The need for digital transformation in the mission-driven sector is not new. Yet with the onslaught of changes caused by the pandemic, it heartens me that digital transformation is finally being recognized as an operational imperative by nonprofit executives.

Any talk on this topic centers around the idea of “integration.” What this means is that all of the digital systems you utilize to provide value to your audiences — from the platforms you employ to communicate with supporters, to the places where their data and information are stored — can be turned into a cohesive ecosystem that works together to boost your impact and efficiency.

Yet integration isn’t only about your digital platforms. It’s also about workflow processes, and how your organization’s strategic goals are distributed across its portfolio. 

I’ve been thinking more about these organization-wide aspects of transformation lately. In doing so, I’ve realized that the potential upstream point for enduring digital transformation likely lies within the Finance and HR functions—primarily through changing how budgets and annual performance metrics are structured and reported on. 

Let’s start with finance. 

If you’re thinking of starting, or deepening, digital transformation at your nonprofit, I can think of at least a few starting points to consider in terms of finance and budgeting.

Funding for systems that are critical to organizational effectiveness may need to move beyond an individual department’s purview.

In most nonprofits, an expense like a website or CRM is generally allocated to a single department’s overhead. This happens even when the impact of the system or project extends beyond one department’s walls, and influences the effectiveness of any number of teams. 

While this approach to funding has practical advantages, it gives project leaders a strong incentive to prioritize their department’s needs over those of other teams. This is harmful in the context of digital transformation, where the imperative is to integrate systems and processes across departments to serve collective success. 

When budgeting for systems and processes that span the entire organization, can budgets be made fungible and spread across departments? Can reporting on expenditure be overseen by staff from another department? 

Funding ought to consider the total cost of ownership of each system.

When a budget for a technical engagement or system acquisition is first developed, your accounting team will often consider how to depreciate the costs over the course of three years–often asked of staff is to figure out if the cost is an “expense” or “capital”. Puzzlingly, there’s rarely a similar conversation about the total cost of ownership of the system beyond the initial acquisition. Completing a new acquisition or system upgrade is an essential prerequisite to reaping its value. But the real work happens during everyday usage—and in most cases this requires proactive funding. It’s best to look ahead and budget for this at the outset.

Funding decisions benefit when they’re driven by a multi-year strategic roadmap that’s evolutionary.

Despite the high cost of many of today’s digital solutions, few organizations have prioritized developing roadmaps that spell out how to move forward with digital and data transformation over time. This means that every year can seem like Year 1 all over again.

With a roadmap in hand, organizations can take an incremental, evolutionary approach to system acquisition and integration over multiple years. This helps reduce anxiety, risks, and surprises. In addition, it has the downstream benefit of freeing department leaders and project managers from some of the pressure to sweep short-term implementation issues and imperfections under the rug, in an effort to justify budget costs. 

Progress in the realm of digital transformation is never a single linear progression. We need to accept there will be dips and struggles. For example, our organizations might not yet have all the knowledge that’s required to immediately implement a cutting-edge digital strategy. Hiring for this skill set might not come with a powerful deliverable in year one. Yet with the right person on board, we can grow confident that the cultural challenges of organizational change will be managed purposefully, and that critical functions can eventually be brought in-house.

HR drives the success of digital transformation as well.

Digital transformation is a collective, long-term endeavor. It requires all relevant departments to align around a shared strategy for integrating systems and processes. Human Resources plays an important role in building and maintaining this alignment through its oversight of performance goals and incentives.

In particular, performance may need to be incentivized across organizational disciplines.

Even in nonprofits that attempt to link employees’ annual performance goals to their organization’s strategic priorities, goal-setting is usually managed within individual departments. Whereas most of the operational work we do everyday takes place horizontally, in partnership with other internal teams and departments. 

So if I need Jane’s help and time to move my project forward, but she is in a different department with a different priority, our incentives may be at cross purposes. The odds aren’t so great that she will be willing to sacrifice achieving her individual and departmental goals to help me achieve an organization-wide strategic goal for a sustained period, if her performance goals aren’t tightly aligned with mine. This often manifests itself in the ever increasing difficulty of scheduling time with stakeholders and the lack of hard lines on creating RACI matrices and living by them.

In the world of communications and fundraising, contact management is an excellent example. Many nonprofits struggle to manage ownership of their contacts database. Fundraising departments are often forced into the role of system “owner” since their needs directly drive organizational revenue. Yet multiple departments (e.g. communications, government relations, etc.) manage systems that feed into this database. Could adoption of consistent, systematic processes for contact management be spread as a goal across departments—rather than one isolated staff member having to constantly beg for time and attention from their colleagues? 

At PTKO we like to say, “Answers get all the credit, but questions do all the work.”

Digital transformation is not about a new piece of software or skill; it is an enduring change in your core operational practices. We don’t have perfect answers for you on every aspect of making this change stick. Yet we all need to start asking bigger questions, and find ways to look past the tactical issues of the moment to explore how to move transformation efforts further upstream.