Goldilocks and the Three Nonprofit Budgets (Apr 07)

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I used to spend summers with a very good friend who managed a piece of land on the Rhode Island coast. It was completely overgrown and contained three abodes. The one I stayed in was basically a two room shack, which I sometimes shared with moles. My friend lived in an ancient farmhouse that had been trashed by the previous tenants, but she and her partner painstakingly put it back together. One summer another friend who split her time between Hawaii and Rhode Island (where she mostly either crewed fishing boats or baited nets for a living) attached a small trailer up to my electricity and she just stayed out back of my shack. Lots of people came to stay. None of us had a whole lot of money but those times were rich.

The point is not new. Excess does not equate to a life well-lived. This is true not just for people who can band together to make sometimes difficult lives work, but also for organizations. There is such a thing as a nonprofit that gets too rich — fat and self satisfied and blind to its surroundings. And, nonprofits can certainly be too poor. But, what defines the budget that is “just right”?

The linked article, “Organizational Slack (or Goldilocks and the Three Budgets)” by Woods Bowman answers the question about how much financial slack is too much, how much is too little, and how much is just right. It is a highly practical and insightful piece that I think deserves not only your attention but also your board’s.

By the way, the friend who lived in the ancient farmhouse has managed a couple of small, brave, and highly effective women’s organizations. When she read the article, she asked me: “What? Is that guy Woods, some kinda genius or something?”

Read “Goldilocks” for yourself and let us know what you think. Meanwhile I’ll sit here for a few moments looking at my screen saver of Tony the dog and Spinx the cat sitting casually on the picnic table in front of the shack before I have to move on to look at NPQ’s own budget planning. Always exciting!