Deconstructing 'sustainability'

What does sustainability mean to your charity? Jeanne Bell, Jan

What does sustainability mean to your charity? Jeanne Bell, Jan Masaoka and Steve
Zimmerman offer some insight.

Maybe in some mythic past it was possible to think first about strategic impact goals, and then about
how to raise the money. But today we know better: you can't talk about what you're going to do without
talking about how to get the money. And, you can't talk about how to get money without talking about what you're
going to do.

What is sustainability?
Most of us in charities are familiar with setting project goals. For instance, we might set a goal of
reducing alcoholism by 10 per cent in a particular city, or a goal of increasing rural youth
employment. Nevertheless, we often aren't sure what our financial goals are, or even what they
should be. If the financial goal in a for-profit company is to maximise profit, should our goal as a charity be to
have £0 profit? Or should the goal be to grow an endowment of £10m, or to have a surplus of 5 per cent
or a deficit of no more than £50,000?

In classical economics, the answer to this question is that the financial goal of a charity is to ensure that it has
adequate working capital; that is, its financial goal is to have enough money to do its work over the long
term. Today we often use the term 'sustainability' for this goal.

But the term is used in different ways to suggest various things. Foundations and social entrepreneurs often describe
a plan for sustainability as one that relies on earned income rather than on donations (although both
earned income and donations can support long-term financial viability). When strategic plans are said
to include goals for sustainability, what is often meant is that the plans include the goal of developing a
more diversified income base. And environmentalists describe sustainability in terms of practices that
are non-polluting and that conserve energy and natural resources.

We like the United Nations' definition of sustainability: doing what is required "to meet the needs of the
present without compromising the ability of future generations to meet their own needs". And we like the
Wikipedia definition of sustainability: "the capacity to endure".

Here are two ways of thinking about sustainability in a charity context:

1. Sustainability encompasses both financial sustainability (the ability to generate resources to meet the needs of
the present without compromising the future) and programmatic sustainability (the ability to develop,
mature, and cycle out projects to be responsive to constituencies over time).

2. Sustainability is an orientation, not a destination. Sometimes the phrase 'sustainable business model'

sounds as if it refers to a place that, once reached, will allow the organisation to generate financial
 resources on an ongoing basis while the board and staff sit back, relax, and watch it happen.

But what is sustainable today may be unsustainable tomorrow. Funding streams dry up or shift focus;
programmatic practices evolve; client populations change. We never arrive at a mix of projects and
revenue streams that can be described as permanently sustainable. But we can always be heading in
the right direction.

In practice, achieving sustained financial stability and mission impact means having leaders make major decisions
while holding both objectives - as well as those two objectives' deep interconnectedness -
front and centre at all times.

What do we mean by the term interconnectedness? Consider the example of a community centre that cannot simply
discontinue its annual neighbourhood festival because of skyrocketing insurance and security costs.
It has to consider the degree to which the community depends on the festival to promote local business
and improve trust among neighbours. It also has to consider how its funders in local government
would react to the festival's cancellation, given how much the funders use the festival as a venue for
showing local responsiveness. There are simply no major decisions that do not have simultaneous, intertwined
implications for mission and money.

We suggest these guidelines:

• Sustainability has financial sustainability at its core. Charity emphasis on real-world impacts and on mission
alignment is fundamental, but the separation of impact goals from financial goals and strategies has
been a deep flaw in both business planning and strategic planning within the charity world. Financial
sustainability is not only a legitimate goal; it is a necessary, intrinsic, core goal.

Recognise that today's charities have hybrid revenue strategies. Nearly all charities now are hybrid organisations
rather than traditionally funded charities: they combine donations, earned income, contracts,
grants, and other income types. As a result, different financial goals must be set for different
types of income streams, and they must be managed in significantly different ways.

• Develop an explicit charity business model statement. Every charity has a business model, whether or not it
has articulated its strategy as such. Each project and fundraising line must be managed individually,
but this must be done in the context of an overall integrated business strategy. Leadership's role is to
develop and communicate that overall strategy as one that brings together all the activities - which will
have different financial goals - into a viable business model.

• Affirm continuous decision-making. Today's charities face constantly changing situations that require
decision-making and choicemaking at all levels of strategy. The global economic crisis has
underscored the reality that the environment changes in unexpected and unpredictable ways. Internal
changes - the departure of a key staff person, for example, or a project's becoming stale - also demand
decisions. In addition to detailed projections, leaders need a compass to support constant decision-
making.

Traditional strategic planning might be likened to looking at a road map, choosing a destination, and
setting out on the route. Today's continuous strategic decision-making might be more like sailing into
the unknown, tacking towards the pole star and changing course as winds and tides demand. Embrace
the journey. The world is in our boats.
This article is adapted from a chapter in Charity Sustainability: Making Strategic Decisions for Financial
Viability, by Jeanne Bell chief executive, CompassPoint Nonprofit Services, Jan Masaoka chief
executive, The California Association of Nonprofits and Steve Zimmerman principal, Spectrum
Nonprofit
Services