This checklist is meant to help organizations, funders and other intermediaries determine whether an organization is at risk for failure, and whether it seems prudent to search for a partnership or merger in order to sustain programs. It is based on research conducted for the NPO Quality Assurance Program and the current Sustainability Program

Most organizations fall into trouble slowly, although some encounter fast reverses. Organizations can look at common problems that have been identified by Anne Hays Egan, New Ventures and the Wilder Foundation as common warning signs of organizations in decline. These are most helpful for organizations that have been in business for a few years, and not for new organizations.  If those warning signs can be seen, then organizations may be able to either reverse the decline or find a partner organization where they can merge. Most organizations in decline will have a majority of the problems listed below.

1.  Mission – It is difficult to fund the mission. The mission often feels hard to carry forward. Staff may look for related activities to fund that they consider easier to fund.

2.  Planning – The organization’s leadership does not often refer to written plans when they are there, and only plans when issues arise. Or, sometimes, a good written plan is in place, but it differs from reality, and staff and board are challenged to move from the current situation toward plan goals.

3.  Communication – This is often sacrificed in the struggle to handle the challenges of the work. As a consequence, communication is not consistent and people are not sure about what others are doing.

4.  Programs & Services – There is a greater challenge to delivering programs and services in a timely manner. The organization may feel stretched or besieged, but is still usually committed to the programs. Quality may begin to suffer as resources are stretched beyond their limits.

5.  Finance – Some regular, continuing sources of revenue are reduced or cancelled. The income budget is not diversified enough, and is becoming less diversified. Funds are stretched, and there is not enough to support operations. Funds that come in for a restricted cause get spent early with the intention of being paid back into the restricted account, and are usually not. Finances become increasingly frayed.

6.  Fund Raising – There are few fund raising efforts, and those that exist have not been successful recently. There may be efforts to raise funds from special sources. Aside from those efforts, fund raising often is set aside.

7.  Marketing & Outreach – An organization in decline feels besieged, and usually reduces its contacts with community friends and stakeholders. The reduction in outreach exacerbates the problem.

8.  Board – Board members may stop attending meetings. It might be difficult to have a quorum at board meetings. It becomes more difficult to recruit board leaders. The board may suffer from a greater than normal attrition.

9.  Staff – There may be staff layoffs due to budget cuts. Or, staff may see the organizational difficulties and move to another, more stable organization. An increase in either layoffs or turnover rate indicates problems.

10.  Volunteers – Volunteer positions are developed; volunteers are recruited in a thoughtful way, are supported in work that is meaningful, and given recognition.

11.  Administrative Systems – These become increasingly incapable of carrying the work of the organization. Staff, systems, space and technology are inadequate.

12.  Technology – The organization has a plan for developing and upgrading technology, including email, web and internal listserves; and staff are provided training.

13.  Diversity – Diversity is celebrated, and represents a core value for the organization, including diversity of cultures, ages, and professional skillsets. Staff and volunteers represent the communities served.

14.  Collaboration & Innovation – A growing organization looks out to other organizations to see for ways they might collaborate to mutual benefit. An organization in decline doesn’t have the organizational energy to reach out, except at a late stage to look at last-ditch merger possibilities.

15.  Evaluation – There is little organizational energy for evaluation, and it is often addressed as a funding requirement and little more.

Is Your Organization?

*  Constantly struggling for funds,  finding it harder each year?

*  Difficulty recruiting and keeping strong board members?

*  Struggling to deliver your programs and services?

*  Losing staff to other organizations?

*  Finding it hard to meet payroll multiple times a year?

If you answer “yes” to two or more of these questions, you may want to consider whether or not your organization will be viable in the coming years. Perhaps funding has changed. Some of the strong leaders rotated off of the board. Staff leadership has changed.

There are many reasons why organizations can fall into a difficult space we call decline. There are external factors like changes in government funding or competing organizations. There are challenges in organizational development which put strains on the leadership. And, many small organizations may find that it is more difficult to stay self sustaining after the first few years.

Find a trusted professional in the field, and talk about your situation. Your choices are to continue and deal with ongoing challenges, dissolve the organization if it has served its purpose, or find a partnership or merger with a larger, more stable organization that shares your mission and values.

If there is important work that remains to be done, and if programs and services are delivered well, meeting needs, it is extremely important for the organization’s leaders to work with stakeholders to outline ways to either become more sustainable, to merge with another nonprofit, to change programs to fit a smaller budget. If none of those options work, then the remaining option is to close down the nonprofit.