The ‘non-profit starvation cycle’ is a phenomenon that was first described back in 2009, in an article in the Stanford Social Innovation Review. Authors Ann Goggins Gregory and Don Howard, of advisory firm The Bridgespan Group, outlined a pattern of behaviour among non-profit leaders that cripple their organizations.
In short, they’re too scared to spend. They said:
A vicious cycle is leaving nonprofits so hungry for decent infrastructure that they can barely function as organizations – let alone serve their beneficiaries. The cycle starts with funders’ unrealistic expectations about how much running a nonprofit costs and results in non-profits’ misrepresenting their costs while skimping on vital systems – acts that feed funders’ skewed beliefs.
Organizations that build robust infrastructure, including sturdy information technology systems, the authors observed, are more likely to succeed than those that do not:
This is not news and non-profits are no exception to the rule.
Seven years on, breaking that starvation cycle remains a challenge, according to David Geilhufe, NetSuite’s director of corporate citizenship, who presented the vertical industry keynote for non-profits at the SuiteWorld conference in San Jose:
It’s about not allowing the starvation cycle to control your organization… It creates unreasonable expectations and it creates a pressure on non-profits to operate their organisations in a way that’s impossible, simply impossible… The folks that are successful break that cycle.
Among them are the more than 600 non-profit organizations that use NetSuite: these companies, he claimed, use its cloud-based applications and customisations based on best practices to create:
a virtuous cycle of higher performance, increased innovation and better outcomes.
With that in mind, NetSuite announced on Wednesday a number of product innovations, targeting non-profits, including NetSuite OneWorld 16, revenue management, SuiteCommerce and custom records. These, Geilhufe explained, are designed to help non-profits adapt to industry changes and make processes more efficient.
In NetSuite OneWorld, for example, support for multiple organisations and transaction and currency consolidation provides international non-profits with the ability to achieve global project and programme transparency.
In NetSuite Advanced Revenue Management, there’s the ability to track and manage multiple revenue sources and develop schedules for subscription management for associations and membership organisations.
Custom Records, meanwhile, allow non-profits to create, track and manage funding sources to give them better visibility into donor and contribution strategies.
With SuiteCommerce Advanced, they can manage engagement, cross-selling and online donation initiatives.
These enhancements are part of NetSuite’s three-year product strategy for non-profits, which focuses on three areas:
- Increasing financial transparency and compliance.
- Connecting dollars to outcomes (in order to see how donations and spending contribute to goals such as rescuing animals, for example, or bringing clean water to rural communities in developing nations).
- Transforming the customer (or member/donor) experience.
The thinking here is that, in the face of increasing donor expectations, new models are emerging that blur the lines between non-profit and for-profit approaches. In other words, ‘customer’ engagement and retention tactics are just as applicable to a non-profit’s donors, supporters and volunteers.
That’s why the pressure’s on for non-profits to break the starvation cycle of low investment, underfunded programmes and unrealistic donor expectations, Geilhufe said.
A recent study of NetSuite non-profit customers, conducted on the company’s behalf by independent research firm SL Associates, found that these organizations experienced a number of benefits from running NetSuite:
- A 50% to 70% reduction in time to close financial books.
- A 30% to 50% reduction in time required for compliance support.
- A 25% to 45% increase in accounting staff productivity.
- A 35% to 50% reduction in the cost of serving the mission
NetSuite’s corporate citizenship arm, NetSuite.org, offers donated and discounted software and pro-bono services to many nonprofits and social enterprises, NetSuite CEO Zach Nelson told diginomica – but still more are regular paying customers, making this sector a healthy revenue stream for the company:
What we want to do is help non-profits run their organizations better. Non-profit has turned into a really great vertical for us, amazing. We’re not giving software away to all of these organisations. They all get the free version for 5 users but then when they get big, it becomes a real business. David Geilhufe’s done a great job of making this a real business for us.
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Disclosure - At time of writing, NetSuite is a premier partner of diginomica.