring, and results in real solutions to social problems.

A good strategic plan allows a nonprofit organization to understand and articulate its contribution to a larger community marketplace and then craft organization goals around that knowledge. Without a good strategic plan a nonprofit is just twisting in the wind — probably doing a lot of work, but to what end?

3. A financing plan
It is not enough to have big goals and a plan for the future; a nonprofit must understand the price tag associated with its strategic plan and how it is going to bring enough money in the door to finance that plan. And a good financing plan analyzes all potential sources of money, lays out a clear road map for bringing that money in the door, and fully integrates the securing of money into the other work of the organization.

4. A pitch for capital
Capital is money to build the nonprofit organization infrastructure, as opposed to revenue, which helps the nonprofit provide more services. Most nonprofits simply raise revenue, but few raise money to build a stronger, more effective and efficient organization. This kind of money is capacity capital. If more nonprofits put together a pitch to persuade funders to invest in organization building, we would start to see many more effective solutions to social problems grow.

In the for-profit world we understand that you can't just sell widgets.You need an infrastructure behind those widgets (staff, technology, systems, sales). But in the nonprofit sector we insist on starving organizations and forcing them to spend every last dime on services, with no money for infrastructure. With a compelling pitch for capacity capital, that can change.

I don't think I'm oversimplifying things. The nonprofits that will emerge from this recession stronger, more effective and better able to really tackle the many problems facing us are those organizations that have taken a step back and put in place the building blocks that will move them forward.

Nell Edginton is president of Social Velocity .