Common Challenges that Nonprofits Face

So many of us in leadership positions are asked to be part of nonprofit boards. It’s a wonderful volunteer commitment that can be tremendously rewarding. I have been a member of nonprofit boards for years and always highly recommend the experience to my clients, peers and colleagues. However, as an agency owner, I have been called upon to support nonprofits in crisis far too many times in the past two years. We can blame it on COVID and the lack of board meetings during the height of the pandemic but, when it comes down to it, many of these groups are not sufficiently protecting themselves.

Nonprofits face many of the same challenges that for-profit organizations do, plus many that are unique to their sector. One of the most common challenges I encounter with nonprofits is the lack of proactive crisis planning and reserving of funds to support the help of a public relations (PR) and legal team in cleaning up any sticky situations. Unless they have dealt with a crisis before, boards and executive management either don’t know or underestimate the costs associated with crisis work. With attorney fees averaging $550 an hour and PR pros closely behind that rate, a recommended minimum reservoir for a crisis fund should be $20,000.

To make things more complicated, nonprofit leaders usually don’t know who to call for help when a crisis presents itself. Time and time again I have seen nonprofit crises bloom quickly and without restraint for this reason. Ideally, PR and legal firepower would have been identified as a part of a standing crisis plan and called to the front lines sooner. In most cases, a proactive, paid-for crisis response plan would have helped to prevent—or at least diminish—damage from many of the issues nonprofits have faced over the past few years.

So, what are these common challenges nonprofits face? Below I outline some reasons nonprofits may eventually need crisis PR and legal services pulled in. The reasons are also scenarios that many of us who chose to be on nonprofit boards must insist on having contingency plans for before we join.

1. Funding Challenges.

   Nonprofits often rely on a mix of government funding, private donations and grants. Any question of access to these income sources can lead to a crisis. For example, a significant donor may suddenly stop their contributions, or a government grant may not be renewed.

2. Mismanagement or Scandals.

   As with any organization, issues related to poor management or ethical lapses can hit nonprofits. These can range from financial mismanagement or misuse of funds to leadership misconduct. Such incidents can cause severe reputational damage, triggering a crisis.

3. Lack of Transparency.

   Nonprofits are expected to operate transparently and demonstrate effective use of resources for their intended mission. Any perceived lack of transparency can spark mistrust and controversy.

4. Volunteer and Staff Issues.

   Nonprofits often rely heavily on volunteers and managing a large volunteer workforce can present unique challenges. Poor volunteer treatment, overwork, or insufficient training can lead to negative public perception.

5. Unexpected Events.

   Like any organization, nonprofits can be caught off guard by natural disasters, sudden changes in government policy or global pandemics. These events can drastically affect their operations and ability to deliver services.

6. Communication Breakdowns.

   Nonprofits may struggle to communicate effectively with stakeholders, which can lead to misunderstandings or misperceptions about the organization’s work. This can be especially challenging when trying to communicate complex or sensitive issues.

7. Regulatory Compliance.

   Nonprofits must comply with numerous laws and regulations. Any noncompliance, intentional or not, can incur significant penalties and damage to the organization’s reputation.

8. Mission Creep.

   Nonprofits can find themselves straying from their core mission, either due to changing societal needs, shifts in funding or the influence of board members or major donors. This “mission creep” can sow internal conflict and confusion, potentially damaging the organization’s reputation if not carefully managed.

Nonprofits need to have a strong crisis PR strategy in place to quickly respond to these and other potential crises. This can involve preparing responses to different crisis scenarios, ensuring donors’ contact information is up to date, training staff and volunteers on crisis communication procedures, and regularly reviewing and revising crisis response plans. Plans also should include some operational changes that prevent the organization from being held hostage by one leader.

The board of directors play a crucial role in keeping any organization—nonprofit or for-profit—clear of facing challenges or problems. They have a responsibility to ensure that the organization is well run and risks are effectively managed, including a duty to insist on keeping a crisis management assessment and strategy cached for easy deployment. Here’s how board members contribute to crisis prevention:

1. Risk Management.

   One of the board’s primary responsibilities is to oversee risk management practices. Members should regularly review and assess the organization’s major risk exposures and ensure adequate plans are in place to manage and mitigate those risks. Anonymous surveys are a great way to get a true, honest read on how employees, donors and partners are feeling about their experiences. The agreement and promises nonprofits make with stakeholders should be treated as sacred. Preventative discovery for anything substandard should be routine, and any active issues need to be reviewed and addressed in a timely manner.

2. Good Governance.

   The board sets the tone for ethical behavior and good governance. By establishing and enforcing clear policies on issues such as conflict of interest, financial management and employee conduct, directors can help prevent many types of crises.

3. Strategic Planning.

   The board guides the organization’s strategic direction. Directors’ planning can help the organization anticipate and prepare for potential challenges and operational changes that could lead to a crisis.

4. Financial Oversight.

   The board has a duty to oversee the organization’s financial health and ensure its resources are used responsibly. This includes reviewing financial statements, approving budgets and overseeing the audit process.

5. Leadership Selection and Evaluation.

   The board hires and evaluates the organization’s top executive(s). By choosing competent leaders and holding them accountable, directors can help prevent crises caused by poor leadership.

6. Regulatory Compliance.

   Directors ensure the organization is in compliance with all relevant laws and regulations. Noncompliance can spark legal trouble, financial penalties and reputational damage.

7. Transparency and Communication.

   By promoting transparency and open communication, the board builds trust with stakeholders and can prevent misunderstandings that could escalate. Communication includes information about the organization’s mission, activities and financial status, as well as how it’s managing risks and handling problems.

8. Continuity Planning.

   The board must ensure that a continuity plan is in place if there is a sudden change in leadership or another disruptive event. This can prevent a crisis that springs from a leadership vacuum or operational disruption.

The board can’t prevent every potential crisis. However, by fulfilling these responsibilities, directors can significantly reduce the risk exposure and ensure a nonprofit organization is prepared to handle whatever comes its way.