By: Jessica Munday, Jessica Rodriguez and Heather Davidson
In the world of nonprofits, pursuing financial sustainability should take center stage as an essential driver for long-term success. While the term ‘strategic investment’ may initially seem at odds with the altruistic mission of these organizations, a shift in perspective reveals that a focus on strategic investment in operations, staff, and research and evaluation is paramount for the organization’s longevity and impactful contributions to the communities they serve.
Jessica Munday, co-founder of Cloud 9, emphasizes this reframing approach. “Striving for profitability in a nonprofit doesn’t counter its mission; rather, it’s essential for its long-term viability. In this context, it’s crucial for boards to act as financial stewards, championing growth and foresight over short-term savings. Boards should also be prepared to take risks, and sometimes, to achieve growth and expand impact, it’s necessary to strategically tap into reserves, understanding that this investment can lead to significant long-term benefits. We’re not just here for today’s challenges; we’re building resources for tomorrow’s needs.”
This mindset departs from the traditional scarcity approach, where resources are perceived as limited and, consequently, underutilized. By prioritizing strategic investment, nonprofits can break free from the cycle of perpetual reactivity and underdevelopment. To build a strong structure that will stand the test of time, nonprofits must first create a solid foundation and that starts with the organization’s operational framework and strategic investment.
Strategic investment, in this context, is not about accumulating financial assets. Instead, it revolves around creating a sustainable model that uses thorough planning and resources to foster innovation, facilitate growth, and respond adeptly to emerging challenges. This strategic approach empowers nonprofits to invest in their operations, enhance services, and, most importantly, ensure their work will survive the ebbs and flows of the economy.
To concretely implement this strategic investment approach, nonprofits can consider tangible steps such as redirecting funds to raise wages—demonstrating a commitment to provide competitive pay and benefits that provide staff with a living wage. The scarcity mindset often results in lower wages and high staff turnover due to employee dissatisfaction and burnout. In the nonprofit sector, employees are asked to wear many hats and be “all hands on deck.” If organizations want a team that can fulfill their missions and make long-lasting community-wide changes, staff need to be compensated for the talent they bring to the table. This attracts and retains top-tier employees and ensures that an organization’s mission aligns with programs, resulting in successful outcomes.
A tangible example of this approach is a nonprofit’s decision to increase its minimum hourly wage to $18 across the board, a livable wage for a single adult. This bold step not only improved staff welfare but also positioned the organization as a proactive ALICE (Asset Limited, Income Constrained, Employed) employer, advocating for fair compensation in the nonprofit sector. Such decisions are pivotal in demonstrating a commitment to staff and the mission, aligning with the principles outlined by the United for ALICE movement.
A strategic mindset could involve temporarily reallocating resources from certain programs to refocus on operations, development, research, and evaluation. We can not know where to go if we don’t know where we’re at. Investing in research, assessment, and program evaluation allows an organization to see where it is thriving, areas for improvement, and how to attract additional funders. It is a bold move, but even if an organization pulls back on program spending for one year, the return on investment will be well worth it. By prioritizing research, best practices, and evaluation, nonprofits will not only be better stewards of the clients they serve but will also show potential donors the care with which they invest in providing the best services possible.
Another nonprofit’s strategic shift to invest heavily in research and outcomes rather than just focusing on outputs signifies an essential change in the sector. This decision allowed the organization to refine its logic model, ensuring that resources are utilized effectively and aligned with the intended impact.
Jessica Rodriguez, Cloud 9’s managing partner, underscores a critical aspect of strategic investment: “Financial health enables nonprofits to take bold strides toward their objectives. It’s not merely about sustaining day-to-day operations but expanding outreach and deepening impact.” Achieving financial stability allows nonprofits to build reserves, providing a safety net during economic downturns and ensuring uninterrupted program delivery despite external financial pressures.
Heather Geronemus, a national nonprofit board member and respected South Florida philanthropist supports this approach. “When nonprofits demonstrate a commitment to strategic and innovative financial approaches and models, they send a powerful message to donors. It shows us that they are not just in the business of good intentions, but are also committed to building sustainable, effective organizations and a wise approach in their own growth and development,”
The nonprofit sector is a critical component of community wellness. Embracing a strategic investment mindset prioritizing sustainability over reactivity demonstrates business acumen and a strong leaning toward the future. In this era of social entrepreneurship, sustainable growth is not just a choice but a strategic imperative for modern, forward-thinking nonprofits. By adopting strategies from the for-profit sector and channeling investments into key areas of their operations, nonprofits can build a legacy that endures and inspires for generations.