The Money Trap
Academics call it ‘goal displacement’.
I’ve fallen for it. And I’ve seen so many other small businesses go down the same path. Small businesses, community organisations, NGOs and not-for-profits have all done it (and continue to). The money trap is pervasive.
When I was an undergraduate student I worked part-time as the sole employee for a small not-for-profit organisation. It functioned a bit like a cooperative and the members needed someone to keep the wheels turning. I did the book-keeping, met with clients or prospective members, emptied the rubbish, ran an industry mentorship program, vacuumed the floor, project managed industry events, took minutes at board meetings, collected debts, created the organisation’s first website, and last but not least, learned how to write grant and tender applications. It was a steep learning curve for a 19-year-old, but I owe many of my subsequent professional achievements to the lessons I learned during those three eye-opening years.
I became well practiced in the art of application-writing and helped win the organisation numerous grants. But what I couldn’t work out was why our financial position never improved. The organisation had more cash coming in than I had seen in years, but for some reason our profit and loss statement continued to be stuck on ‘smell of an oily rag’. The grants were high profile and gave the organisation an ego-boost, but eventually the board and membership began to smell a rat: “the money is flowing, but we’re running on the spot”.
The beating heart of the problem became more and more obvious. We were responding quite perceptively to the funders’ vision and doing a great job ‘playing to our strengths and capabilities’, but the funded activities simply weren’t aligned with our own strategy or strategies (that is, both the strategy of the organisation, and the business strategies of individual members).
In short, we were playing: ‘strategic scattergun’.
The hidden costs associated with granted money, whether financial or in the form of blood, sweat and tears, was slowly grinding the organisation down. Members who had been enthusiastic participants at industry events or happily donated time to the organisation’s cause became less and less available. Their micro-businesses couldn’t sustain the weight of ‘common good’ projects when not sufficiently aligned with (and contributing to) their own core vision and activities. We had fallen into the money trap. We were focusing our strategic energies on obtaining funds rather than using these funds to further our overarching vision.
Not all grants and tenders are ‘traps’ to be avoided.
Government and philanthropic funds are often the lifeblood of NGOs, not-for-profit organisations, community organisations and small businesses. Sometimes it is necessary and very appropriate for an organisation to realign goals in ways that are sensitive to this ever-changing context. This includes responding to shifts within a funding environment. But the key principle is: money is a means to an end, and the end must drive the means. Cohesion between vision, strategy and action (approached in that order) form the building blocks for lasting value.
Blog by Ellen
Managing Director, Amfractus Consulting