Category: leadership

case for support, communications, fundraising, invaluable, leadership, management, planning, strategy

3 misunderstandings about nonprofits that prevent them from succeeding

It’s been six years since “The Nonprofit Starvation Cycle” was published and two years since Dan Pallotta gave his famous TED talk about the financial burdens facing nonprofit organizations. Despite these widespread, articulate, and compelling calls to arms – and a plethora of research, reports, guides, and tools – the sector continues to suffer from financial struggles that have broader impacts on its progress and success at tackling societal problems. In 2013, Guidestar, Charity Navigator, and BBB Wise Giving Alliance started the campaign to end the Overhead Myth, but letters and signatures are meaningless unless we actually put words into action.

What is it that’s stopping us from taking action? Why do we continue to do things the same way when we know there’s a problem and there are solutions at hand?

It strikes me that what drives our behavior is a set of underlying assumptions and beliefs about nonprofits – paradigms that paralyze us from doing things differently. These unspoken paradigms perpetuate the funding and management practices that keep nonprofits from thriving financially and successfully responding to societal problems at scale:

  1. The Misnomer of Non-profit. We associate profit with personal gain and nonprofits with the public good, but nonprofits are businesses, and any successful business needs to earn a surplus. For nonprofits, this surplus isn’t doled out to investors but rather it’s reinvested in the growth and improvement of the organization. Without making a profit, nonprofits live under stressful conditions and cannot expand or innovate to have more impact.
  2. The Overhead Problem. We all know the story: not enough money goes to the nonprofit enterprise – the business side of things that provides for the programs and services we all love and desire, a.k.a. “overhead.” The problem is that the overhead-to-program ratio is seen as an indicator for efficiency, when in fact, it’s actually not, and varies with an organization’s business and business model. We should care less about the overhead ratio and more about important things like effectiveness, or whether the organization is actually solving the problem.
  3. The Restricted Nature of Giving. Unlike the way we invest in for-profit companies, with nonprofits we feel we get to specify how our funding should be used, because hey, it’s our money, right? Unfortunately, this restriction on spending limits an organization’s decision-making and reflects a lack of trust that the organization knows how to spend our money wisely. We should have more faith in the people who dedicate their lives to the causes we care about and the organizations we value so much. (And if we don’t have that much faith in them, should we really be giving them our money?)

There are many different efforts out there to improve nonprofits – how to write better fundraising appeals, how to use social media to attract more support, how to manage volunteers, etc. – but those efforts will only have limited success if the deck is stacked against nonprofit organizations as a whole. Until we get at the root of the problem and change the way we value and invest in nonprofit organizations, everything else is like rearranging the chairs on the deck of the Titanic.

For more on these paradigms – and how funders and organizations can break them by doing things differently – download a free copy of Invaluable today.

 

board, communications, leadership, management, strategy

Does your board understand its job?

When people join a nonprofit board, they often do it because they either care about the cause or because they’re looking for the experience – or both. But they don’t always know what the roles and responsibilities of the Board are, and they often aren’t given the proper orientation.

As a result, I’ve seen many boards operate inefficiently and ineffectively. Sometimes they micromanage programs. Sometimes they fail to hold leadership accountable. Sometimes they don’t always act as effective evangelists for the organization. And all too often they don’t have a cohesive understanding of the organization – or a common vision to guide it.

While the board is the ultimate leadership of any entity, it is the responsibility of the senior management (usually the Executive Director or President) to help orient the Board and define its role in guiding the organization.

So what are the roles of the board? What should it be doing to maximize its effectiveness for the organization – and what should it not be doing? Here’s a brief rundown:

  • Manage resources. This is an obvious one, but the legal obligation of any Board of Directors is to oversee and ultimately be responsible for the organization’s financial well-being. This doesn’t mean line-item approvals or even approving department budgets, but the board should review organization-wide budgets and keep tabs on its assets and liabilities. If the ship sinks, the board is the captain that goes down with it.
  • Manage leadership. Everyone’s got a boss, including the Executive Director or President of the organization. The board is the supervisor of the organization’s top brass, and as with any supervisor, it is the board’s job to support the Executive Director and review his or her performance. Just as other employees go through a performance review, so should the Executive Director, with clearly defined expectations and competencies. The Executive Director should also have professional development that strengthens his or her ability to lead the organization effectively towards its goals.
  • Provide strategic guidance and focus. As the highest leadership of the organization, the board should help define the organization’s mission and vision, and the strategies the organization will take to be successful in achieving them. The board should shape and oversee the organization’s programs in terms of their alignment with the mission and progress, but without micromanaging it: the board should not review program details – just shape the direction for programs and review higher-level measures of progress. The board is also responsible for ensuring the organization – its leadership and its programs – stays focused on the mission, and does not wander off chasing distractions (aka “mission-drift”).
  • Monitor and evaluate. As part of the strategic planning process, measurable goals and outcomes should be defined, as well as indicators of progress and measures of success. Without monitoring every detailed indicator for each program, the board should keep tabs on the organization’s progress towards achieving its mission, including strategic goals and program goals. Just as the board should periodically review the performance of the Executive Director, the board should also periodically review the performance of the organization towards its goals.
  • Be evangelists. Many boards have requirements for financial contributions to the organization, but beyond giving money there is the important job of promoting the organization. Board members should be talking to their networks and the public about the organization and garnering support for its work. Board members who join in support of the cause will be better at this than those just looking for experience on a board, but in either case the staff should train the board to speak effectively on behalf of the organization.
  • Be a moral compass. In addition to keeping the organization focused on its mission, it should also ensure its integrity by adhering to legal standards and setting the highest standards of ethics. This is partly done through its own behavior, partly through the policies it enacts and enforces, partly through its management of the Executive Director, and partly through its review of programs and resources. A public charity is ineffective if it is corrupt, immoral, or has a tarnished reputation. After all, if it can’t be trusted, why would anyone support or invest in its work?

A board can be a key asset in support of an organization’s success, but this can only happen if the board assumes its proper roles and responsibilities. And just as any good employee knows how to manage up to his or her supervisor, so should an organization know how to manage up and support its board.

Do you think your board has the right role for your organization? Has it been difficult to manage the board or to maximize their effectiveness? What problems are you facing with your board and what has been helpful for getting the most of out your board?