Many nonprofit organizations are reconsidering and repositioning their strategic planning to help sustain the continued success of their missions. Several of our clients and the industry at-large are taking actions to accomplish this, including:

  1. Changing fundraising campaigns; 
  2. Assessing the impact of mergers and acquisitions;
  3. Dialing in on liquidity; and
  4. Focusing on staff and board succession planning.

Here we offer more detail about these strategies along with best practices and general considerations to help nonprofit organizations achieve success in their missions.


Fundraising is the lifeblood of many nonprofit operations and can directly affect their ability to fulfill their missions. Some nonprofits look to their donor base to develop fundraising campaigns. Organizations may explore donor psychology to understand why donors give and what they expect in return. Other nonprofits tailor their donor relation strategies to appeal to the different donor groups. Some nonprofits see how willing donors are to contribute in light of economic, political and other external factors.

Fundraising will always be the lifeblood of nonprofit organizations.

Mergers and Acquisitions

Today, many organizations are considering strategic moves to confirm the continued success of their mission. One trend we observed is the frequency of mergers and acquisitions (M&A), particularly in higher education, religious institutions, associations and healthcare segments. There are a few considerations for organizations looking to engage in these transactions.

Mergers and acquisitions are complicated transactions, and we suggest engaging the appropriate legal counsel, M&A consultants, and other related services early and often in the process.

Financial health, typically including both the balance sheet and income statement, is central to any merger or acquisition due diligence process. We recommend paying extra attention to the retirement plan status of the target organization. 

The Internal Revenue Service (IRS) lists explicit rules for tax-exempt organizations that “end their operations, either through shutting down, transferring their assets or merging with another tax-exempt organization.” The IRS must be informed of the action. It may also be appropriate to ask for a private letter confirming the resulting entity will retain its valuable tax-exempt status. Losing plan status could cause significant hardship for the plan sponsors.

Synergy, overhead reduction and cultural integration are all important to any merger or acquisition activity. Many established organizations have a set way of doing business and may be hesitant to accept change. This could impede a successful merger or acquisition and prevent the resulting entity from capitalizing on synergy and overhead reduction considerations. Not every organization and its employees will work seamlessly with one another. Determine the cultural fit of the two organizations in advance and have a plan in place to ease the transition.

Sometimes donor restrictions prevent smooth mergers and acquisitions. A common example of this is in higher education, where legacy donor gifts can prevent colleges and universities from easily acquiring, or being acquired by, other institutions. Before considering a merger or acquisition, assess the impact the merger or acquisition may have on restricted gifts. Consult legal counsel to determine what court, regulatory, or donor approvals may be necessary, as rules differ from state to state.

Donor restrictions can also impact combining endowments and/or planned giving programs. For example, certain charitable giving vehicles can create liabilities that might not legally translate or transfer well into a new entity without donor permission. Similarly, combining endowments may create charter, investment policy and/or other conflicts under the new structure. Proactively plan and communicate how donor outreach will be managed under the new entity. Mergers and acquisitions are complicated transactions. We suggest engaging the appropriate legal counsel, M&A consultants and other related services early and often in the process.

Dialing in on Liquidity

Broadly speaking, the founding purpose of most endowed or foundation assets is to support a spending or distribution policy. An organization’s investment program is successful if it can support its spending or distribution policy while preserving purchasing power and allowing the modest growth of wealth. The way the spending or distribution policy is developed and defined may significantly impact the investment program’s ability to generate necessary returns to support this goal. Further, a spending or distribution policy can determine the appropriate amount of liquidity in an investment portfolio: too great of an allocation to cash could create performance drag on a portfolio, while too little of an allocation to cash could create “emergency” liquidity needs that can potentially force security sales at a loss in the event of a market downturn. We believe this discussion of spending and distribution policy should also include operating reserves, even if they are held separate from the longer-term investment portfolio.

Our experience working with nonprofit organizations has also shown that having a clearly defined spending rule can help instill discipline into the budgeting and financial management process from an oversight perspective.

Given its importance to budgeting, financial management, and portfolio management, we recommend clearly defining a spending or distribution policy rule as part of a nonprofit organization’s investment policy statement (IPS).

Staffing and Board Succession Planning

Board composition is a crucial component of a successful nonprofit organization. Board members can enhance the charitable mission through their own efforts and contributions. In the early stages of a nonprofit, much care and study go into the selection of the initial members. This governing board is legally accountable for the actions of the nonprofit organization, so individuals who serve must be aware of and willing to shoulder the responsibility. Their focus is to oversee compliance with regulations (for example, public support testing for 501(c)(3) tax-exempt status), maintain and refine policies and procedures, and confirm the plans and programs of the organization’s mission are implemented and enhanced. At the same time, they are also responsible for conducting the three legal duties: duty of care, duty of loyalty and duty of obedience. Great care should be taken in selecting the inaugural members of the board and this same level of due diligence should be applied when determining subsequent generations of the board.

Realistically, selecting board and leadership positions can be one of the most substantial decisions facing any nonprofit organization. The gravity of this responsibility becomes increasingly vital as the nonprofit advances so staff, volunteers and even donors have a sense of stability and continuity about the organization and its mission. Consequently, volunteers may desire a place on a firm’s board of directors, yet not every applicant may be ready or qualified to serve.

Succession planning can be a critical component of strategic planning and requires the same respect and diligence given to other areas of the enterprise management process.

Whether planning for leadership or staff and volunteers, together these individuals can play important role in the success of the organization’s mission.


Looking at how nonprofit organizations fit into the community, country and world, it is hard to point to a time with more changes, concern for capital market returns, and need for nonprofits to succeed in their missions. Strong enterprise management through strategic planning can help nonprofit organizations position themselves well in this environment. Our research indicates that these steps and best practices generally improve success in nonprofit management.

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Strategic Planning: Best Practices in Nonprofit Enterprise Management