The worst of economic times brought out the best in nonprofits

“A crisis is a terrible thing to waste,” American economist and NYU professor Paul Romer was credited for saying in 2004. His sentiment, unfortunately, is appropriate again today as nonprofits throughout the sector learn from tough decisions that help them recover from the Great Recession and what we are now seeing will likely be dubbed, “The Great Correction.”

Many of you are familiar with the notion that negative news often gets repeated more often than positive news. This post is an effort to tip the scales toward encouraging information I recently read in The Chronicle of Philanthropy: “How Recession-Racked Charities Emerged Stronger Than Before.”

Paul Romer would be pleased to learn the nonprofit sector did not waste the Great Recession. They’re making good use of it and demonstrating impressive resolve. “Hopeful lessons” are shared in the Chronicle article, and one in particular involves Voices for Children. Voices is a nonprofit dedicated to providing every foster child in San Diego County with a volunteer court advocate.

Voices for Children

After laying off a quarter of the staff, the board resigned itself to the fact that it would have to scrap its ambitious fundraising goal set years earlier and rebuild by stepping up with its own members and setting up a skeletal development shop. The executive director courted and hired a seasoned development director from the arts arena and paid the fundraiser more than anyone else. Today the budget is approaching $6 million, double the amount of its pre-recession budget. Payroll has reached 73 employees. Voices is now in a better financial position and perhaps better equipped to handle the next economic downturn.

Administrative and space collaborations

Stronger nonprofits have also resulted from collaboratives to share space and administrative resources. For example, in Denver, international development nonprofits renovated a 19th-century horse and trolley barn, which they call the Posner Center. The Center is a 25,000-square-foot space that now houses 60 nonprofits. According to the Chronicle, “The Center recently awarded $60,000 in grants to fund partnerships among its tenants, including one between Engineers Without Borders and a group that builds footbridges in Guatemala.”

Built to last

In a related article, “Bold Choices in Dark Times,” St. Louis Opera general director Timothy O’Leary was faced with collecting promised pledges on the day the stock market crashed. The donors told him they needed to “trim” their major gift commitments. O’Leary reported, “The difference [between pledges and fulfillments] was not unsubstantial.”

On the heels of these discouraging donor visits, O’Leary, the new board chair and artistic director, set to work creating a long-term strategic plan that would weather a long economic crisis. While other arts organizations were reducing schedules and turning to crowd-pleasing classics, the St. Louis opera committed to commissioning new and creative work. O’Leary was convinced new and exciting material would compel loyal patrons to return and support the opera.

“The downturn hit the opera’s corporate sponsorships the hardest, and revenue slipped further when the company reduced its draw from its $16.5-million endowment. To compensate, it froze salaries, suspended staff 401(k) contributions, and renegotiated deals with its unions. Yet as the opera rallied donors around its commitment to risk-taking productions, individual giving climbed — gradually at first, and then 21 percent in 2011.”

In 2013, a commitment to innovation and collaboration paid off with an unprecedented debut of “Champion,” which generated more ticket sales than any other production in the history of the St. Louis opera. “Champion” was named a finalist for international opera of the year. Today, the endowment is now topping $28 million.

Always in crisis

With the Great Recession over and a market correction that hopefully will be fleeting, it might be tempting to try risky ventures or allow yourself some wiggle room with financials. Perhaps the lesson here is that nonprofits should act as if they’re always preparing for a crisis. Look for ways to work smarter and leaner and focus on what’s working and core competencies. If you’re interested in engaging in financial forecasting or looking at different scenarios, consider contacting us at Execute Now! where we can help you assemble a financial plan you can feel confident about following.

Image credits: nonprofitcenters.org, urpe.wordpress.com, nytimes.com

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Don’t go it alone: Turn your nonprofit board into fundraising partners

I conducted a straw poll that confirmed my suspicions: Other consultants, executive directors and development directors get the same blank stare from board members that I do when I tell them their job includes an active partnership in raising money. We all know that the economy has created a situation of higher human service needs and, at the same time, a decrease in foundation resources. 

Now, more than ever, board members need to tap into the community philanthropy base that’s out there: individual donors. And they are out there. Giving USA’s latest annual report reaffirms a consistent trend–more than 70 percent of philanthropy comes from individual donations.

In this article, I’d like to offer some simple ways to increase your board’s comfort zone and strengthen your board members’ partnership with you and your organization to impact the bottom line. I’ll be relentlessly repeating the three important components of a successful individual donor effort: Acquire, Retain and Upgrade. Your board may need some support in cultivating donors. Make their job as easy and effective as possible. As with any motivational strategy, the more your board members get positive results, the more enthusiastic they will be to continue their participation.

 

Develop your key messages

 

Work with your board on simple, consistent messages that will convey to prospects that your organization:

Is differentiated and unique from other organizations;

Will use their investment efficiently;

Provides programming with measurable results; and

Has a compelling mission and vision that you believe in.

Leverage your board’s strengths

 

Not all board members are good or comfortable at all aspects of fundraising, and there’s no sense trying to fit a square peg into a round hole. Help your board choose their own action steps – all with the goal of Attracting, Retaining and Upgrading donors. Possible ways to contribute include:

Give a significant “leadership” gift

Identify prospective donors

Design and participate in fundraising activities and events

Engage in media and community outreach

Recruit other people who can join your work

Once your board members select areas of participation, move on to your strategies to Acquire, Retain and Upgrade your donors. It will be important to identify a collaborating “champion” or champions on the board to shepherd its development activities, ensuring that the work plan moves toward the organization’s funding goals.

 

Setting the stage in your community

 

Raise your organization’s visibility with strategies that need not be complicated or costly. Using the key messaging your organization has agreed on, board members should be actively involved in garnering attention, reputation and donor prospects by helping with:

Media coverage: Plan for four newsworthy events or photo opportunities during the year; match each event/opportunity with a compatible reporter (i.e., the education editor or the sports editor); then make a phone call and send him or her a compelling press release. You are doing them a service by offering them great fill for their assignments.

 

Community events and visibility: Get invited to host a table at a community-wide event, join committees and task forces, show up at affairs and network continually throughout the community.

 

Constant ambassadorship: I am like the old stereotype of an insurance salesperson. I am always on the lookout for prospects. Sell, sell, sell. If someone is interested, make sure you know how to contact them to send them follow-up materials.

Personalize every strategy you and your board uses

Take care that each interaction with prospects is culturally sensitive. (You may want to refer to my article on fundraising in diverse communities if you have questions about this).

 

Infuse a sincere passion into the key messages you have developed. Whether making a personal visit or sending a letter of appeal built around a template, you will be asking an individual to support a cause to which your organization is deeply committed. It’s worth spending time on an activity that reminds your board why your mission is important to them, so that those feelings are potent and compelling when they promote the organization.

 

Using the messages that you have agreed on, help your board members customize them to an individual prospect, emphasizing common values and playing to people’s self-interest. If you will be approaching a business person, he or she may care about community economic stability; if it’s a parent or caregiver, he or she may care about access to services. The question is, “Why would they care?”

Acquire new donors

Have your board members make a list of at least 20 people each that they know who also believe in the organization’s mission. That means anyone, without presumptions about finances or life situation. It is critical here to remember that you will be giving someone an opportunity to invest in a cause they believe in. If they choose not to, for whatever reason, they are free to do so.

 

Provide specific guidance to the prospect regarding what level of giving he or she might consider. For instance, you might create levels of giving that resonate with the services you provide, such as a Heritage Patron level of $2,500 to support cultural programming or a Legacy Patron level of $500 to support citizenship education activities.

 

Retain

Whether they donate or not, continue to keep prospects informed about your organization’s plans and accomplishments. Remind board members to leave calling cards at places of business that they frequent (i.e., a copy shop or local restaurant) to convey your organization’s appreciation of their contribution in the community.

 

Continually acknowledge donors. Have your board thank donors promptly and personally with a phone call and handwritten note, acknowledge them in your materials (unless they wish to remain anonymous), invite them to events and involve them in other ways in your organization.

Upgrade

Identify a few dependable donors, including board members, who can give generous “leadership gifts” and, with their permission, leverage that information as motivation when you approach other prospects to join on or to increase their gift.

 

Provide past giving data to your board members, and have them identify individuals or businesses that they know. It may be time to suggest an increase to past donors. Use your judgment here, but it’s reasonable to believe that after several years, a $50 donation could be doubled and so on.

 

These loyal donors are also a great source for special board appeals when your organization embarks on a specific, short-term or emergency campaign.

 

The reality is that raising sufficient money to help your organization achieve its mission can be a relentless and daunting task regardless of the rewards. Your ability to engage your board as a partner in your efforts could be a “four-way win” situation: Your board members become inspired because they personally are making a difference, your donors are able to make an impact on a cause for which they believe, your job is just a little bit easier and, of course, your organization and the constituents you serve are the overall winners.

 

Learn more about Page to Practice nonprofit book summaries related to this article:

A Fundraising Guide for Nonprofit Board Members

Fundraising the SMART Way™: Predictable, Consistent Income Growth for Your Charity + Website

Super Boards: How Inspired Governance Transforms Your Organization

Image credits: articulate.com, elevatoragency.com, builtlean.com, sitefinity.com, allthatiknow.com

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Do your board recruitment goals reflect your evolving nonprofit?

Your organization’s board recruitment goals will change depending on where your nonprofit is in its life cycle. There’s just one problem. Perhaps there was a time when people could describe a fairly predictable, steady trajectory for the life of a nonprofit board. Not so in today’s economy.

Today, an organization that is thriving one day can lose a major anchor funder the very next day. For example, a key funder could be a company that shuts down or is acquired, or an individual whose finances are wrapped up with the wrong investor, or a city government that has lost its commercial base. On the other hand, I am seeing nonprofits receive significant infusions of cash that are game-changers. For example, there are nonprofits receiving substantial new federal grants or contributions from individual donors or private foundations that are shifting their focus to fewer causes and organizations.

Organizational life cycles are also radically affected as nonprofits enter a multitude of strategic alliances – a more and more common phenomenon. Even more game-changing are nonprofit mergers.

When organizations go through such dramatic revenue changes, as well as strategic alliances, the pressure on boards to adapt can be fairly fierce. New pressures are driving some boards to be clearer about board member expectations, board assessment, plans for leadership succession and board composition.

Assessing where your organization stands

1) Before deciding whom you need to recruit for your board, think about the following:

2) What was the driving purpose to establish your organization in the first place, even if that was long ago? It’s valuable to put today in a historical context.

3) What’s your mission today? Is it still relevant and compelling?

4) What’s your vision for the organization’s greater potential over the coming years?

5) What’s your revenue model – your key sources of revenue (government, fees for services, philanthropy; corporate, individual, foundation)?

6) What are key challenges and opportunities going forward?

Assessing where your board stands

Based on numbers two through five above (the mission, the vision, the revenue model, and key challenges and opportunities), consider the extent to which your board has the diversity of expertise, experience, perspectives, networks and relationships to:

Ensure there is a strategy for financial and programmatic success, and plans to update the strategy in an iterative way (board in collaboration with the CEO).

Ensure there are metrics for the board and funders to monitor financial and programmatic progress (board in collaboration with the CEO).

Provide financial and fiduciary oversight.

Select board members with leadership potential for leadership succession planning.

Determining whom you need on your board to advance the mission

Based on “where your board stands” (above), consider the qualifications you seek as you identify and recruit new board members. Think about recruiting new board members with:

Leadership potential.

Diversity of perspectives.

Experience and expertise in particular areas such as: finance, accounting, public relations, law, strategic planning and the mission area on which the nonprofit focuses.

Ability to directly provide support or make valuable introductions in key revenue areas that are relevant to your nonprofit – for example, government relations, corporate funding, private donors, foundations, or pricing for fees for services.

A firm commitment to meet the board’s expectations to be engaged productively in the ways you discuss and define together with the candidate.

Less predictability requires greater dynamism

The era of lengthy terms of board service and board leadership are over. Historically, board chairs served for many years, and board composition remained stagnant sometimes for decades. In today’s challenging and enterprising environment, boards and their CEOs need to be engaged in iterative organizational planning, a highly dynamic process of assessing the board and identification and recruitment of board members who can and will commit to advance the organization in serving the community.

See also:

Leveraging Good Will: Strengthening Nonprofits By Leveraging Businesses

Super Boards: How Inspired Governance Transforms Your Organization

The Invisible Yellow Line: Clarifying Nonprofit Board and Staff Roles

The Practitioner’s Guide to Governance as Leadership: Building High-Performing Nonprofit Boards

 

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Nonprofit board members: What to do when they just don’t get it

Every now and then there’s a board of directors that — how can this be written diplomatically — doesn’t seem to get it. This doesn’t happen often, but when it does it’s never a pretty sight. Usually the not-getting-it board seems to be paying attention, and its members really do want the best for their organization, but somehow or another “the best” never seems to happen. In fact, to most outsiders, the organization might seem immobilized and floundering. There are many reasons why nonprofits seem headed for doom, dysfunction, or both, and most of the time it isn’t directly attributable to board members. But when it is a board problem, here are some frequent scenarios and potential fixes.

The past and the short term future

This common problem was covered in “What Time Are You?” in the May 2013 issue of The NonProfit Times. Ideally, a board of directors is focused mostly on the future, less so on the details of the present. This is because boards of directors should be leaders, not outsiders immersed in management detail. Perhaps not surprisingly, board members’ preferred orientation to time is often connected with their personalities and what they do for work. Board members who work in technical roles of any kind often prefer to operate in the here and now. This means they could be uncomfortable with the kind of thinking that leaders must do to position a nonprofit for the next three or four years.

The solution to this kind of board dysfunction is straightforward yet admittedly difficult. The simplest approach is to construct each board agenda so that the bulk of time will be spent on future opportunities and challenges instead of focusing on subjects from the past or votes requiring immediate attention. Constructing the agenda so that the majority of items relate to future decisions is actually simpler than it seems. It does require that the CEO and board chair work closely together, but that is largely a matter of sharing the same future orientation to time. Part of leadership is shared discipline among the leadership team, and this is a relatively easy place to start.

Visioning as trustees

The term “trustee” is sometimes used to refer to a conventional nonprofit board member, but that is usually either a loose statement of philosophy or an inaccuracy. In legal terms, a trustee holds property on behalf of an outside beneficiary. That is in no way similar to nonprofit board member responsibilities, which are more related to leadership than conversation of assets, but the mythology persists.

Implicit in a trustee self-image is the idea that the trustee must protect the asset as their primary duty. But nonprofit board members are intended to lead the organization, along with the CEO, and preserving assets for beneficiaries is never in the equation. Board members who see their role as “protecting” the organization will always be conservative in the literal definition of the term. While this role might work well for financial assets not owned by the trustee, it can lead to an exaggerated sense of outside threats and a paralyzed nonprofit board if it becomes the dominant image of the board’s role.

A good board member selection process and continual self-education will fix this problem over time. One board, for example, recruited new members by inferring from their strategy the type of characteristics that would be most beneficial. This requires discipline because the tendency is always to search for “star” board members and then try to adapt them to the organization. A self-education process can reinforce those board member skills.

Different “business models”

Any large industry develops its own jargon and shorthand references, and the nonprofit sector is no exception. But nonprofits funded in large part by federal and state governments are inevitably immersed in payment systems, quality assurance mechanisms, and political developments so detailed that even a nonprofit CEO may not be fully abreast of all the nuances.

Board members from outside the sector often speak of their meeting agendas as a thicket of obscure regulations, political connections and mystifying lingo. While these are all necessary elements to manage, board members quickly give up hope of being conversant in them and as a result their ability to make contributions is reduced. This is a situation where Not Getting It says more about the industry than it does the board members. The solution is to reduce the language and complexities to an understandable level. Votes and discussions should take place to allow both board members and senior staff to have solid discussions, with insider references kept to a minimum. And the policies and decisions arising from the discussions need to be expressed in lowest-common- denominator language.

Denial of service

Fundraising imperatives help shape a preference for wealthy board members in a nonprofit with an established fundraising capacity. Equity investors, bankers, and high net-worth individuals can be prized board members because of their personal ability to make contributions and for their networks of similar professionals. The conflict these kinds of board members face is that they are so thoroughly steeped in equity investing and money management that they cannot operate in the non-equity world of nonprofits. Often their personal approach to governance becomes a largely passive and reflexive acceptance of majority decision-making.

Here’s what happened with the board of directors of a large national organization.

Arguably the most powerful person in the room was a former corporate titan with an international reputation who sat silently during a lengthy presentation and discussion of nonprofit mergers. His knowledge of the subject would have been welcomed by all, but for whatever reason he remained silent. Whether motivated by a sincere desire not to complicate the discussion, or for personal reasons, this kind of “denial of service” will make the board less effective by not offering personal expertise. Unlike the other scenarios this one is likely to be tied to individual board members, and often they are the board members with much to offer. Board presidents can be useful in reversing the situation simply by making a personal appeal, and the CEO has the ability to coax more input should they wish to do so. Nonprofit board governance is an imprecise process at best.

Although in theory the role of the board of directors is clear enough, the actual practices of boards vary greatly. A nonprofit board’s apparent passivity or disinterest may be a reflection of the difficulty of nonprofit governance, but on occasion it is the result of a breakdown in the governance process itself. Left unchecked this can lead to confusion and decline. But with the right kind of self-reflection and support, most boards will get it — and get it done.

See also:

A Fundraising Guide for Nonprofit Board Members

Super Boards: How Inspired Governance Transforms Your Organization

The Invisible Yellow Line: Clarifying Nonprofit Board and Staff Roles

Image credit: friendshipcircle.org, publichealthontario.ca, aauw-wa.aauw.net

Special thanks to author Thomas McLaughlin for allowing us to cross-post this article, which originally appeared in The Nonprofit Times.

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Does your nonprofit board give fundraising a warm reception or cold shoulder?

“Your fundraising program reflects the effectiveness of your overall organization. It’s a litmus test of your viability,” explains author Laurence Pagnoni.

He laments that too often fundraising programs exist in a silo, meaning the fundraiser works in isolation and the fundraising programs are not embedded into the fabric of other organizational operations and initiatives.

Over-reliance on rudimentary fundraising and lack of teamwork among board, staff and CEO

Most nonprofits that are envious of high-performing organizations with robust fundraising programs are usually reliant on one dominant funding source for too many years, renew rudimentary or sleepy grant programs, operate planned giving on a “self-serve” basis, and have a board that doesn’t work efficiently as a team with the CEO and staff.

What to do when your board is hot or cold with fundraising

While a chief concern is a cohesive board, CEO and staff, another primary focus Pagnoni emphasizes is, of course, fundraising. In his book, The Nonprofit Fundraising Solution, Pagnoni discusses what to do when your board’s core strength is fundraising and what to do when the core strength is not fundraising.

First, do a little detective work

To take an organization to the next level, a board and CEO must align themselves around the strategic plan, where both parties have a deep understanding of the vision. Then, Pagnoni emphasizes finding your board’s core strength (e.g., fundraising, compliance, etc.) through conversations, a perusal of board minutes, attendance at meetings, and possibly a self-assessment.

The cold shoulder

If a board’s core strength is not fundraising, Pagnoni suggests these steps “in their ideal order of execution”:

1)      Recruit a fundraising professional for the board.

2)      Implement a development or fundraising plan.

3)      Establish gift acceptance policies and use them (i.e., which kind of gifts you’ll accept).

4)      Develop the necessary committee structure (at least a development committee and possibly an events committee or planned giving committee).

5)      Prepare an annual ROI report.

6)      Direct volunteers to fundraising activities they feel lie within their strengths (e.g., good writers write appeal letters; good talkers solicit donations verbally).

A warm reception

If your board’s core strength is fundraising, follow these methods:

1)      Campaign more.

2)      Explore comprehensive giving with top donors (e.g., annual, stretch and planned gifts).

3)      Review your development plan and address a longer period of growth over 10 to 25 years.

4)      Execute more detailed business planning.

5)      Go deeper into one dominant and minor source of revenue, instead of diversifying, since going deeper may prove more lucrative with a good fundraising board.

6)      Develop subcommittees to report to the development committee.

7)      Ensure that strong connections are created between all your various fundraising tactics (e.g., events program connects with the individualized giving program).

8)      Make routine use of external consultants to infuse talent.

Let your relaxed confidence emerge, be nimble and keep an eye on ethics

When it comes to fundraising in harmony with your board whether they embrace or sidestep fundraising, Pagnoni emphasizes identifying solutions that fit your own challenges. He says, “Each person must find his own fundraising path and use his own experience, infused with best practices. What I’ve offered [in my book] are my own experiences based on best practices. Many people ‘want to do it right,’ and I’d rather see a more relaxed confidence emerge where you try a few things, evaluate, change course as may be required. So the challenge here is to be nimble with applying the strategies that I outline and always head toward the most ethical ways to raise the most revenue.”

See also:

The Ask: How to Ask for Support for Your Nonprofit Cause, Creative Project or Business Venture

The Money-Raising Nonprofit Brand: Motivating Donors to Give, Give Happily, and Keep on Giving

Fundraising the SMART Way™: Predictable, Consistent Income Growth for Your Charity + Website

Image credits: ca.citizenrelations.com, discoverindulgence.com, sharpologist.com

 

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Clear up blurred lines of responsibility between nonprofit board and staff

If there was one universal nonprofit rule book that contained a set of rules defining the roles of the board and staff, we could avoid an incredible amount of miscommunication and angst over getting things done at the leadership level.

The fact is it doesn’t exist because things change, asserts author Jean Block. She adds that organizations and people evolve. Block has written The Invisible Yellow Line to provide a way for board and staff leaders to communicate about their roles and “reduce the trap of assumptions and defensiveness.”

Is your organization thriving or diving?

Board leadership is an area that demands much of our attention and effort due to its critical role in helping an organization thrive or dive. The Invisible Yellow Line author, Jean Block, has taken the literature on this topic one step further.

Block recognizes that a lack of clarity among roles between board and staff members is one of the most common reasons for conflict and inefficiency at the leadership level. Block provides leadership guidance in the areas of governance, management, operations and development as well as the key responsibilities where most gray areas (or what Block calls Invisible Yellow Lines) exist.

How to get started with using The Invisible Yellow Line

We asked Jean about how to get started with her model:

CP: The list of key responsibilities at the end of each core chapter (worksheet) is very helpful for generating conversation about the many Invisible Yellow Lines that may arise as board and staff work together. How did you create these lists?

JB: Practice, practice, practice and on-the-job experience as both a board leader and staff leader. These are the kinds of things that apply to most nonprofits and create a stepping-off place for discussion as to how you might handle them in your particular organization. I mean for these discussions to be ongoing because as organizations change and the people running them change, the roles might change.

CP: You state the obvious in the beginning of the book when you emphasize how communication is essential to manage the inevitable Invisible Yellow Lines. Yet knowing this fact still doesn’t always help boards and staffs work together. What’s the best way organizations can start and keep the communication going?

JB: Obviously, when things go wrong, fingers start to point and often there is no good way to get back on track without feeling defensive. I have seen organizations that have adopted the Yellow Line terminology as a way to communicate without pointing. In fact, using the Yellow Line can even be an icebreaker in tense situations.

CP: Is there an area of leadership (governance, management, operations or development) where organizations should start defining responsibilities or do you recommend a different beginning for nonprofits looking to avoid conflict at the Invisible Yellow Line?

JB: I think the answer to this question has to be defined by the organization. For some, defining governance versus management responsibilities is difficult. This is especially true in situations where the board has to transition from a “working board” status to a governing and policy-making board. For others, defining resource development is a critical issue. And let’s remember, these roles are likely to change with changes in staff and volunteer leadership as well as changes in an organization’s focus, maturity, etc.

Get the best of both worlds—our free summary and 20% off the book

If you feel like your staff and board would benefit from greater clarity, consider downloading our free summary of the book. Inside the summary on the cover page, we’ve included a 20% discount promotion code for the book.  Open up communication with your board and staff and prevent critical tasks from becoming enormous problems later.

See also:

The Practitioner’s Guide to Governance as Leadership: Building High-Performing Nonprofit Boards

The Ultimate Board Member’s Book

Super Boards: How Inspired Governance Transforms Your Organization

Image credits: CharityChannel.com, JeanBlock

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Kick these tires before you embark on challenging roads ahead

Last week, we introduced Mission-Based Management by Peter Brinckerhoff and his three philosophies that informed his 30-plus years in the successful business of guiding causes. They are:

“Nonprofits are businesses.”

“No one gives you a dime.”

“Nonprofit does not mean no profit.”

He convincingly demonstrates the truth in each of these points throughout the book and in each of the management competencies he explores—from leadership, governance, and finances to marketing, mission, ethics, and more.

But what exactly do these philosophies mean?

It’s worth asking and answering because these “Brincker-isms” are not a passing phase. Brinckerhoff has written three editions of Mission-Based Management—much to the appreciation of the sector. In other words, the nonprofit sector has kicked the tires and liked the journey in this book. So let’s take a closer look at what informed so many other readers’ decisions after reading it:

Nonprofits are businesses. “Your organization is a mission-based business, in the business of doing mission,” claims the author. He adds we don’t have license to be sloppy or ignore a good idea simply because it was originally designed for the business sector. “Using good business skills as a mission-based manager does not, I repeat, not mean dropping services simply because they lose money, nor does it mean turning people away because they cannot pay. But it does mean paying attention to the bottom line, having a strategic vision, and negotiating in good faith and from a position of strength—in short, being businesslike in pursuit of your mission,” explains Brinckerhoff.

No one gives you a dime. Brinckerhoff explains that nonprofits don’t get gifts. If a donor writes you a check for $100 to your social services organization, she isn’t making a donation. Rather, she is purchasing services for someone or some family she will never meet. Brinckerhoff says the business community calls this giving money in exchange for an expectation of outcome. When you purchase concert tickets, you have an expectation of entertainment. When you purchase an airline ticket, you have an expectation of transportation. When you send money to a nonprofit, you have an expectation of service. In other words, “you earn all the money you get,” asserts Brinckerhoff. An interesting paradigm shift.

Nonprofit does not mean no profit. Brinckerhoff encourages you to consider this point. Making money in a nonprofit is legal. Nowhere in the state or federal law does it say nonprofits cannot make a profit. He asks, “If you cannot make a profit, why do you need a tax exemption?” Profit is essential and a key tool for financial empowerment, a subject the Brinckerhoff covers at length later in the book.

As you move forward with your organization, ask yourself if anyone on your team subscribes to the thinking Brinckerhoff tries to overcome in these three philosophies. If so, how is he affecting your decision-making and outcomes? I know, it’s challenging to turn the corner on new thinking but well worth the effort.

Challenging terrain ahead

While I have you thinking about challenges, I’ll add one more. We asked consultant Raylene Decatur what she thought was most challenging about being a mission-based manager today:

CausePlanet: Where do nonprofit managers most commonly find challenges with leading a mission-based organization in your experience?

Decatur: Discipline is the number one challenge. The manager may be a disciplined individual but leading a disciplined department, division or organization is challenging. In a corporation, the bottom-line (profit and loss) creates discipline. Mission-based organizations have multifaceted impacts, which lack the quantified clarity of financial results. The board members, staff and volunteers may each love that mission differently and each be pulling the organization in slightly (or profoundly) different directions. It is the manager’s job to harness that energy and achieve the organization’s stated outcomes, year in and year out.

If you find yourself looking for a comprehensive analysis of how high-impact nonprofits lead their causes, consider Mission-Based Management; it’s grounded in Brinckerhoff’s road-tested philosophies and you’ll benefit from years of wisdom gained from many journeys.

See also:

Building Nonprofit Capacity: A Guide to Managing Change Through Organizational Lifecycles

Do More Than Give: The Six Practices of Donors Who Change the World

Forces for Good: Six Practices of High Impact Nonprofits

Image credits: Brinckerhoff, sikhchick.com, seriouswheeels.com

 

 

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Financial trends affecting your nonprofit in 2015

At Execute Now!, we’re often in the unique position of having a broad perspective on what trends affect financial management in the nonprofit sector due to the wide range of clients we serve. During this time of year, the legislative sessions are gearing up for what’s on the horizon in 2015. Most recently, we heard our country’s State of the Union address.

In the spirit of evaluating the state of affairs, I couldn’t help but share some of my own nonprofit sector insights for 2015 in light of some of the trends I’ve observed in the news. Join me in taking a look forward:

Giving circles and impact funding

If you’re like me, you’ve noticed the growing popularity of giving circles. Millennials have helped make this movement a popular way to give collectively with others. Giving circles are a form of participatory philanthropy where groups of individuals donate their own money or time to a pooled fund and decide where to donate the funds. During this process, they may also engage in activities to increase awareness of and engagement in the issues surrounding the cause or community project. Giving circles can be as informal as a group of friends or as structured as a foundation. Some examples of giving circles can be:

Investors
Nonprofits
Students
Policy makers
Business leaders
Political leaders

An article in The Chronicle of Philanthropy about a Jewish Group launching its own giving circle, called the Natan Fund, reported that studies show people who participate in giving circles tend to give more, have stronger religious and community ties, and are more strategic in their charitable contributions. They are also younger. Most of the members in the Natan Fund are under 45.

Natan Fund’s executive director, Felicia Herman, observes, “Young givers like to do things in a community of their peers.” The Natan Fund has approximately 200 members and has given roughly $9.6 million in grants since its formation in 2002. It launched a website as part of its efforts to offer a resource library that helps potential philanthropists join in the growing movement of collaborative charity. Natan.org is one of many giving circle sites cropping up to make it easier for collective philanthropy. Websites like www.Tilt.com are one of the “easiest ways to pool money with your group and make amazing things happen,” according to the website tagline. Tilt and other giving circle sites abound on the Internet. Enter “giving circles” in the search bar to find 14 million plus results.

Philanthropy and politics

No forecast is complete without acknowledging the uncertainty created by politics and legislative sessions surrounding nonprofit tax laws. According to The Chronicle of Philanthropy reporter Alex Daniels, the Republican takeover of Congress will mean lawmakers will dig deep into the tax code.

Some of the provisions under scrutiny, says Daniels, will be:

Extending the charitable deduction window into April 15 after the calendar year-end

Benefits for land conservation, donations to food banks and contributions to charity made from certain retirement accounts

The IRS considering what constitutes political activity by social-welfare organizations and whether their donors can remain anonymous

Foundation excise taxes (The House passed a measure to simplify and lower this tax to one percent.)

A proposal to require donor-advised funds to pay out at least five percent of their assets each year

The provision of federal support for social-impact bonds that fund “pay for success” efforts at the state and local levels

Pending rules that limit how to conduct federated campaigns (The United Way, in particular, hopes a Republican Congress will remove recently added federal regulations.).

Most of the sector’s preliminary feedback on these issues surrounded the April 15 deadline for charitable gifts. Some large nonprofits don’t like the idea because it diminishes the emotional appeal during the holidays. Lawmakers argue that businesses don’t really know what they have to give until they’ve completed their taxes in the first quarter. Depending on the legislation that passes this year, nonprofits could be making a year-end and April push for gifts.

Light at the end of the tunnel

Allow me to give you a dose of certainty after looking at the uncertain legislative provisions above by sharing some good news I’m confident will positively impact charities this year. The federal Office of Management and Budget (OMB) announced effective December 26, 2014, that “governments at all levels entering into written agreements with nonprofits to deliver services to the public have an affirmative duty to pay their fair share of the costs that those nonprofits incur.” This will require government agencies to reimburse nonprofits for some or all of their indirect costs. Amazing. This report came as a delightful surprise, especially since I’ve written at length about the lack of consistency with government funding and underwhelming support from its agencies.

In Nonprofit Advocacy Matters, Tim Delaney, President/CEO of the National Council of Nonprofits was quoted as saying, “The changes promised by the new rules are a major victory for people who depend on nonprofits every day. If properly implemented, the new rules will finally end the harmful practice of governments imposing artificially low limits on the reimbursement of indirect costs that nonprofits must incur. Those arbitrary caps have essentially forced charitable nonprofits to subsidize government.”

I couldn’t have said it better myself. I hope these observations have given you a sense of what 2015 may hold for your nonprofit. Giving circles are an inspiring movement and demonstrate innovation behind our giving spirit. Politics will always provide a climate of uncertainty and challenge us to overcome bureaucratic hurdles. The OMB’s new requirement teaches us an important lesson: There is always room for optimism—even with the government. Bloomberg Businessweek reported on the economic power of optimism in a January 8 article: Optimistic people work harder, get paid more, get elected to office more often and win at sports more regularly. They even live longer. The effect of optimism spills over into business decisions. Let your optimism impact your leadership decisions this year. You may live longer and have time to start a giving circle of your own.

See also:

Cash Flow Strategies: Innovation in Nonprofit Financial Management

Nonprofit Sustainability: Making Strategic Decisions for Financial Viability

The Nonprofit Business Plan: The Leader’s Guide to Creating a Successful Business Model

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CEO Survival: Thou shalt not get (too far) ahead of thy board

It’s the first commandment of nonprofit CEO survival: thou shalt not get ahead of thy board. At least, not too far . . . But you do need to be a little ahead of them . . . Just not so much that they notice and get offended.

If you’re confused, you’re not alone. Most veteran nonprofit CEOs have a sack full of stories about interactions with their board. One of the mistakes that is most frustrating — and potentially damaging — is getting too far ahead of a board of directors. The result is the collapse of a seemingly promising idea or policy change, and possibly a severe dent in the CEO’s credibility.

What follows are some thinking points to help negotiate this always treacherous interpersonal whitewater. The central premise of each approach is simple: Ideas and concepts are easily discussed and changed, and this is the proper role of leadership, including the board. Plans are also easily changed, but the effort that goes into them increases the commitment to their plans. Stick with ideas in the boardroom, plans outside of it.

Too far out on growth (Egos and economics)

Two of the most powerful motivators swirl around the intersection of the CEO and the board: ego and economics. By tax law, neither board members nor executives can have a private ownership stake in a nonprofit. But the executive (and other staff) have a potential economic interest, in the form of salary and benefits, financial stability, and improved systems. They also have an ego investment in the form of pride of performance. Together, these constitute a compelling package. This is one of the many reasons why executives will be more likely to propose growth strategies than will board members.

Board members can only invest their egos, so when presented with plans for growth their biggest ego investment can often be summed up in the question: “What if it fails?” This is one of the reasons why board members will be more likely to oppose growth than will executives.

To avoid getting too far out on growth, the CEO can frame the proposed expansion in terms of organizational ego. This approach might use arguments such as “this is an extension of what we already do well” and “if we don’t do this, [another organization] will, but we’re much better at it.”

Too creative (Divergent and convergent thinkers)

During the 1960s, a researcher named Joy Paul Guilford suggested that people think in two different ways — divergent or convergent. Divergent thinking is creative in nature, while convergent thinking seeks the “right answer.” Most individuals are instinctively comfortable with only one of these approaches.

Nonprofit CEOs, because of the nature of their pro- scribed roles, are more likely to engage in creative thinking. Boards are more likely to prefer discovering the “right answer.” This also tends to be true because the CEO is usually more knowledgeable about the field than the board as a whole, since board members are typically volunteers without extensive opportunities to learn about the sector. This tendency of boards to seek the “right answer” also explains why so many motions are passed unanimously.

The creative (divergent) CEO will sometimes have a difficult time with the board because of this difference in thinking styles. When the CEO is too creative for the board’s taste, outsiders such as authorities, respected peers, and consultants can often be a buffer. Note that the board doesn’t necessarily want to diminish the CEO’s creativity – which they probably respect. They want to find independent reassurance that they’re on the right path. Convergent thinking is often done in stages. We drill down to the first correct answer, then the next one, then the next. Bringing the board along might also need to happen in stages.

Acting before deliberation (Getting it done versus deliberating over it)

CEOs are in charge of getting stuff done. Boards are in charge of deliberating about stuff. The tension is obvious. Putting these two approaches carelessly together can result in wasted time, hurt feelings, and worse.

While taking action and deliberating policies are about as different a pair of activities as it is possible to have, a little role clarity will help things go more smoothly. Translation: with a little mutual candor, the CEO won’t always be trying to jump ahead while the board won’t always be trying to slow things down.

At the risk of oversimplification, boards make choices and executives make decisions. Individuals tend to be good at sizing up a situation, making a decision, and carrying it out. Groups, on the other hand, are simply better at refining and improving ideas, plans, and strategies. The CEO will not get dangerously in front of their board if they build in the opportunity for its members to sincerely try to improve the quality of the CEO’s decisions.

This is not second-guessing. It has been proven that groups  that  emphasize  collegial  conversation  and  can evaluate  themselves  honestly  make  better  decisions than  do  individuals.  The inevitable problem is process and time required to get there. Researchers have also shown that people tend to have an exaggerated sense of their own individual capabilities, which is why the CEO/board split can be particularly intense.

The ideal situation exists when an executive’s approach to an issue is vetted by the board in a supportive way. This fits the expected roles — the CEO by definition has to be the public face of the organization, while the board should concentrate on the quality of the outcome (the choices above).

Too risky (Lead with ideas, not plans)

It will come as no surprise to veterans of nonprofit board rooms that CEOs can get too far out in front of their boards on all matters involving risk. This is a structural inevitability — the CEO (as well as other executives) is almost required by the uniqueness of their position to be the designated risk-taker.

The real challenge from a risk management perspective is how quickly the CEO can bring the board around to their position. Considering the baked-in conservative nature of most nonprofit boards as described earlier, this could take some time.

One good way to gain board support for a strategic risk is, again, to lead with ideas, not plans. This is one of the reasons why good strategies, as opposed to strategic “plans,” are not filled with details such as assignments, dates, and activities. Most boards go through three stages of reaction when confronting new ideas for the first time: learning, analysis, and acceptance. Committing to details too soon disrupts this flow and can waste time.

Leading with ideas also makes it possible to work through various scenarios without committing resources. If the dialog is genuinely open it enables the board to safely explore the risks abstractly before encountering them in real time. Note that all parties must be sincere about this process. It can lead to long board meetings, but the offset is that board members will be more committed and will usually report greater satisfaction in their roles.

Another way to avoid getting too far out front is for the CEO to anticipate and cope with real risk as a regular practice. Dealing with a board’s fear of risk is a different problem. This should happen anyway, but doing it routinely helps the CEO establish their conservative bona fides.

The first commandment of CEO survival is to never to get too far out in front of the board of directors because they too have a responsibility to shape the future. But the CEO doesn’t want to be behind the board, because their job is to lead. It’s a structural dilemma, but most of the pathways to success are based on the second commandment of CEO survival: Lead with ideas, then talk about plans.

See also:

The Practitioner’s Guide to Governance as Leadership: Building High-Performing Nonprofit Boards

The Ultimate Board Member’s Book

Super Boards: How Inspired Governance Transforms Your Organization

Reprinted with permission by The Nonprofit Times and Thomas McLaughlin.

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Does your organization have a high impact board? Seven questions to ask

Great boards have a significant impact by adding value not available to their organization’s current resources and means. High impact boards are the key difference between achieving good results and great results. They don’t spend their time micromanaging, listening to reports, approving predetermined decisions and second guessing their staff’s decisions. Instead, they act as a high performance team using their member’s skills, talents, knowledge and expertise to make key decisions and build organizational capacity for producing results.

How can you ensure your organization benefits from a high impact board? Here are seven questions to ask:

1.      Do you have the “right people (board members) on the bus”?

Jim Collins in Good to Great (HarperCollins, 2001) stresses the importance of having the “right people on the bus” for building a great organization. High impact board members have a passion for the mission, vision and the organization. They act as team players using their individual knowledge and expertise to engage in collective decision making. These board members put their egos aside and have the ability to engage in strategic thinking that builds on one another’s ideas, thoughts and opinions. Each board member adds specific value to the board that would greatly impact the organization if he/she were to leave.

2.      Does your board partner with the chief executive officer (CEO)/executive director (ED) to operate as a championship team?

High impact boards have a culture similar to a championship sports team. Their focus is on becoming or remaining number one, so their culture is built upon using the individual skills and abilities of each team member collectively to achieve their goal. Patrick Lencioni, in his book The Five Dysfunctions of a Team (Jossey-Bass, 2002) lists these characteristics of high functioning teams:

·        High level of trust between their members

·        Willingness to engage in conflict

·        High level of commitment to each other and their organization

·        Collective accountability for following through on board agreements

·        Attention to producing results

3.      Does your board chair and CEO/ED act as one leadership team?

There is a high level of trust between the board chair and the CEO/ED of a high impact board. They act as one leadership team communicating the same message about the organization. They are clear about the differences in their individual roles and build on each member’s skills, strengths and expertise to complement each other. They feel comfortable disagreeing with each other respectfully at board meetings and putting their unfinished thinking on the table for others to build upon.

4.      Does your CEO/ED take personal accountability for building the board’s capacity and leadership to govern with excellence?

CEOs/EDs of high impact boards understand their critical role in building their board’s capacity to lead. Most board members have little, if any, training in how to effectively govern a nonprofit organization. They often think that their governing role is to manage the day-to- day operations of the organization. CEOs/EDs need to constantly educate their board members about effective governing practices and provide them with the skills, information and support to successfully carry out their roles. The CEOs/EDs must also learn about what motivates each of their board members and about important aspects of their life (i.e. family, passions, etc.).

5.      Does your board have a “Culture of Inquiry?”

Most boards see themselves as policemen or compliance regulators. High impact boards add significant value by engaging together with their CEOs/EDs to determine future directions, impacts and strategies. They have what Nancy R. Axelrod calls a “Culture of Inquiry,” in which they are constantly learning and sharing knowledge and information about how they can have greater impact. They are not afraid to question complex, controversial or ambiguous matters or to look at issues from all sides. They are clear about their decision making authority, as well as about those they have delegated to CEO/ED, which allows them and their staff to feel comfortable discussing any key issues impacting their organizations. They have active feedback mechanisms, employing board and board member assessment processes, that help them engage in continuous improvement.

6.     Do your board and CEO/ED constantly recruit and groom future board leadership?

Most organizations wait until the board chair announces that he/she plans to retire to begin succession planning. They often end up “twisting the arm” of some unwilling board member who is often not the most qualified person, but who is willing to serve as the next board chair. A high impact board, usually through its governance committee, and the CEO/ED, think about who will be their next board leaders when they recruit and select new board members. At least a year ahead of the retirement of their current board chair and other board leaders, high impact boards have identified their next board leaders and have begun grooming them for their jobs.

7.      Do board members feel a significant return on their invested time?

Board members who feel that they are in an exciting learning environment, meeting interesting new contacts and friends, having fun and feeling that they are part of a winning team, are more willing to give of their time, expertise and resources to the organization. If their board service significantly enhances their life experiences, they will make it a high priority in their day-to-day activities.

A high impact board adds significant value to an organization that can be measured in terms of organizational resources, organizational performance and organizational influence. The board plays a leading, proactive role partnering with the CEO/ED, rather than merely serving as an audience for staff or as a regulator providing oversight. If the high impact board vanished, the organization would suffer.

See also:

Super Boards

The Board Game

The Ultimate Board Member’s Book

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