Addressing Forbes’ 20 nonprofit warning signs: How BoardEffect can help

From financial instability to poor board leadership, the warning signs of a nonprofit in distress are critical to recognize early on. A recent Forbes Nonprofit Council article highlighted 20 such warning signs, emphasizing the importance of proactive leadership and strategic intervention to steer nonprofits away from potential failure.

For leaders, understanding these warning signs is just the first step; implementing effective solutions is key to turning challenges into opportunities for growth and sustainability. This is where BoardEffect can play a transformative role. By leveraging its comprehensive suite of tools designed specifically for nonprofit board management, BoardEffect empowers leaders to enhance communication, improve operational efficiency and foster a culture of transparency and accountability.

As we explore how BoardEffect addresses each of the 20 warning signs identified by Forbes, you’ll discover actionable strategies that can help safeguard your organization’s future and amplify its impact.

Forbes’ 20 nonprofit warning signs — and how BoardEffect can help with each

1. Lack of board leadership and succession strategies

As Victoria Burkhart of The More Than Giving Company points out, “You know you are in trouble when the board becomes weak. This means there is a lack of leadership and no strategy for building a strong pipeline. Some find term limits and mandatory rotations harsh, but fresh and motivated board members keep organizations growing.”

With BoardEffect, the board and nominating committee members can collaborate on succession planning projects, simple and securely in dedicated workrooms. Recruitment of new leaders is also easier if the board is seen to be diverse, tech-savvy and good at governance.

BoardEffect also allows organizations to track and report on term info, including member start and end date, 1st/2nd/3rd/etc. term and officer role. This can be added to the board member profile in the directory and then can be reported on using internal reporting tools.

2. Poor communication

Lacette Cross of Diversity Richmond says that a key consistent indicator that a nonprofit is heading toward failure is poor communication, stressing that “without communication, no one is able to fully execute their role responsibly”.

BoardEffect offers a central ‘single source of truth’ with a set of communication tools including secure email messaging and notifications to board members about upcoming meetings and board packets, private discussion forums and more. With BoardEffect, the entire team can communicate more efficiently and successfully to support the organization’s goals.

3. Emotion-based decisions

Another key indicator of a nonprofit failure is that decisions are based on emotion and “not ensuring the service will be effective and fiscally sustainable” as Stacy Bliagos of HANAC, Inc advises.

Moving to being a data-driven decision-making board can offset this issue. Building a robust collection of data and reports is an important step, but ensuring they are easily accessible is just as critical. You want your board to be able to access the right data at the right time as they go about making decisions. BoardEffect offers secure document storage with granular permission controls and powerful keyword search functionality ensuring everyone has easy access to the documents they need to make informed decisions.

4. Lack of growth and funding

As Tom Ulbrich of Goodwill Industries of Western New York shares, “An organization’s demise often happens slowly, then suddenly. Leaders often don’t react until it is too late. Spotting the signs of trouble early can enable leaders to make necessary course corrections.”

Making sure that you include key reports for board members to review in advance of meetings, and that agendas include time for discussions about progress on your strategic plan can help. BoardEffect is an essential tool for strong nonprofit strategic planning with a central Resource Library, collaboration and communication tools plus granular permissions that ensure that only authorized individuals have access to board materials.

As the board or fundraising committee goes about applying for grants and drafting those grant applications, a private workroom can be created for the team to collaborate. You can also store key information in your WorkroomLibrary to easily be able to report back to funders.

5. Financial instability

Another sign that a nonprofit organization may be on the path to failure is financial instability. Jason Fields from Madison Region Economic Partnership suggests that “Leaders should focus on optimizing operational efficiency by identifying cost-saving measures, streamlining processes and eliminating redundant activities.”

Using your BoardEffect solution to store your financial reports and have the board and/or committees examine and maximize resources can ensure funds are directed towards impactful programs.

BoardEffect is a cost-effective solution that is designed specifically for nonprofits. It offers integration with other tools your organization uses such as Microsoft 365, helping you to save money and reduce unnecessary costs from requiring multiple solutions to manage your board business.

Not having a board portal solution in place can also impact your organization more than you may realize, from data breaches and reputational risk to board members not meeting fiduciary duties.

6. Toxic work culture

Culture has such a large impact on the success of any organization, and the presence of an unchecked toxic culture is a crucial sign that an organization may fail to accomplish its mission and goals. George Hsieh of Community Resource Exchange recommends that leaders “disrupt behaviors that normalize the bad culture and reinforce systems and structures that reflect the desired organizational culture.”

BoardEffect was designed to help nonprofits improve governance and support a culture of shared leadership and accountability. Board evaluations are also one of the most viable ways to assess board culture. In addition to offering boards the benefit of secure communications and a process for streamlined board meetings, the software has a survey tool built into the platform that’s perfect for doing regular assessments of board culture. With the combination of board director commitment and the right digital tools, organizations can begin enhancing their culture.

7. Clashes between the chairperson and executive director

Caroline Boudreaux of Miracle Foundation states that “one of the most telling signs that an organization is going to fail is if the chairperson and the executive director are at odds. The relationship between the board and the executives is critical, and when that relationship is in danger, the entire organization is in danger.” Good communication, transparency, and accountability are the keys to a strong nonprofit board-executive partnership.

BoardEffect plays a key role here, giving both the chair and the executive director access to the same data and other essential information.

And in the spirit of transparency to trustees, BoardEffect also offers a secure place where board members can collaborate and share files whether they’re working in person or remotely. It becomes a ‘single source of truth’ for the board and executives in the organization.

8. Over-reliance on one revenue stream

Erin Mote from InnovateEDU has seen nonprofits fail because they are too reliant on one stream of revenue — be it a major event, a campaign or grants. “Work hard to diversify funding sources. Relying on a mix of donations, grants, earned income and other sources is a key strategy to turn this around.”

Keep your strategic financial documents securely stored in BoardEffect for regular review at your board meetings. Current and past grant applications can also be stored in your Resource Library for easy search as you plan those.

9. Lack of planning for disruptions

“One way to fail is to not plan for operational disruptions,” says Dawn Reese of The Wooden Floor, who advises having the financial discipline to create reserve funds of three to six months minimum. “We saw during the pandemic that some nonprofits didn’t have enough cash on hand; this led to staff furloughs and layoffs, as well as impacts to program delivery with some organizations closing when the community needed them the most.”

Planning both for your strategic and financial objectives is made easy with BoardEffect you can add time for reviews of these to your board meeting agendas, set up secure workrooms for committee work, and store your key documents in the Resource Library for board members and staff to access easily.

10. Sticking to “the way we have always done it”

Kristin Salkil from Black Women’s Health Imperative has seen suggestions be made that deviate from “what we have always done” but boards choosing to stick with their comfort zone. She points out that “This limits nonprofits from being able to grow and adapt to current circumstances.”

Making sure that succession planning encourages more diversity on the board is one way to counteract that, using your BoardEffect software for your nominating committee and discussions about succession planning. The surveys and polls feature can be also used to ask trustees for feedback to encourage more diversity of thought on different topics the board is tackling too.

With board and organizational accountability in the spotlight, how can nonprofit boards define discrete impact metrics, consistently measure them, and clearly communicate them to stakeholders? Download our free guide today to learn how your board can extend your organization’s reach and deepen your impact, furthering the good that your mission-driven organization strives constantly to deliver.

11. Funding is not mission-driven

“Nonprofits can never forget why they exist and what their mission is. Trying to obtain funding that is not aligned with the mission is the first sign of real trouble. Before long, the organization may shift its priorities and therefore stop being true to its members, supporters and stakeholders.” advises Magdalena Nowicka Mook of the ICF (International Coaching Federation), “Leaders need to stay vigilant about serving the cause.”

Using BoardEffect to constantly review that your funding applications are meeting mission goals and having that as part of your board and other meeting agendas can help avoid this mission-creep.

12. Scarcity of data stories

In Michael Bellavia of HelpGood’s experience, one early sign that a nonprofit is trudging towards trouble is when the organization stops listening to its data stories. Michael’s suggestion is that “Stakeholder and constituent research, along with a regimented data evaluation process, will help nonprofit leaders avoid slow-moving icebergs.”

Being more data-driven in your decision-making and using data to regularly challenge assumptions, can be easily supported through BoardEffect.

13. No internal values

Matthew Gayer of Spur Local says that “Nonprofits fail when values are not applied internally. If you prioritize equity, collaboration and generosity in your programming and fundraising but not with your staff and other internal stakeholders, it will eventually cause challenges.”

When collecting data from multiple departments and sources, BoardEffect puts it all into one place, for one-stop viewing, analysis and reporting.

BoardEffect streamlines communication and information-sharing and enforces security and confidentiality throughout, helping to foster an open, inclusive culture.

14. Lack of transparency

“A lack of transparency around operations can quickly lead to failure,” says Albert L. Reyes of Buckner International. “The first role of a leader is to tell the truth about the organization’s condition, then identify problems and enlist leaders to implement immediate solutions.”

You can harness the power of technology to streamline data gathering and reporting, improve transparency, and capacity on your board.

Regular and consistent reporting will also reveal trends and patterns that will help you make informed decisions for the organization, as you go about addressing any issues.

15. Key stakeholder turnover

Jamee Rodgers of Urban Neighborhood Initiative says that one sign of failure is “when leadership, team members, key donors and partners start to remove themselves from the organization and its work.”

Establish metrics to check in on these key stakeholders so that your board stays ahead of folks disengaging and have plans ready to roll out should warning signs appear, all stored on your BoardEffect solution. Regular sense checks on where the organization is in relation to those metrics can then be built into your board meetings to keep on top of trends.

16. No attention to finances and staff retention

“Nonprofits fail when the leaders stop paying attention to financials, staff retention, the board and community engagement. It’s a similar effect to “quiet quitting.””, says Kimberly Lewis of Goodwill Industries of East Texas, Inc.

Keep your key metrics about financials, staff retention, community engagement, etc. with regular update reports securely stored in BoardEffect for review at your board meetings to make sure oversight on these key areas is done. Board engagement can also be easily seen and measured through the solution.

17. No diversity in the financial portfolio

In Erin Davison of Big Brothers Big Sisters of Southwest Louisiana’s experience, not diversifying your financial portfolio can lead to failure. She points out that “Relying on one funder, funding source or major event is good for a small nonprofit but if you wish to grow your capacity, you must include multiple revenue streams and build a strategy that clearly defines your growth plan and the revenue needed.”

Store your strategic financial documents securely in BoardEffect for regular review at your board meetings. Workrooms with granular permissions can be set up for committees or working groups looking at diversification of the financial portfolio, while your current and past grant applications can also be stored in your Resource Library for easy search and retrieval.

18. Negative public perception

As Aaron Aljandro of Texas FFA Foundation points out, “a negative perception can become a negative reality.” He suggests that if you have a decline in volunteer engagement, donor support or staff retention, it is time for a rebrand, and that it’s okay to reboot for a great cause.

If your organization needs a brand overhaul, this can be planned easily by the board, taken into working group or committee workroom spaces for discussion and reporting back to the main board, while the Resource Library can store documents for collaboration or review as you go about the rebrand project.

19. Disengaged board members

“Nonprofit leaders must curate and nurture its board of trustees to ensure continued success” states Tara Chalakani of Preferred Behavioral Health Group. She warns that “if a board is disengaged, unsure of the nonprofit’s mission and not invested in its success, failure will be imminent.”

With BoardEffect it’s easy to engage your volunteer board members. Our software has been specifically designed to meet the unique needs of nonprofits like yours, and can help streamline your board activities while encouraging better engagement from your members.

BoardEffect comes with a range of features that have been shown to improve board engagement, including

• Secure document management, making it easier for members to stay up-to-date on the latest developments and be better prepared for board meetings.
• Streamlined meeting management that integrates with calendars, tracks attendance and sends reminders to board members.
• Insightful voting and surveys to gather feedback from board members.
• Simple task management to assign tasks to board members and track their progress, helping to keep your members accountable and ensures that everyone is actively contributing to your cause.
• Intuitive apps for board members to access important documents and updates from any device, keeping them informed and engaged, regardless of their location.

20. Forgetting the reason for being

Finally, as Cherian Koshy of Kindsight points out, “An organization falls into The Big Rut, according to Les McKeown, when it stops understanding its reason for being — serving the cause — and viewing its own existence as primary. Nonprofits can return from frustration around the loss of creativity, innovation and vision. When it’s actively discouraged, it’s unlikely that the existing leadership can course-correct since they can’t self-diagnose.”

Board self-evaluation is one easy way to keep mission on track. With BoardEffect, you can easily keep your questionnaires anonymous and keep track of who has completed them. The digital survey tool is designed so that you can set up a variety of question and answer sets to maximize the benefit of your efforts. It also automatically tracks and analyzes the results. You can save your results to track progress in coming years.

That’s just one of many valuable board management tools that you get with BoardEffect to ensure the most effective board leadership possible for your mission-driven organization.

If you’re interested in finding out more about how BoardEffect can support your board, request a demo now.