What do we mean by “organizational sustainability”?

By Marcus Coetzee, 21 September 2017.

Non-profit organizations and social enterprises in South Africa are desperately striving to become “sustainable”. I hear this term so often it has become almost meaningless. It is possible for a room full of people to have a vigorous debate about sustainability without reaching any agreement. This is because this term is ill-defined.

I believe that organizations should have a broader view of “sustainability” and be precise when discussing it. This will make it much easier for non-profit organizations and social enterprises to develop “sustainability strategies”.

I define “sustainability” as the reduction of organizational risk that increases the likelihood that an organization will survive and thrive in the future, coupled with the mitigation of any harm to the things and people around it.

With this definition, “sustainability” can refer to the following:

  1. Cultivating a diversity of income sources. For example, an organization could earn income from government, donors, beneficiaries and businesses, and from different departments within each of these organizations.
  2. Pursuing a diversity of types of income. For example, an organization could receive donations, product sales, sponsorship, dividends etc.) I’ve unpacked these concepts in my article “Thinking about Income Generation and Profit in a Non-Profit World”. A diversity of income sources and forms will help protect an organization against a decrease in anyone of these.
  3. Generating a profit or surplus. This will occur when the income is greater than the true cost of activities, once all direct costs and overheads have been allocated. In the article mentioned above, I also discuss the three costing methods that can assist to achieve this.
  4. Building a financial reserve. This will require an organization to first make an overall profit or surplus. This reserve could be used to fund strategic activities, invest in businesses, manage cash flow and sustain the organization in case of a rainy day.
  5. Nurturing required organizational capabilities. Being strong in the right areas will increase the probability that an organization survives and thrives despite the adversity the future will bring. Useful capabilities include the ability to manage projects, engage with communities, build a brand; package products and measure impact.
  6. Keeping key staff engaged. Staff should ideally feel motivated and loyal to their organization, and willing to use their initiative to help move it forward. Organizations that don’t achieve this are more likely to be sabotaged by their staff or lose staff that have essential skills or knowledge.
  7. Making sensible strategic decisions. Organizations must closely monitor their strategic context and be able to detect risks and opportunities as they emerge. Sometimes a risk may seem far off, but will require immediate and drastic action. Directors and leaders should cultivate their strategic awareness and be prepared to act swiftly and decisively when necessary.
  8. Acting ethically towards beneficiaries, stakeholders, suppliers. It goes without saying that a sustainable organization should do no harm to the people around it. Moreover, they should strive to cultivate a feeling of loyalty among these stakeholders.
  9. Acting ethically with respect to the environment. This behaviour captures a popular meaning of the term “sustainability”. I believe we should protect, respect and nurture our planet earth so it’s there for our descendants to experience. We are custodians of our planet.
  10. Being comfortable taking calculated risks. Counter intuitively, one of the best ways to enhance the future of an organization is to take strategic risks. It’s impossible to “play it safe” and hope to thrive in a competitive and ever-changing world. Organizations must do experiments, try out new business models, test new opportunities etc. if they hope to avoid stagnation.

Strategists recognize that no organization can ever truly “become sustainable”. All it can do its move forward constructively, manage its risks and strive to reduce its negative impact on the world.

Adopting a broad view on “sustainability”, and thinking clearly about its components, will make it much easier for organizations to fully embrace it.

In pursuit of strategic clarity

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