What Would You Do With a $$ Windfall?

RECEIVING A SUM OF MONEY UNEXPECTEDLY (or half-expectedly) isn't as unusual as it may seem in the nonprofit world. It often comes in the form of a bequest, but it might just as often come as a year-end gift from a loyal member. Sometimes, it's a grant few thought the organization would ever be competitive enough to get. Or a local corporation or government acknowledges the efforts of a nonprofit that is making the community a better place.

The question that gets some organizations tied up in knots is how to make the best and most efficient use of these funds. We all dream about how we'd put a few thousand bucks to use if it were to arrive on our doorsteps, but when actually faced with a check in one's hands, the dreams may be...well... too dreamy. Where should it go, if the donor hasn't stipulated a place for it to land?

The director of a small cultural nonprofit asked me this question. After several years of increased attendance and program income, should a new source of funding be used to expand promotion to keep those numbers rising or should it be used toward dedicated staffing that ensures organizational stability and related programmatic quality?

My first response was to ask what the nonprofit's strategic plan said. Hmmm....no up-to-date strategic plan. OK, that explains why the organization doesn't readily know where to put its windfall. Then how about the mission -- what does the organization say it does? Where does the mission focus the work? Once those questions can be answered, then an obvious next question to answer is how can that work be best accomplished? Answering that could lead to a landing spot for the cash.

And what about that phrase "be best accomplished" -- what do I mean by that? I'm talking about the greatest return for the investment of that money, because, frankly, what to spend the money on is as varied as those staking a claim on it, but clearly some items have greater mission ROIs than others.

There's also this old notion that I particularly like: windfalls should be invested rather than frittered away precisely because it's money you never planned on and might certainly never see again. If you use your windfall to pay the electric bill, you've bought yourself a month's ROI. If you use it to install energy saving systems, your ROI is a whole lot longer.

In the case of the nonprofit that's trying to weigh staffing against a bigger promotion budget, I see the investment in staffing as having greater potential long term impact on developing and expanding the reasons why people would attend. Will more advertising about the same old programming really keep attendance growing? To a point it will, but promotion dollars follow great programming (not the other way around) and what really keeps audiences coming back for more is the talent behind the mission. To me, that's where I'd put the windfall.

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If you were asked to narrow down the list of executive director qualifications to the three most important, which ones would you identify? Would the list consist of soft skills, hard skills, or some combination? Would your list be based on the great ED you are or one you've worked for, or would it be your wish list for the ED you haven't been fortunate yet to work for? This was an assignment in my recent online class in leadership and administration for the American Association for State and Local History . I asked the class to review three-five advertisements for museum directors and analyze what these listings intimated about the organization’s past experience, current focus and goals, and future aspirations. Then, I asked the class to identify what they consider to be the three most important qualifications they would look for in a director. (Okay, so there's more than three if you dissect my three big groups.) Soft skills outnumbered hard skills, although

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MY LAST POST WAS NOVEMBER 2012, A LIGHT YEAR AWAY it seems, that marked the beginning of a long push toward completing a manuscript on history museum leadership with my co-author, Joan Baldwin. We finally submitted 350+ pages to our editor at Rowman & Littlefield this week. If all goes well, we expect the book to be available in early 2014. It's taken us two years to get to this point, so six more months or so of revision and production don't seem too long to wait until we can hold the final product in our hands (and you can, too!). The project put a lot of things on hold, including this blog. I'm glad to be back writing about intentional leadership -- leading by design -- for nonprofit boards and staffs. Certainly, my thoughts are now informed by the forthcoming book, in which Joan and I posit that nonprofits need to focus resources on leadership, not just management. Most cultural nonprofits are at a crossroad, as is the sector in general, where nothing is qu

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THERE'S SO MUCH WRITTEN ABOUT RECRUITING BOARD TALENT, I thought I'd spend a little time thinking about it from the prospect's point of view. Clearly, there are boards where the line is long to get on them. But what would make you turn down an invitation? Here's a short list to get the conversation started: 1. You've had no prior exposure to the organization. Your immediate reaction is "did you pull my name out of a hat?" (Is that lady in the picture the head of the Nominating Committee?) Seems as though there must be a hidden agenda at work (like you're rich and once you become a board member you'll pour all your resources into the organization) or the organization is simply looking for any warm body to fill a seat. 2. The organization doesn't have a good reputation. There's something to be said for street cred. An organization that's floundering may be strengthened by your participation or you may find yourself sucked into

Cedar said…

Depends on the size of the windfall, of course, but our most pressing need is a nice cash reserve cushion.

December 1, 2014 at 8:19 AM

Bill Hosley said…

Real total surprises - especially big ones - are rare. But my sense is that any non-profit that is not in the 70/30 zone - they should make it their business to get there. By 30/70 zone - I generally assume (at least from my work work in the museum industry) that any org that doesn't get at least 30% of their operating revenue from income off of endowment - will struggle against almost insurmountable odds. Ironically (because yes - one can have too much money) orgs that that more than 70% of their revenue from income off endowment - it immunizes them from public responsiveness and accountability and indulges staff and board in potentially self-serving adventurism; or simply lulls them into complacency. If my museum had an $700k operating budget $300k of which was income from a $6 mill endowment and suddenly got a new $1 mill bequest - I'd probably put 90% of it into further endowment building and maybe pick off one strategic project or need for $100k

December 1, 2014 at 9:44 AM

Unknown said…

We're in a similar position after selling some property. About 75% will go to our endowment, and the board is determining this week what other projects to pursue. The options include tackling a difficult to fund maintenance project, hiring a development consultant and a staffing boost. A mix of saving and spending on impactful projects seems like the best approach.

December 1, 2014 at 10:58 AM

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