This chapter discusses the life cycles of organizations and focuses on the life cycle of nonprofit organizations. Daft. R. L. argues that life cycle of an organization includes four stages: entrepreneurial, collectivity, formalization, and elaboration. Stevens. S. K. argues that nonprofit organizations evolve from vitality to regeneration, through seven stages, encompassing idea, start-up, growth, maturity, decline, turnaround, and terminal. The chapter identifies factors affecting organizational transformation process of nonprofit organizations and discusses the elements of an organizational transformation initiative. The organizational transformation of a nonprofit organization includes factors that are antecedent to the process and other elements that are part of the process. Organizational transformation is the consequence of other factors or elements, which must be taken into consideration in future plans of action. These factors include, but are not limited to, life cycles, internal environment, and external environment. The chapter explains the relationship between organizational transformation and financial sustainability.

This chapter explores the dimensions of financial sustainability as well as the principles needed to manage a nonprofit organization that can generate continuous funding through diverse sources in order to support its vision and mission in a way that is socially and environmentally sustainable. Sustainability is the ability of a business, an organization, or a project to fulfill its vision and mission, meet its goals, and serve its stakeholders over time. The chapter discusses the inherent, collateral, and environmental factors of financial sustainability in nonprofit organizations. Inherent factors of financial sustainability include: Financial management, budget, financial statement analysis, financial sustainability plan, social enterprise, fund-raising, grant seeking, investment, and risk management. Collateral factors of financial sustainability include: Governance, leadership, and strategic planning. The chapter describes key indicators that can reveal whether an organization is financially sustainable or is on the path for financial sustainability.

This chapter defines the concept of leadership and describes the most common leadership theories. Most scholars agree that leadership is a key component of organizational effectiveness. The very range of definitions of leadership and the absence of consensual agreement between the definitions make the concept of leadership an issue in itself. The chapter examines leadership from various perspectives with an emphasis on the influence of particular leadership styles on the financial sustainability of a nonprofit organization. It integrates theory-based and practice-based approaches, and thus provides tools to better understand and influence the leader-follower dynamic in the nonprofit setting. Early leadership theories include: Great man theory, traits theories, behavioral theories, contingency theories, and attribution and charismatic theories. The chapter explains the relationship between leadership and community relations and discusses the role of leadership in strategic planning. It also explains the relationship between leadership and financial sustainability of nonprofit organizations.

This chapter defines the term “grant” and examines potential funding sources for nonprofit organizations. A grant is a monetary fund disbursed by an institutional or organizational donor to a recipient, which does not have to be paid back. The chapter discusses the overall grant-seeking process and describes the items of a generic grant proposal or application. A grant proposal is a written document or application submitted in response to a call for proposals issued by a grant-maker agency or as a result of opportunities for funding or an invitation received by an applicant. A generic grant proposal includes: cover letter, cover page, table of content, abstract, problem or needs statement, goals and objectives, project description, timeline, organizational capability, evaluation, references, budget, and appendices. The chapter focuses on how grant seeking can serve as a strategy to generate revenues that may ultimately contribute to financial sustainability of a nonprofit organization (NPO).

This chapter defines the term “human resource management”. Human resources management is the set of managerial activities involved in planning, recruiting, motivating, retaining, and developing a workforce that can contribute to the efficiency, effectiveness, overall performance, and sustainability of an organization. The chapter describes a human resource management system and human resource information system (HRIS). A generic HRIS includes components related to personnel management, time and attendance, payroll, and benefits. The chapter defines “job satisfaction” and discusses various job satisfaction approaches and theories, staff turnover, and staff retention. Theories in job satisfaction will be examined with respect to content, process, and situational theories. The chapter explains the key roles of human resources management and job satisfaction in the financial sustainability of a nonprofit organization and also explains relationship between human resources and financial sustainability.

This chapter defines the concept of program evaluation and also defines the term ‘logic model’. A program evaluation design is a document outlining principles and procedures to assess the achievement of a program’s goals. The logic model is one of the most common program design frameworks used in program evaluation. Program evaluation can be a needs assessment, a formative or process evaluation, a summative or outcomes evaluation, or an impact evaluation. The chapter identifies the items in a logic model and explains the benefits of a logic model for a nonprofit organization. It describes the process used to conduct a program evaluation and also explains the term ‘performance measurement in a nonprofit organization’. Program evaluation includes performance measurement to assess overall organizational effectiveness. The chapter examines the relationship between program evaluation and financial sustainability.

This chapter provides an overview of the nonprofit organization in the United States, the main characteristics of nonprofit organizations, and the reality of the nonprofit sector today. It describes the differences between a nonprofit and a for-profit corporation. Nonprofit organizations have existed for many centuries, especially through religious groups or religious-based activities. The nongovernmental sector is growing throughout the world. Increasingly, these organizations are playing key roles in the economic and social contexts of their countries. Unlike private-sector organizations concerned primarily with making a profit, nonprofit organizations are focused on carrying out a specific public-service mission. Successful nonprofit organizations require substantial capability in key areas of management: developing strong boards of directors, recruiting and motivating talented staff and volunteers, creating plans to focus resources on relevant goals and innovative programs, winning the support of diverse stakeholders, raising funds, and wisely managing fiscal and human resources.

This chapter describes the concept of social enterprise and explains the term ‘social entrepreneurship’. The term ‘social enterprise’ refers to a business activity intended to generate profit to finance a social, educational, cultural, religious, or charitable cause. A social enterprise is a for-profit business whose primary purpose is to reinvest its profits in not-for profit activities. There can be various types of social enterprises such as small-business entities, co-operative, social firm, credit union, trading arm to charity, and public sector spin-outs. The chapter explores the steps needed to develop a social enterprise and describes the key components of a business plan. The development of a social enterprise requires an investment, which implies some costs. The costs will be fixed and variable. The chapter emphasizes social entrepreneurship as a mission-driven enterprise and a strategy for financial sustainability in nonprofit organizations.

The term “fund-raising” can be used for any activity whose primary purpose is to raise money to support the activity of a nonprofit organization. The meaning of the term “fund-raising” can change based on approaches used by a particular nonprofit organization. This chapter discusses why people donate to nonprofit organizations. The literature suggests that people donate to nonprofit organizations based on compassion, altruism, values, tax deductibility, corporate social responsibility, stewardship, and solicitation. The chapter identifies some common effective fund-raising strategies used by nonprofit organizations in the United States and describes the items in a fund-raising proposal. An effective fund-raising proposal requires effective planning. The planning of fund-raising activities should start with a fund-raising proposal that sets clear justification, goals, objectives, and overall approaches and strategies. Finally, the chapter provides conceptual frameworks and approaches to organize fund-raising activities that can generate alternative funding for financial sustainability.