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6 Signs Your Nonprofit Is in Crisis Mode

Lynch Law Firm, PLLC Nov. 18, 2019

A nonprofit is only as strong as its top executives. Poor management practices or lack of competence in a specific area can be cause for alarm, or it could even signal an oncoming nonprofit crisis. In this article, we’ll look at six signs your nonprofit might be headed for crisis and how to avoid it:

1. Unhappy Employees

Are you fielding complaints from a number of employees, board members or volunteers, or can’t seem to retain top talent? If you’re experiencing a number of employee issues and general unhappiness, this could be a sign your nonprofit is in for a crisis. 

A good management strategy should include being involved in daily operations and fielding complaints to the board, thus, solving those problems at the organizational level before they become a toxic part of the environment. If complaints are getting past managers to the board without any type of attention or resolution, it’s a clear sign of problems within the organization.

2.  Change in Donor Activity

When top fellows and donors start calling the board members to report problems, then there is definitely something that needs addressing in the management strategy. Sometimes nonprofits don’t get any notification from funders. In fact, it’s common that top donors who are displeased with the organization to stop contributing. 

If you’re nonprofit has begun losing money or you’ve received reports of donors being displeased, you could be in serious trouble. After all, nonprofits rely on philanthropy and community support to perform their operations. If your operations have gotten to the point where donors are unhappy or unengaged, it can be a difficult transition to fix the issues, including making up any lost donations in the process.

3. Lack of Community Partnerships

If your nonprofit can’t cultivate partnerships, it will be difficult to thrive and could be further indicative of a management problem. Nonprofits rely on donors and partners, and sometimes even other nonprofits, for community help and support. The inability to share the playing field and collaborate on resources could be signaling an upcoming crisis.

4. CEO and The Board: A Tenuous Relationship

There are several behaviors that may indicate that the CEO and board relationship is at the zenith point of a crisis. Some of these include:

  • Late or erroneous reporting from CEO

  • CEO does not provide solutions for organizational problems

  • CEO doesn’t observe institutional policies, like those established by Finance or HR

These are a few examples that represent an organization that is out of compliance with established standards, with a CEO who isn’t aligned with the goals of the organization. The board’s job is to ensure compliance and consistency, and a rogue CEO can cause major organizational problems, leading to the potential failure of the organization.

5. Compliance and Regulatory Troubles

All nonprofits have to submit reporting and disclosures to specific compliance regulators (the IRS, for example). Some nonprofits, however, are accountable to more regulatory organizations than others. If compliance organizations are citing a lot of issues, a nonprofit could be hit with hefty penalties and fees. 

Moreover, this spells trouble for organizations that something within the nonprofit is amiss. Why are compliance regulations not an emphasis within the nonprofit’s culture? Is it an infrastructure issue or management one? Either way, the cost of being out of compliance could greatly impact the effectiveness of a nonprofit.

6. Advisor warnings

Nonprofits build relationships with a number of advisors and consulting agencies, like accountants, attorneys and more. Your advisors are concerned with the well-being of your organization while helping management remain in compliance and operating at peak efficiency. When your advisors point out warning signs, it’s time to listen.

Natalie Lynch is a corporate attorney with over a decade of experience. If you choose Lynch Law as your legal partner, you’ll get a team of experts that are remedy and prevention focused. To learn how Lynch Law can rescue your nonprofit, contact Natalie Lynch, today.