Project Management Institute

Reinventing the business of doing good

project management in the nonprofit sector

Though long ignored as an application area, the nonprofit sector of the economy provides a proving ground for project management principles.

by Jeannette Cabanis

ANEW COMMERCIAL JET. A skyscraper. A software product. These are the kinds of deliverables that project management cut its teeth on, and with which project managers can readily identify. It's easy to see how the triple threat of time, cost and quality applies to producing a better mousetrap on deadline, under budget, and with a satisfying snap of closure.

But increasingly, project management is being applied in enterprises where the ultimate deliverable might be expressed as something like “lessened human suffering”; “improved understanding of a social problem”: “a safer society for children”; or “an increased awareness of the arts.” Does the discipline of project management cross that divide seamlessly? Is it even, as currently understood, applicable to projects where outcomes concern individual and social welfare, education, and development?

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The Big Business of Helping People. Most people—including nonprofit managers and board members themselves—do not realize the potential power of nonprofit business. Statistics from 1995 show that “The Third Sector” is not only necessary to our survival as a civil society, providing approximately 40 percent of all human services, but also an economic powerhouse. The 1.5 million nonprofits in the United States possess assets of over $500 billion (an amount equal to about half of the assets of the federal government). The sector has been growing at twice the rate at which the private and public sectors are growing. Nonprofits contribute more than 6 percent of the gross domestic product and are responsible for over 10 percent of national employment. In 1993, social-welfare nonprofits alone raised nearly $24 billion, not including funds received in government grants. Millions of volunteers contribute billions of hours in the service of nonprofit organizations each year.

Demands on the nonprofit sector continue to grow as government strives to slim down by shedding social program responsibilities. For many communities, welfare reform has meant that the safety net once provided by government programs must now be stitched together from a patchwork of underfunded, volunteer-dependent private charities, many of which concurrently face the loss of government grants. At the same time, individual contributors, an important source of revenue, have grown more cynical about nonprofit leadership in the wake of several widely publicized scandals involving mismanagement at major nonprofit corporations. Clearly, an infusion of creative management solutions will be required if the nonprofit sector is to meet the challenges of this combined market expansion and resource crunch.

From Charity to Business Enterprise. One way that many nonprofits are striving to close the gap is by developing and launching nonprofit business initiatives. From the mail-order gift catalog that supports public radio programming to the thrift shop that helps underwrite a local soup kitchen, nonprofit business initiatives are multiplying rapidly. But while these endeavors offer a bright future for those organizations that successfully launch and manage them, they also pose a great risk. Frequently such enterprises are hampered by the fact that most nonprofit sector managers and staff have little experience or skill in ordinary business management—and none in the project management areas that are so critical to kicking off a successful new endeavor.

While many nonprofits strive to operate on business principles similar to those in the corporate world, the realities, especially in the resource area, are quite different for a nonprofit manager. Project management techniques require some customizing to fit the volunteer- and donation-driven organization. (This exhibit was adapted from one originally developed by Pat Barber and first published in Project Management Consulting News, an EDS internal newsletter, in Oct. 1997.)

Exhibit 1. While many nonprofits strive to operate on business principles similar to those in the corporate world, the realities, especially in the resource area, are quite different for a nonprofit manager. Project management techniques require some customizing to fit the volunteer- and donation-driven organization. (This exhibit was adapted from one originally developed by Pat Barber and first published in Project Management Consulting News, an EDS internal newsletter, in Oct. 1997.)

In addition, the kind of annual event-based fundraising that has always been the bread and butter of small nonprofit entities can benefit from the application of project management tools and techniques.

But project management isn't a language that's spoken in most nonprofit organizations. A glance at the bible of nonprofit management, the Jossey Bass Handbook for Nonprofit Leadership and Management (1994) yields zero references to project management and only a few pages concerning risk management and management control systems. While some organizations—notably health care institutions and larger nonprofits such as the March of Dimes and the Nature Conservancy—have signed on to the project management bandwagon, the small organizations that form the backbone of charitable and educational work in the United States still, from a project manager's point of view, operate in the dark. What are the barriers?

Special Management Challenges. Those versed in project management who seek to put the value of their expertise to work in nonprofit organizations will encounter numerous special conditions. For example, in grant-funded organizations, project start-up can be complicated because no design and planning work can be charged to the budget until the funds to support it exist; yet design and planning must take place in advance of even applying for a grant that may eventually fund the project. In essence, many projects must accomplish the entire start-up phase before any resources—either monetary or human—can be allocated.

This Catch-22 situation is compounded by the fact that, especially in small nonprofits, staff resources are limited and frequently seriously underpaid. Employees in the nonprofit sector often grumble that their love of the work is expected to reimburse them for the long hours, in lieu of money—a deal that few architects, engineers or financial planners would accept, no matter how much they loved their professions. Thus many nonprofit managers are reluctant to ask for unreimbursed extra efforts from an already over-burdened staff to get new projects off the ground.

Volunteer labor is usually the resource that is relied on to solve this problem. However, anyone who has ever steered the board of a nonprofit or managed volunteers knows that this resource base is high-maintenance and extremely variable as to time commitment, knowledge base, and accountability.

When a project is mission-critical it frequently becomes the purview of a volunteer board of directors—a volatile animal at best, as any nonprofit manager can tell you. “Effective governance by the board of a nonprofit organization is a rare and unnatural act,” the writers of a Harvard Business Review article stated flatly in a 1996 article (“The New Work of the Nonprofit Board,” Taylor, Chait and Holland, Sept.–Oct., p. 36). Tension between the governing board and the managers of nonprofits is ubiquitous; board members may have personal agendas that conflict with the mission of the agency and which can lead to scope definition problems that, being emotionally charged, are difficult if not impossible to resolve.

While boards of directors are often skilled businesspeople, they usually do not have any of the special knowledge or experience necessary to effectively manage nonprofit organizations; this lack is exacerbated by the fact that most nonprofit managers themselves have little or no business management experience. Instead they tend to be subject matter experts in whatever the mission of the agency happens to be, whether it's domestic violence prevention, arts education, or environmental protection. So comparatively basic skills such as cost-benefit analysis, business communications, and prioritizing can be missing. And a business-savvy board member may be speaking Greek when he or she talks of risk management or change control with the program's managers.

In addition, it can be hard for a nonprofit to steer a straight strategic course when it is primarily funded by grants and contributions. Most grants and many large contributions are earmarked for very specific purposes, so the program manager has little flexibility in how to expend the organization's resources. Often an organization's progress toward its goals resembles the track of a sailboat beating against the wind: it must zig and zag according to how the latest grant or contribution forces it to frame its objectives.

Introducing PM to the Nonprofit. Despite the differing environments, when nonprofits convert to project management principles, the payoffs can be rewarding for the organization and all its stakeholders. Project management is such a needed set of ideas in nonprofit management that the HBR article cited earlier actually proposes projectizing the work of the board (without, of course, ever referring to project management as such!). The article recommends that nonprofit boards abolish committees and “organize around what matters,” forming temporary task forces (read: project teams) to accomplish time-limited, goal-driven projects.

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Project management experts who have worked in the nonprofit sector are very enthusiastic about the discipline's untapped potential to make these organizations more effective. Alan Gump, director of special projects for Project Mentors, a San-Francisco-based project management consulting firm, notes that the March of Dimes is now working with his firm to launch a major project. As to the potential for small nonprofits, Gump, who spent several years doing independent project management consulting with such organizations, notes that while it is “a bit of a stretch” for people who work in nonprofits to take their long-term strategic vision and projectize it, shifting gears to project management can happen fairly quickly precisely because foundations tend to fund organizations for specific projects.

“In the familiar context of a grant application,” Gump explains, “they can learn to do scope definition, define the specific problem, and define the period of time. Grant applications force an organization, in most cases, to develop measurable goals—in terms of people served, for example. Most foundation grants are actually couched in project management terms … steps, sequence, time limit.”

Pat Barber, a consultant with EDS in Flint, Mich., has developed something of a sideline in introducing project management to nonprofits through her volunteer involvement with several local organizations. In the process, she has tallied the differences between the for-profit project management environment and the nonprofit environment (see Exhibit 1).

While Barber admits to having “some success” with getting project management techniques used for such endeavors as annual fundraising events and a capital campaign (a major fundraising drive devoted to raising capital, usually for a major investment such as a building), she cautions that there are many barriers in the nonprofit world that must be overcome before project management can exert much influence on the way the business of the organization is carried out. She warns project managers who long to proselytize in the nonprofit sector that they must be persistent and patient.

“When you start to talk project management in the nonprofit sector,” she says, “it's like PM 101: very basic risk management, developing a timeline, scope definition. Then, over time, when the staff of a nonprofit sees that they can pull out the timeline and work breakdown structure from last year and reuse them to pull off the annual fundraiser, they start to see the merit in it.”

Alan Gump says that the problem is principally one of perception. There tends to be a lot of project work going on in nonprofits that is never called a project. There's never clear scope containment; the plan is never thought through in project terms. Nonprofits need to learn to look at their programs in terms of a series of projects that have some strategic direction … and then seek funding for specific projects to serve a specific purpose, as opposed to asking the community to ‘fund us to do our ongoing good work,’ which there's no way to measure.”

Getting a Foot In the Door. It's easy: volunteer! Individuals and chapters with project management skills to share should have no problem finding local organizations that need their expertise. Pat Barber recommends that project managers who have an interest in the nonprofit sector consider developing papers for presentation at the conferences that attract nonprofit leaders, such as the American Society of Association Executives, or at the national conferences directed at leaders of the specific type of organization they are most interested in (environmental, child-abuse prevention, arts education, and the like.)

Lively conversations on nonprofit management issues take place on the Internet, among them the Fast Company threaded discussion at www.fastcompany.com/community. For a listing of nonprofit management Web sites and newsgroups, check out the University of Washington's Nonprofit Gateway (www.gspa.washington.edu/orgs/nongatelinks). These resources offer project managers a place to introduce the topic to paid and volunteer leaders on the nonprofit scene.

THE BURGEONING NONPROFIT sector is one in which project management and the organizations it helps to improve can grow together, providing opportunities for the profession while bringing much-needed skills to nonprofit management. All that, plus you get to feed the hungry, build a museum, or save the whales. What a deal. ■

Jeannette Cabanis is special projects editor for the PMI Publishing Division. She is also president of the board of directors for a small nonprofit social service organization.

This material has been reproduced with the permission of the copyright owner. Unauthorized reproduction of this material is strictly prohibited. For permission to reproduce this material, please contact PMI.

PM Network • April 1998

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