Non-profit Consultant, Derek Link, offers some thoughts on the dangers of “closed” organizations:

One of the worst things a non-profit organization can do is to become a “closed” organization. First I’ll define what that means to me and then I’ll give you an example of how it looks in action. A closed organization is one that has become inbred and sort of nepotistic. Only familiar people are invited into the decision-making. The Board hasn’t changed in years or at the very least never includes anyone with a different viewpoint or who is strong enough to rock the boat. A closed organization can’t grow because it fears the innovation, requirements, and new attachments that growth requires.

So what does this look like in practice? I’ve seen a few organizational symptoms lately. Last week I was reviewing a nonprofit organization’s strategic plan. The plan looked fairly detailed at first blush, there were lots of items, neatly numbered, and there were various categories of things that the organization wanted to take action on. The problem was that all of the categories were things they already did and there was nothing new. The second problem was that the sub-items were all so general that it wasn’t possible to know what actions should be taken to actually accomplish anything. It was a 3 year plan that led nowhere. To make matters worse, it was a 3 year plan that ended last year and the action of the board was to re-authorize the same plan for the next three years! Obviously that Board is not including any new people and certainly not anyone who would question the status quo in order to propel the mission forward.

The second example is a non-profit that I have a lot of experience with because I sometimes volunteer there. Like most non-profits, the organization is always short of money but that is mostly because they don’t bring in any expertise in fund raising to implement any sort of organized fund raising plan. It’s always put this fire out then put that one out.

The leadership hasn’t changed over time and new members to the Board have not been added from outside the immediate circle of friends. In fact, I attended a Board meeting once when two new people happened to come in from the outside. They proposed that the strategy for fund raising wasn’t very good and they were actually shouted at by the Board President. These were people with concrete experience raising money so their concerns were based on real knowledge, but the closed system isn’t open to new ideas. The “interlopers” were driven away before the Board president’s veins had even receded from his forehead!

One symptom of a closed system is a Board that only cracks open the Board room door when it is in danger of fiscal collapse. Closed systems are locked in a death spiral that may be slow or fast, or it may simply spin in one place for eternity when the Board is wealthy enough. The Board members of the arts organization I volunteer with are wonderfully generous with their own money and time, but they aren’t wealthy. They periodically publish pleas for funding that are couched as dire warnings to the community that they are in immanent danger of going under financially. The appearance they give is that the only time anyone new is invited to participate is when they need money in times of crisis. That comes across as desperate and irksome to people who would enjoy being involved if a sincere invitation to do so were ever proffered.

So long as your organization has a solid funding stream then it may survive being a closed system, but as soon as that funding stream is compromised, it can come down like a house of cards. In the current economic environment, even some foundations with large endowments that have traditionally been closed systems are questioning the feasibility of remaining as such.

Join Derek for our BlogTalkRadio Tips from the Grant Goddess show this week (Friday, 3 p.m., PST).  He’ll be talking about hjow to tell if your organization is a closed system, and what you can do about it. If you miss the live show, you can listen to the recording on demand.