Navigating Nonprofit Leadership…Without Losing Your Mind (Pt.1)
I absolutely adore the nonprofit sector. I love that it is mission-driven, service-oriented, and aimed at solving some of society’s biggest problems. I love the grassroots nature of many of these organizations, and the way they learn and adapt to the needs of their communities. But what I love the most are the two ingredients that give the sector its heartbeat: the people who lead these organizations, and the passion they infuse into everything they do. The people who lead nonprofit organizations are some of the most passionate folks I’ve ever met: these are the advocates, the activists, the change makers, the doers. Unfortunately, these are also the people who will work themselves to the bone to make sure their organizations are making positive impacts in their communities. The fact is, there’s always more to do, and never enough time or resources. This is the reality for many small and midsized nonprofit organizations and the executive directors who lead them. So, how does an executive director effectively position him/herself to lead when the day-to-day realities get in the way? How does an executive director excel as a leader if he/she is too busy with all the “doing” that goes into managing a nonprofit organization, its programs, and its people? I believe the first step in empowering a nonprofit leader to do their best work is to provide them with an understanding of the things they should be most heavily focused on. Once a leader is clear on where they should be spending their time and energy, he/she can start figuring out what they need in terms of time, resources, and professional boundaries, to be the best leader they can for their organizations. In Part 1 of this post on nonprofit leadership, I am focusing on six fundamental leadership duties that every executive director must be familiar with. Next time, I’ll offer some practical tips to help nonprofit leaders find balance and maintain their sanity in the face of competing priorities. OK, here goes: Six leadership fundamentals that every nonprofit executive director must know… Human Resourcing – even if your nonprofit has a human resources professional on staff, the executive director is still one of the most important people involved in recruiting staff, board members, and volunteers. It is the E.D.’s responsibility to ensure that the organization has the human resources needed for good governance, operations, and programming. This includes nurturing a strong board of directors, hiring and training staff and volunteers, and creating a culture where everyone feels valued and appreciated along the way. Financial Management – the nonprofit executive director must have a solid understanding of their organization’s finances, financial cycles, and revenue projections. While it is true that the nonprofit board is fiscally responsible for the organization, the E.D. is often responsible for creating the annual budget, developing forecasts and projections for the board, and identifying new fiscal issues that arise due to strategic organizational shifts or other changes, whether foreseen or unforeseen. Fundraising – the E.D. is also chief fundraising officer for their organization. Sure, some of the fundraising work can be delegated to grant writers or other paid development staff, but the largest donors and grant funders are going to expect face time with the leader. A nonprofit E.D. must be comfortable with fundraising and donor relations and be prepared to spend a great deal of their time doing this type of work. Program Knowledge – although the nonprofit E.D. should NOT be spending the bulk of their time implementing their organization’s programs, this person should be the primary person out in the community talking to people about the programs as part of their fundraising and community relations duties. This means they must know enough about each program to clearly articulate their activities, their impacts, and their needs to donors and other community stakeholders. Planning – the E.D. should be thinking at least 2 years ahead at all times – about programming, about staffing, and about the organization’s board. On the program side, the E.D. should be considering trends related to the organization’s target population and thinking about how programs might need to change or expand to accommodate shifting community needs. On the staffing side, the E.D. should be conscious of growing staff needs to meet program growth and professional development goals. And, in terms of the board, the E.D. should be thinking about what expertise will be lost through term expirations or term limits, and what types of expertise and representation is needed moving forward to maintain a strong organization. Community Relations – the E.D. should be spending more time out in the community than sitting in the office. Their role is to be out there creating new relationships and nurturing existing relationships – with the board, with major donors, with the organization’s natural partners or collaborators, and with other major community stakeholders. As the face of your organizations, the E.D. should be the first person that comes to mind when your organization comes up in the community. Next time, I’ll share a few practical tips to help the nonprofit leader maintain their sanity among competing priorities…and stay focused on leading!
Read moreLet Your Policies Be Your Guide
Hey there, friends in the nonprofit sector! Today we’re going to talk a bit about your nonprofit board’s role in policy making, and I’ve got a few tips to offer about policies that every nonprofit organization should have. But first, a quick story from the field: A good friend of mine is the executive director of a regional nonprofit organization that works on issues of housing and housing affordability. One of her board members, a real estate agent, is constantly pitching fellow board members about purchasing investment properties or refinancing their homes with him. At her wits end, my friend asked for my advice on how to deal with this board member and encourage him to stop pestering his colleagues for business. I encouraged her to find her Conflict of Interest policy and slam it on the table with authority at her next board meeting. OK, I skipped the table slamming part, but the rest is true. This story illustrates two things in my mind: first, the significance of policies to the overall governance of a nonprofit organization; and second, the importance of board members understanding (and enforcing!) the policies that are in place. Who Needs Policies, Anyway? I can’t tell you how many nonprofit leaders I’ve met who have told me some version of the following: “I have spent so much time creating and growing my programs that I never stopped to think about policies and procedures.” If you share this sentiment, friends, just know that you are not alone. The fact is, nobody sets out to start or grow a nonprofit organization because they’re excited about governance policies. People who get involved in our sector tend to be doers, problem solvers, program implementors….so it’s no surprise when policies get forgotten in the midst of the more exciting (and often more challenging) work of growing programs and services. Whether we think they’re fun or not, governance policies are so important to the long-term sustainability of a nonprofit organization. Not only do they help lay the foundation for how the business will be governed and managed on a daily basis, but they also often serve as a pathway to help navigate tricky situations when they arise. Going back to the story I shared at the beginning of this post, if my friend didn’t have an existing Conflict of Interest policy at her fingertips, who knows how much longer her board member’s inappropriate behavior would have been tolerated. With the policy in hand, she was able to successfully initiate a conversation with her executive committee and the violating board member later resigned. I know…we don’t like losing board members, but some board members simply must go. And in these types of tricky, political situations, written policies keep everyone focused on what’s best for the organization. Nonprofit Governance: The Board’s Policy Role One of the most important roles for a nonprofit board is to oversee compliance and policy issues for their organizations. This includes ensuring that the organization’s governing documents are in order, that federal and state required filings are handled, that the mission and vision statements are clear, and that the appropriate policies are in place to help the Director guide the organization on a daily basis. It’s easier to keep board members focused on policy during an organization’s start-up phase when everything is being built. But, for those well-established nonprofits where policies have been in place for many years, it’s not uncommon for boards to get complacent about this duty…especially when there are more fun and interesting things to pay attention to, like the organization’s programs. Please don’t let your boards get too distracted by the fun stuff, friends. While it’s great for your board members to be curious and excited about the programmatic work, their actual job is governance, not programs. And the key to good governance is good policy. This policy duty, along with strategic planning and fiscal oversight, make up three governance must-haves for your board. Policies…But Which Policies? There are many policies that a nonprofit organization might need to govern itself effectively. Personnel policies, financial policies, operating policies, the list is long. But, for the sake of this post, I’ve pulled out a few of the top policies I look for when working with a nonprofit client: Board Member Duties Policy– documents in writing what is expected of a board member. This policy might address issues like meeting attendance requirements, giving expectations, and committee service, among other things. Conflict of interest Policy– specifies various circumstances that may be considered conflicts of interest and clearly spells out requirements for the disclosure and handling of these issues. This is one of the first policies an organization will create, as it is required even before nonprofit status is granted. Budget Policy– clarifies the budget creation and approval process and puts provisions in place regarding the circumstances under which board approval is required (or not) for spending. Gift Acceptance Policy– specifies the types of contributions that will be accepted by the organization and how. This policy may include gift options like cash, stocks, real estate, etc., and will spell out how these gifts will be handled, and the donor acknowledged. Investment Management Policy– if your organization has enough cash to warrant investment activity, there should be an investment management policy to guide it. This policy will include the types of investments that are acceptable (stocks, bonds, etc.), place limits on the percentage of the portfolio that can be invested in these vehicles, and include accountability measures for outside investment managers, if applicable. Confidentiality Policy– stipulates that board members and staff must maintain the confidentiality of any personal or sensitive information they acquire during their service to the organization. This policy should define what types of information is considered confidential and may also include a formal agreement to be signed by board and staff members. Record Retention Policy– specifies the types of records that will be maintained and for how long. This policy should be created with IRS guidance in
Read moreNonprofit Finance: Your Board Members Hate It. Help Them Love It.
Throughout my twenty-plus years in the nonprofit sector, I have encountered a lot of governing boards. I’ve served as a staff liaison to board committees, managed boards as an executive director, provided professional development consulting services to boards, and served on numerous nonprofit boards through my volunteer work out in the community. In each of these experiences, I have observed one very predictable reaction when it comes to organizations’ finance committees. Friends, your board members do not want to be on your finance committee. Of the various types of governance committees that a nonprofit may have, finance committees are usually the least in-demand when it comes to board members volunteering to serve. If you are blessed to have at least one CPA on your board, you can usually count on that person to serve as chair. But filling the committee with a variety of voices and perspectives is usually like pulling teeth. What’s this all about? Well, friends…fact is, finances can be intimidating! Assets, liabilities, pledges receivable, oh my! Revenues, expenditures, investment strategies, please help! It takes a special kind of mind to LOVE finance. But, at the end of the day, the finance committee is by far the most important committee a nonprofit organization has. Whether your board members love finance or hate it, they have a fiduciary duty to the organization, and it behooves them to understand the finances to be sure there are no fiscal surprises down the road. And, as a nonprofit leader, it behooves YOU to give your board members the tools they need to be successful. What Does Fiduciary Duty Mean, Anyway? When a person agrees to serve on a nonprofit board of directors, they are agreeing to become fiscally, ethically, and legally responsible for the organization. In terms of financial responsibilities, this means board members must ensure the organization’s fiscal health in all aspects. This includes approving the organization’s budget, ensuring that organizational expenditures remain within the approved budget, keeping a close eye on bank accounts and investments to ensure proper handling and performance, and overseeing the annual audit and tax filing processes. I know, it’s a lot. And the fact that it’s a lot reinforces the importance of the endeavor. Board members’ fiduciary duties simply cannot be overstated, and it is a big mistake to rely on the one CPA on your board to do all the heavy lifting in this area. So, how can nonprofit leaders help bring more awareness to the importance of organizational finances and support board members who say “yes” to serving on finance committees? Here’s a few tips: Training is Key. Setting board members up to be impactful finance committee members is so important. Start by offering a training session so members can learn about the organization’s current financial position. Is your nonprofit financially healthy or are you operating with less than one month of operating expenditures in the bank? Either way, your board members should see and understand. They also need training on the types of reports they’ll be reviewing regularly, their role in the budgeting process, and any other financial issues that they’re responsible for overseeing. Take them through the annual audit process and discuss why it matters. All of this is important, you must never assume that board members understand it all the moment they join your finance committee. If you’re lucky enough to have a CPA on your board (or other professional who is well-versed in finance), perhaps you can recruit this person to help with training, whether one-on-one with individual committee members or as a group. If you don’t have an in-house financial expert, spend a few hundred dollars to hire a consultant for this purpose. It’ll be well worth the expense, your board members will appreciate it, and your organization will be better off because of it. Slow Down the Finance Discussions. I can’t tell you how many board meetings I’ve sat through where the board treasurer sprints through their financial report as if it will self-destruct in 30 seconds. Other board members may try to follow along, but most simply zone out until the report is over. Is this familiar, friends? I know… Nonprofit leaders can begin to deepen board members’ understanding simply by slowing down financial discussions during meetings. Give the treasurer ten minutes instead of five. Review the profit & loss and balance sheet reports in detail. Avoid too much financial jargon that board members outside of the finance committee won’t understand. Discuss the finances in context with the organization’s programs. Incorporate charts, graphs, etc. for the visual learners on your board. Encourage questions and spend whatever time it takes to get those questions answered. Seriously, friends, your nonprofit’s finances are too important to rush. Please, take it easy. Be Clear About Annual Financial Cycles. As your nonprofit’s leader, you are more likely to understand your organization’s financial fluctuations better than your board members. Do you have a major annual program that hits your balance sheet hard with expenses every June? Do you have a gala that replenishes your funds and enables you to build up your reserves at the end of each year? Are there two months out of every year when you barely meet payroll? Whatever these cycles look like for your organization, its important to be clear and transparent with board members so they don’t panic when a normal dip occurs. Helping your board members understand these cycles can also enable them to think strategically and offer solutions to help the organization through difficult times. It’s Tricky But Not Impossible. Sure, friends, nonprofit finance can be overwhelming, confusing, and outright boring for board members who are less numerically inclined. But this thing called “fiduciary duty” is real and helping your board members perform their important fiscal oversight duties is so important to your organization’s overall health and sustainability. So, spend the time giving your board members what they need to be successful in this area. Slow down the financial discussions at your board meetings. And don’t
Read moreA Gentle Reminder About Governance…
I’ve taken too long of a break from writing, friends! Life and business sure have a way of taking over. I’m excited to be in the middle of launching a new education series for nonprofits with my friends over at the Academy for Grassroots Organizations. This new series will be called the Level Up Nonprofit Education Series. All workshops will be created and facilitated by yours truly, and while we’re targeting small and midsized nonprofits, there will surely be something for everyone. So, stay tuned and get ready for some excellent tips to take your nonprofit’s governance and management to the next level. Preparing these new workshops has forced me to take a fresh look at some of the fundamentals that I and many other nonprofit leaders take for granted. For example, I often notice that the words “governance” and “management” are used interchangeably. Yet, these terms couldn’t be more different in their meanings and applications. So today, I’d like to offer a quick reminder about governance and how it is distinct and separate from nonprofit management. OK, here goes: Governance is defined as: the act or process of governing or overseeing the control and direction of something1. Management is defined as: the judicious use of means to accomplish an end2. Taken at face value, governance and management are easy enough to distinguish. But on a day-to-day basis, when the nonprofit leader is focused on getting things done, often with limited resources, it’s really no surprise when lines get blurry. When it comes to the governance and management of a nonprofit organization, friends, it’s important that these two very different roles be treated as such. Equally importantly, we must ensure that the right people are involved in the roles that are most appropriate for them and encourage everyone to stay in their respective lanes. In short, management is for the executive director; governance is for the board. When we talk about governance in terms of “overseeing the direction of something”, the board of directors should be top of mind. It is the board’s role to create the organization’s vision, oversee the finances, and ensure that the business needs of the nonprofit are in order. Governance includes duties such as strategic & financial planning; policy setting; legal & fiscal oversight; and executive staff oversight. Governance is all about the high-level vision and oversight that a nonprofit needs to be successful. Governance is where the “what” of an organization gets defined and nurtured. It is NOT where programs get developed, nor is it where minor budget expenditures get approved or where volunteer management occurs. Governance is vision and oversight, and the rest – the “how”, the day-to-day, the implementation – is management. More on management another time. Even though board members shouldn’t be involved in the daily management of a nonprofit, their role is just as important to the organization’s overall success as the executive director, program manager, or volunteer. Governance can and should be active. What this means in practice is that board members should prepare for and actively participate in board meetings, understand the organization’s mission, pay attention to the finances, and serve as ambassadors in the broader community. There is a lot involved in nonprofit governance, friends…more than just showing up for the occasional meeting. Over the next several weeks, I’ll dive a little deeper into the main components of nonprofit governance. Check back for a quick refresher and I’ll be sure to share more information about the Level Up Nonprofit Education Series as it becomes available. Take it easy!
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