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Challenge 42 in the series 50 Reasons Why It Is Hard to Run a Nonprofit
The board meets quarterly. Attendance is thin. The agenda hasn't changed in two years. The executive director files reports that nobody reads. Programs continue because they've always continued. The annual fundraiser raises less each year, but nobody suggests canceling it.
Nobody is doing anything wrong. And nothing is getting better.
No nonprofit sets out to become irrelevant. A founding energy fades. A signature program runs its course but nobody evaluates it. A strong ED retires and gets replaced by a caretaker. The board fills empty seats with available people rather than needed skills. One day, someone asks what the organization's strategic plan says, and nobody can find the document.
Managing Your Nonprofit for Resilience includes this challenge in a section I call "market failures" — the absence of the natural selection that forces for-profit businesses to adapt or close. Research by Harrison and Thornton on nonprofit entry and exit patterns confirms the dynamic: nonprofit exit rates are extremely low compared to for-profits, and the survival rate of new nonprofit organizations far exceeds those found in the for-profit sector. A restaurant that stops attracting customers closes. A nonprofit that stops being effective can persist for years on residual funding, donor loyalty, and institutional inertia.
That persistence isn't resilience. It's stagnation wearing resilience's mask.
And it hurts more than just the organization itself. A stagnant nonprofit occupies space — funder attention, donor dollars, community trust, volunteer time — that could be going to an organization with energy and purpose. Every dollar that flows to a nonprofit because "we've always funded them" is a dollar not going to one that's actually solving problems.
This is uncomfortable to say. But the sector needs to hear it: not every nonprofit should continue to exist. Some have accomplished their mission. Some have been overtaken by other organizations doing the same work better. Some have simply lost their way. The hardest question a board can ask is whether the organization's continued existence serves anyone other than the people who work there.
If your organization is in this place, the paths forward are renew, merge, or close. All three are respectable. Continuing to drift is not.
Renewal starts with honesty. Ask five stakeholders — a funder, a community partner, a program participant, a staff member, and a board member — one question: "If this organization closed tomorrow, what would the community lose?" If the answers are vague, you have your diagnosis. If they're specific, you have the foundation for a genuine strategic conversation about what comes next.
But honesty also means separating legacy from strategy. "We've been here for 30 years" is not a strategic argument. Legacy matters — but only if it's connected to current impact. An organization's history is a foundation to build on, not a reason to keep the lights on.
Stagnant organizations almost never diagnose themselves. The insiders are too close. Bringing in a peer consultant, requesting a state nonprofit association assessment, or even scheduling a structured conversation with a trusted ED from another organization can surface what the people inside the building can't see — or won't say.
And sometimes the right answer is a graceful exit. Closing or merging isn't failure. It's stewardship. An organization that transfers its assets, programs, and relationships to a stronger partner serves the community better than one that spends its last years in decline. I've seen this done well, and the leaders who did it were among the most courageous I've worked with. That kind of strategic courage — knowing when to push forward and when to let go — is a recurring theme in Nonprofit Good News Premium.
Pull up your organization's last three annual reports. Read them side by side. If the programs, the numbers, and the language are essentially the same across all three years, you're looking at stagnation. Name it. Then decide what you're going to do about it.
This is part of an ongoing series based on the 50 challenges outlined in Appendix 1 of Managing Your Nonprofit for Resilience (Wiley, 2023). Each post names one challenge clearly and offers a practical reframe with steps you can take this week. For deeper coverage of nonprofit strategy, risk, and resilience — including tools you can put to work immediately — check out Nonprofit Good News Premium.