Non-Profit Governance: The Work of the Board, part 1

August 6, 2013 erik Board development, Board governance, volunteers

Dani Robbins is the Founder & Principal Strategist at Non Profit Evolution located in Columbus, Ohio. I’ve invited my good friend and fellow non-profit consultant to the first Wednesday of each month about board development related topics. Dani also recently co-authored a book titled “Innovative Leadership Workbook for Nonprofit Executives” that you can find on Amazon.com.

Governance: The Work of the Board, part 1

Hiring, Supporting and Evaluating the Executive

By Dani Robbins

As mentioned in Board Basics and reposted on this very site “Boards are made up of appointed community leaders who are collectively responsible for governing an organization.” That includes:

Setting the Mission, Vision and Strategic Plan,
Hiring, Supporting and Evaluating the Executive Director,
Acting as the Fiduciary Responsible Agent,
Setting Policy, and
Raising Money.

As you know, one of my goals is to rectify the common practice in the field of people telling non-profit executives and boards how things should be without any instruction as to what that actually means or how to accomplish it.

Since I wrote a recent post on Strategic Planning, I’m going to circle back to that one and start with Hiring, Supporting and Evaluating the Executive Director.

What that means is:

It is the Board’s role to hire the Executive Director, also called CEO. Prior to hiring, interviewing or even posting the job, it is imperative the Board discus what they want and need in an Executive Director. This conversation cannot be farmed out to a committee primarily consisting of non board members, or to a consultant or hiring firm. That will only get you what they want and think you need – not what you want and actually need.

What skill sets and experience do you need in a leader?

Growing, turning around or maintaining an organization require very different skill sets. Which trait do you want your new leader to have? Does your leader need to be a subject matter expert? Does she need to be local? Does he need to be a fund raiser, an operations person or both?

I recommend a search, REGARDLESS OF . . .

if there is a good internal person,
if someone on the board wants the job, or
if there is an obvious heir apparent.

Do a search, let everyone apply and see who best matches your needs. For more information on conducting a search, please click here.

Once your hire an Executive Director, s/he needs to be supported. Supporting an Executive Director is where the rubber meets the road.

I once had a colleague tell her board to “Support her or fire her, but to choose.” While I was shocked, I was also in agreement. The job of the Executive Director is very difficult and energy spent on worrying is not spent on moving the organization forward. (To the Executive Director’s out there: Worrying about keeping your job precludes you from doing your job. You have to do what you believe is best, based on your experience, information and training, within the boundaries of your role and the law. We all know that any day could be the day you quit or get fired. That can’t stop you from leading.)

Communication is key: the Board needs to know (and approve of) what the Executive Director is doing and the Executive Director needs to know (and be willing to do) what the Board wants.

It is the Board Chair’s job to be the direct supervisor of the Executive Director and the entire Board’s job is to support him/her, set goals and hold her accountable to those goals. This means the Board has to let the Executive Director fulfill the bounds of his/her role. There should also be a strategic plan that is being implemented, board approved policies that are being followed and an annual evaluation process for the Executive Director (and the rest of the staff).

The vast majority of Executive Directors rarely get evaluated, and when they do it’s often because they asked for an evaluation. (To the Board Presidents out there: Executive Directors, just like Board members and most other people, when left to their own devices will do that they think is right. What they think is right will not necessarily be aligned with what the Board wants, especially if what the Board wants has not been discussed or communicated. It also may not be aligned with anything anyone else is doing. See the Strategic Plan link above to create alignment.)

Executive Directors should be given expectations and goals (just like all other staff) and should be evaluated against those expectations and goals every year. There should be a staff (including executive) compensation plan that has a range for salaries for each position and reflect comparable positions in your community; raises should be given within the confines of that plan, or the plan should be revised. (More on that in the Setting Policies blog to come in the next few days.)

Hiring, Supporting and Evaluating the Executive Director has to happen – in full- for your executive to be an effective leader, for your board to fulfill its responsibilities and for your organization to fulfill its mission.

When an Executive Director is hired right, supported appropriately and evaluated effectively there’s no end to the impact it can make on an organization and a community.

What’s been your experience? As always, I welcome your insight and experience.

Audit committee or no audit committee? That is the question.

July 30, 2013 erik Board governance, organizational development

audit When it comes to financial management, I’ve run into two types of non-profit organizations. There are those organizations who struggle with financial management and don’t have a strong and independent Finance committee in place. Then there are agencies whose Finance committee is the strongest voice in the boardroom. For the latter type of organization, the question about whether or not to form an audit committee always seems to linger in the air with a diversity of opinions spinning around it.

In my experience, strong finance committees have had a difficult time accepting the case for support for forming another standing committee focused on finance. After all, it is hard to argue with the “Why fix something that isn’t broken?” argument. Moreover, the “Our agency should stay ahead of Sarbanes-Oxley legislation” also seems to fall flat.

I fought these battles a decade ago when I was on the front line leading a local non-profit organization. I was successful in my quest to form an audit committee, and it allowed us to relieve the Finance Committee of the following roles and responsibilities:

Selecting the audit and periodically putting the audit work out for bid.
Reviewing the work of the auditor and making recommendations to the board based on this work.
Providing board oversight of the auditor so that management hasn’t his/her only point of contact.
Review and assessment of the agencies internal controls.

In hindsight, I loved this move for two big reasons:

It got some stuff off of the Finance Committee’s plate and allowed them to focus on important stuff.
It gave me another committee opportunity to engage board volunteers and recruit influential finance-minded non-board volunteers.

I must admit that in the beginning many people (including myself) still had a difficult time with the blurry line between these two committees. This issue recently reared its head at an agency where I am doing some work, and I really like the clarity that came out of the conversation. So, I thought I’d share it with you this morning.

Finance Committee – develops and monitors financial practice
Audit Committee – monitors the process in which financial practices are carried out

Are you still not feeling it? OK, the following is a list of resources that I really like and hopefully provide you with the answers for which you’re looking:

Minnesota Council of Nonprofits: “Nonprofit Finance vs Audit Committees“
BDO’s Nonprofit Standard blog: “Effective Audit Committees“
The Center for Association Leadership: “Nonprofit Audit Committees — A Toolkit“
American Institute of CPAs: “AICPA Not-for-Profit Audit Committee Toolkit Downloads“
Virginia Society of Certified Public Accountants: “Audit Guide for Audit Committees of Small Nonprofit Organizations“

I hope you find these links helpful.

Has your organization formed an audit committee? What was your experience? Did you develop two different committee charters with two different committee work plans? If so, how did you divide things up? How have things worked since you made the change? Does your audit committee feel like a superficial after-thought that you only did because people were telling you it was a best practice?

Please scroll down and share your thoughts and experiences in the comment box below. This is an important board governance question that always seems to fly under the radar. Let’s talk about it.

Here’s to your health!

Erik Anderson
Founder & President, The Healthy Non-Profit LLC
www.thehealthynonprofit.com
erik@thehealthynonprofit.com
http://twitter.com/#!/eanderson847
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http://www.linkedin.com/in/erikanderson847

Is your non-profit good at the Why-How-What?

July 24, 2013 erik Board development, Board governance, Planning

A few days ago I bumped into a non-profit friend who had recently viewed a TED Talks video on YouTube featuring Simon Sinek titled “How great leaders inspire action“. It was obvious to me that this was a TED Talks video that I needed to view because it had inspired her to take action. Not only was she talking to everyone about what Simon calls the “Golden Circle,” but she had also shared the video with board volunteers as a precursor to a strategic discussion.

I think there are three things that make this video so contagious and easy to watch:

The idea of the “golden circle” is easy . . . What-How-Why.
These ideas are woven into many non-profit professionals’ DNA.
The speaker does a nice job of relating What-How-Why to other companies and their successes (e.g Apple)

Early in the video Simon says,

“Every single organization on the planet knows WHAT they do . . . Some know HOW they do it. Whether you call it your differentiating value proposition, you proprietary process or your USP . . . But very, very few people or organizations know WHY they do what they do. And by WHY, I don’t mean ‘to make a profit’. That is a result. It is always a result. By WHY I mean what is your purpose? What’s your cause? What’s your belief? Why does your organization exist?“

I’ve done a lot of strategic planning over the years. I’ve also done lots of tactical planning. And Simon hits on a super powerful idea with his What-How-Why.

what how why Those organizations that excel at strategic planning have a very clear understanding of what they do, how they do it, and why they exist. However, those organizations that are little fuzzy on these ideas do a lot of wrestling with themselves. Sometimes countless hours are spent at the 50,000 foot view talking about these issues . . . and for good reason! Without clarity on What-How-Why, there is no way you can set goals, develop objectives and write action plans that are meaningful in any way, shape or form.

Some of you might be scoffing right now and asking, “How in the world can a non-profit agency not know ‘WHY’ they exist? It is as simple as revisiting their mission statement!”

Well, not so fast, my friend. There are at least two situations that come to mind where this simple idea starts to get blurry.

Some organizations have LONG histories and over the course of time their mission changes. For example, the March of Dimes was founded to address polio and today it exists to improve the health of mothers and babies. When this happens, sometimes the shift isn’t as clear as it was for March of Dimes . . . the ‘WHY’ gets fuzzy . . . and the challenges ensue.
Some organizations experience mission creep because their resource development strategy wasn’t well-defined and board members let staff chase all sorts of funding opportunities regardless of what it was for or what they do. The end result kind of looks like a McDonald’s restaurant that also sells electronics and chiropractic adjustments. In short, the ‘WHY’ gets fuzzy.

I believe that good non-profits revisit the questions of What-How-Why on a somewhat regular basis. I applaud my non-profit friend for using this YouTube video to frame and stage an engaging boardroom discussion. If you have a little time today, I suggest you click-through to YouTube and view the video. If you like it, then forward it to your board president and have a discussion with them about its value. If you’re both excited and engaged, then share it with your board and talk about it as a group.

[youtube=http://www.youtube.com/watch?v=qp0HIF3SfI4]

If you end up doing any of what I just suggested, please circle back around to this blog post and share your experience in the comment box below. We can all learn from each other.

Here’s to your health!

Has your non-profit discovered Quora yet?

July 22, 2013 erik Board development, Board governance, Fundraising, technology

questions When I used to work at Boys & Girls Clubs of America (BGCA), my colleagues were responsible for the existence of something called theFUNDRAI$INGbank, which is a special webpage embedded inside of the intranet accessible to local affiliates. We outsourced maintenance of this page to FundRaisingInfo.com. There were many different resources located on “The Bank” including a free service called “Ask The Expert“.

Whenever I talk to agencies who aren’t Boys & Girls Clubs about “Ask The Expert,” I’m typically told how lucky local Boys & Girls Clubs are to have such a service (and to have access to it for free). Usually, somewhere in those conversations, the person with whom I’m speaking says they wish they had access to such a thing.

For those of you who don’t have a national organization behind them offering such resources and services, I’ve always told them not to fret because we now live in the 21st Century and answers are mostly just a click away. I’ve encouraged non-profit friends to open their minds to the full potential that Google search offers them. I’ve also reminded them about how many non-profit bloggers are out there begging for comments, questions and engagement (this blogger not withstanding).

Now I am adding another suggestion to those non-profit staff and board volunteers who are in search of answers for free . . .

QUORA

Have you checked out this new online Q&A webpage yet? If not, I suggest you do so because it looks like a great resource for non-profit folks with questions. Here is what Wikipedia says about Quora:

Quora is a question-and-answer website created, edited and organized by its community of users. The company was founded in June 2009, and the website was made available to the public on June 21, 2010.^[3]

Quora aggregates questions and answers to topics. Users can collaborate by editing questions and suggesting edits to other users’ answers.^[4] Quora’s main competitors are social bookmarking sites like reddit, social networking sites like ChaCha, and numerous question and answer websites.

Unlike BGCA’s “Ask The Expert” service, the answers and advice you get from Quora might not necessarily be from an amazing expert like the folks at FundRaisingInfo.com. However, if you go into it with the right mindset and an understanding that the answers you receive might just be from your peers, then this could be a great resource for you. At the very least, it represents a good starting point for finding answers.

Here are just some of the non-profit and fundraising questions that I see being asked on Quora:

What are some good platforms for online fundraising?
How do you manage memberships and donation drives in a small or medium size non-profit?
What cutting edge fundraising techniques are charities using?
What are the characteristics of high-performing non-profits?
How much power does a non-profit board have?

Interesting questions!

Of course, there is the obvious question, “What are some of the best ways non-profits can use Quora?” Click here if you want to see responses.

When you have a question with which you’d like other people’s opinions, where do you go online? Google? WordPress? Blogger? Facebook? LinkedIn? Quora? Where do you find the most value in your search for answers? Have you used Quora yet? If so, what was your experience? Please scroll down and share your thoughts and experiences in the comment box below because we can all learn from each other.

Here’s to your health!

Don’t put Dorothy on your board of directors

July 19, 2013 erik Board development, Board governance, organizational development

On Monday, I shared with you a few observations from The Wizard of Oz and Oz: The Great and Powerful as I think it pertains to non-profit work. At the end of Monday’s post I promised to take you further down the Yellow Brick Road by revisiting a series of Oz-inspired posts from two years ago. Today’s post is about board composition and board development. Enjoy . . . here’s to your health! ~Erik

Don’t put Dorothy on your board of directors

Originally published on October 27, 2011

dorothy September 15, 2008 . . . do you remember where you were and what you were doing? It was the day the world changed. It was what some people have called an “economic 9-11″. Regardless of how you characterize the day that Lehman Brothers filed for bankruptcy and the stock market started its crash, it is hard to argue the following: 1) the economic paradigm we all used to live in shifted and 2) nothing will ever be the same again.

This week I have used characters from “The Wizard of Oz” to talk about current challenges facing the non-profit sector. Today, we will spend a moment talking about Dorothy.

Dorothy is an iconic character who has been described as a “level-headed, plucky, resourceful, determined, all-American, populist”. However, I’ve always seen her as a traditional “conservative”. Don’t believe me? Refresh your memory with this quick YouTube clip. Of course, I don’t mean this in any kind of political way, but more of the traditional meaning of “holding to traditional attitudes and values and cautious about change or innovation”.

You cannot afford to have Dorothy on your board of directors during these tough and turbulent economic times!

Mentally take a look around your board room and see if you can identify how many Dorothy-like volunteers occupy chairs. They are kind folks (dare I say friends) who look and sound like the following:

They are frightened by the economic “tornado” whirling throughout the world. They talk about economic news constantly.
They wish for yesteryear and reminisce about times when your non-profit was facing a different set of circumstances. They fixate on making things better . . . just like they “used to be”. They’re focused on making that formerly kick-butt special event awesome again. They’re insistent that you can hold onto all of your government grants if you just tried a little harder. After all, there is no place like home.
They are visibly closed to new and innovative ideas that have not been tried. They believe ePhilanthropy is a passing fad. They won’t entertain ideas around merger, acquisition, or strategic alliances that share back office functions. After all, that is not the Kansas they so fondly remember.

Don’t get me wrong. I am not suggesting a “witch hunt” to root out these folks and fire them. Dorothy serves an important role on your board. She is that cautious voice that keeps you from getting into trouble. She will stop you from pulling the plug on your annual campaign and direct mail appeals and “going all in” on ePhilanthropy efforts. Valuable? YES! However, what happens when you have too many Dorothy-like board members? Or what if you have those well-intentioned people serving in the wrong roles (e.g. board president, annual campaign chair, strategic planning committee, etc)?

My best two pieces of advice for non-profit staff and board volunteers this morning are:

Be especially strategic and thoughtful about where you ask these people to serve in your organization. This means that you need to: a) identify who these folks are and b) have a clear understanding of which volunteer opportunities are acceptable for conservative personalities.
Focus your board development efforts over the next year on recruiting people in your community who don’t resemble Dorothy to serve on your board. This is not the time to pine for Kansas! This means your board development committee needs to double down on the “prospect identification” and “prospect evaluation” elements of the board recruitment process. Gone are the days when everyone sits around a table and tosses out names of good, kind and resourceful people. BE STRATEGIC!

I suggest that the type of people your board development committee should look for exhibit some of the following characteristics:

They don’t appear to be “personally” economically impacted by the Great Recession
Their business or line of work seems to be doing fine
They are naturally positive and have a decent outlook on the future
They seem to be open to new ideas (as evidenced in their personal and professional lives)
They are “outside-of-the-box thinkers (as evidenced in their personal and professional lives)

Remember, if you want to keep the flying monkeys away from your non-profit agency, STAY AWAY FROM DOROTHY.

OK — if you aren’t buying into my cheesy “Wizard of Oz” analogy, then please go to the library and borrow the book “Who Moved My Cheese“. You’ll thank me later.

How has your agency adapted to the new realities? Have you changed your resource development model or are you still trying to do things the old way? Do you see your board development efforts changing or focusing on different types of prospects? Please use the comment box below and weigh-in. Please remember that we can all learn from each other. In fact, it is probably the most effective way many of us learn.

Here is to your health!

Are you King of your non-profit forest?

July 17, 2013 erik Board governance, Fundraising

On Monday, I shared with you a few observations from The Wizard of Oz and Oz: The Great and Powerful as I think it pertains to non-profit work. At the end of Monday’s post I promised to take you further down the Yellow Brick Road by revisiting a series of Oz-inspired posts from two years ago. Today’s post is about leadership. Enjoy . . . here’s to your health! ~Erik

Are you King of your non-profit forest?

Originally published October 25, 2011

cowardly lion As a new business owner who just opened up a nonprofit & fundraising consulting practice, I’ve made it my business to “get around”. In addition to visiting with many of my oldest and dearest non-profit friends in Elgin, Illinois, I recently attended a regional Boys & Girls Club conference and engaged countless staff and board volunteers from around the country through a very aggressive social media strategy including Twitter, Facebook, LinkedIn and this blog. While I don’t want to exaggerate, I was surprised at how many conversations looked and sounded like this“Wizard of Oz” YouTube clip.

Here were some of the things heard I nonprofit CEOs, fundraising professionals, and board volunteers saying that leaves me wondering “King or Coward”:

“Erik, I am so sick and tired of my board volunteers passing the buck on fundraising and expecting staff to pick-up the pieces. I’m just gonna tell them ‘how it is’.”
“Erik, our staff has let us down and not provided the necessary leadership during these tough economic times. I’m afraid the board will just need to look at making draconian cuts and muddle through these tough times.”
“Erik, donors are cutting their charitable giving during these tough economic times. So, the only thing left to do is tell donors and anyone who will listen that our agency is on the brink of closing its doors if people don’t start stepping up.”
“Erik, I know we need to invest heavily in capacity building activities during this economic down turn if we have any chance at making it out the other side. However, I just know that the board isn’t up for this kind of work at this time, and I won’t use my influence to push for something that doesn’t have legs.”
“Erik, I refuse to invest in ‘planning’ activities because they just don’t work. We once wrote this amazing plan, and it just ended up on the shelf collecting dust.”
Erik, fundraising is the board’s job, and I am hesitant to offer my opinion on what needs to be done because then it becomes ‘my idea’. And if ‘my idea’ falls short, then it just becomes one more reason for the board to fire me. Remember . . . board volunteers don’t fire themselves, they always fire the executive director.”

I understand that tough economic times has a chilling effect on leadership, but your only chance at surviving these strange and new times is by eating an extra bowl of Wheaties in the morning and showing up for work ready to take some smart risks and actively lead. Here are a few observations and suggestions I have for the non-profit community as my “listening tour” comes to a close:

My kindergarten teacher always taught me that “telling people” isn’t very effective if you want them to be your friend. I suggest sharpening your listening skills and do more asking than telling when it comes to engaging donors, volunteers and board members.
The “blame game” is an old and tired game. If the board is unsatisfied with the agency’s performance and is feels inclined to play this game, my advice to those board volunteers is skip it, save your breath, fire the executive director (because you know you’re going to do it regardless of what anyone tells you), and get on with the business with digging out of your hole. Brutal? Sure it is, and I’m uncomfortable with the recommendation. However, how many times have you seen board and staff struggle through tough times with lots of finger-pointing and it all worked out “happily ever after”??? Never! So, be decisive and move on to what is important — survival. By the way, after the hatchet job and search for a new leader, it is probably important the board turn the mirror on itself, dust off the guillotine and quickly get rid of non-performing, poor fundraising members. I suspect many of those soon to be headless board volunteers were leading the charge to fire the executive director. Vive Le France!
Pointing the finger at donors is the quickest way to lose a finger. I don’t care if it is an individual, corporation, foundation or government agency. I’ve seen “the little boy who cried wolf” fundraising strategy work once, but it gets more difficult to fundraise the more you use this tactic. Of course, the reason for the fast diminishing return is because no one likes to invest their charitable giving in what they perceive to be a “sinking ship”. Stay positive and double down on stewardship efforts. People like to see the good things their contributions helped produce. So, show it to them.
Written plans that fall short are most likely the result of: a) a poorly designed planning process that did not appropriately ‘engage’ those you needed to step forward during the action plans part of the process, b) thin-skinned leadership who didn’t like what they saw during the evaluation phase and dismissed the call to action by putting their heads in the sand, or c) a poorly designed implementation tools (e.g. committee work plans, staff performance plans, dashboards, scorecards, etc). Don’t toss one of your few ‘engagement tools’ out the window. Instead, double down on do it differently and better!
Attention agency staff: If you find yourself treading water and paralyzed by fear of failure, then please do the honorable thing and resign. I don’t say this to be mean, but board volunteers need strong leaders who know how to LEAD. With leadership, sometimes comes failure. Right? So, don’t be the “Emperor who walks into the room without any clothes on“. (Please accept my apology for this last YouTube link. It was salty and unprofessional, but it was sooooo funny I just had to share it because this uncomfortable and funny video is exactly the same feeling we all share when a non-profit staff person is paralyzed and unwilling yet pretending to lead)

I could go on and on, but I’ve gone on too long. Please use the comment box below and share a story on how you are “king” of your non-profit castle and not a “coward”. How are you investing in capacity building efforts? How are you engaging others who seem to be stuck in neutral during these tough times? Please weigh-in because we can all learn from each other. Your words can also serve as inspiration to others who are struggling.

Here is to your health!

What are you doing with your non-profit data?

June 13, 2013 erik Board development, Board governance, Fundraising, organizational development

If you are collecting data on your non-profit organization’s performance and doing nothing with it, then you should be tarred and feathered. You are too busy to be doing things that don’t get you a return on investment on your time. Unfortunately, data collection can be time-consuming if you haven’t built good systems to make collection easy, and there are too many small non-profit organizations who are under-resourced and haven’t built those systems.

So, why do so many agencies still invest the time to collect data when it is difficult to do and so incredibly time-consuming? In almost every instance that I’ve seen, it is simply because a donor is requiring it or they are affiliated with a national organization that makes it mandatory.

Here is a thought . . . if you are going through the effort, then why not benefit from it?

What should you measure?

The “WHAT” is hard to answer unless you know the “WHY”. In other words, you should measure things relating to board engagement and performance if you want to improve those things. You should measure things relating to money and donor behavior if you want to improve your resource development.

One national organization with whom I am very familiar (wink, wink), developed an entire organizational scorecard full of key performance indicators (KPIs) that breakdown into the following five ares:

strategic growth
increased impact
financial health
resource development
board of directors

I know that a number of subscribers to this blog aren’t members of this “unnamed national organization,” and you are probably wondering what are some of the KPIs listed under these categories. While I don’t think I’d be violating any major trade secrets in sharing those KPIs with you, I want to be respectful of their work. So, I’ll only share a few of those KPIs to give you an idea and a start:

net change in number of clients service
average days cash on hand
net change in total income
percent of board volunteers that attended 75% of meetings
percent of board volunteers who make a personal unrestricted financial gift
percent of board volunteers who make a face-to-face solicitation on behalf of the agency

If you are interested in developing KPIs and a scorecard for your non-profit organization, here are a few resources I’ve found online that may help you:

Association of Fundraising Professionals: “Key Performance Indicators: Nonprofits Need Them, Too!“
Liz Marenakos of Blackbaud: “Identifying and Measuring KPI’s“
Virtue Center: “Brutal Honesty: Measuring Non-Profit Success with Key Performance Indicators“

What next?

I point you back to my inflammatory opening sentence:

“If you are collecting data on your non-profit organization’s performance and doing nothing with it, then you should be tarred and feathered.”

Collecting this data isn’t rocket science, but it is time-consuming and you’re too busy to invest that time and get nothing back in return. Right?

If you are measuring program-related KPIs (e.g. outcomes data, impact data, etc), then you should share that info with the staff responsible for those programs. If you are measuring fundraising-related KPIs, then you should share that info with your fundraising staff and fundraising volunteers. If you are measuring board engagement related KPIs, then you should share that info with board volunteers.

I believe all KPIs should be shared with all board members in all instances (but at the appropriate time and setting) so they understand whether or not the organization is healthy or unhealthy. I also believe that where possibly, KPIs should be directly tied to performance management systems and evaluation tools.

The big idea here is that collecting this type of data, sharing this type of data, and integrating this type of data into systems like employee performance appraisal and board evaluation will drive change because it creates urgency, accountability and the assessment information necessary upon which organizational plans can be built.

Has your agency developed KPIs? If so, how do you use them? With whom do you share your data? What has been the result? Please use the comment box below to share your experiences.

Here’s to your health!

Nonprofit board development is a process when done right

June 5, 2013 erik Board development, Board governance, organizational development, volunteers

board of directors3 The single most important thing an organization can do to ensure its sustainability is develop its board. You may be thinking — “No Dani, it’s staff, leadership, programming, impact or fundraising” — and all of those things are important, but none of them can happen the way they should without a strong board. Everything flows from a strong board of directors.

Strong boards set the mission, vision and values for an organization; they hire the talented and effective CEO and hold that CEO accountable for ensuring and implementing the strategic plan; they raise money, act as the fiduciary responsible agent over the finance and the programming; and they set policy. When it’s done right — like all good leadership — it looks like nothing.

Don’t be fooled, it’s not nothing and it’s not easy.

Board development is the intentional process by which the board is perpetuated, evaluated, and educated. It is usually stewarded by a committee that may be called Governance, Nominating, Administrative or Board Development, and it helps develop an effective board through its two main functions:

Board Building: A diverse board of directors (thought, skill, race, faith, ability, orientation, age, and gender) that is passionate about the mission of the organization is created through a board building process. That process includes an assessment of the current board and needed skill sets, identification of prospective members, and recruitment and nomination of new board members.
Board Education: Board members will fully understand and can effectively fulfill their commitments to the board of directors when a comprehensive orientation, continuing education, and annual evaluation process is in place.

The Board Development Committee outlines what the organization is looking for in a board member by analyzing current board make-up and identifying future needs, and finding the very best person(s) to meet those needs. In this identification process, the Board Development Committee informs the entire board of what the expectations are for board service.

The Committee reviews the prospects and sets a target number and priority listing of those they wish to bring on at the annual meeting. This list is presented to the board of directors for their comments. Any concerns are directed to the Board Development Committee.

In the absence of concerns, or after such concerns have been addressed, the prospective board member is contacted, preferably by a board member, a committee volunteer, or the person with whom the prospect is most closely affiliated, who requests a time to introduce the prospect to the mission of the organization.

I do not recommend you start the conversation inviting someone to join your board, or even share that you are calling to discuss potential board seats. I recommend you say that you are aware of their interest in the population your organization serves and you’d like to share some of your successes in positively impacting that population. (It may be necessary to assure them you are not setting up the meeting to ask for a gift.) You can decide once you are at the meeting if they are good fit for your board and if you should open the door to discussing a board seat; if not, you can find another way to engage them.

board recruitment

If you decide that you would like to invite them to be considered for a board seat, I recommend you communicate the time, financial obligation and effort expected of all board members before they agree to join.

Time is the principal commitment. Board members should be available at the time the board meets and be prepared to meet as often as is necessary to complete the business of the board during their term of service. They should also be prepared to attend fundraising events and to participate as fully as possible in developing and implementing the resource development plan.

I recommend you do not add someone to your board who cannot attend the meetings; either move the meetings or have them serve in another capacity. Organizations can only carry so many members who cannot attend meetings and most organizations already have a few people who fulfill that role.

Another primary responsibility of the Board of Directors is to ensure financial stability. Therefore, board members are expected to assist with fundraising efforts, as well as personally contribute. The financial health of the organization depends upon people-to-people contact, and prospective board members should understand that identifying and cultivating potential donors is part of their job.

Prospective board members are voted onto the board of directors in accordance with procedures laid out in the organization’s by-laws, which in Ohio are called Codes of Regulation.

Once voted upon, new board members should be oriented. I like to orient board member after they’ve been voted upon but before they’ve been seated. The orientation, either individually or as a group, should be conducted by the Board President, CEO, or Committee Chair. By the conclusion of the orientation, new board members should have a sense of the mission and programs, finances, fundraising initiatives, strategic goals, structure of the board of directors and staff, and their own roles and responsibilities as a member of the Board of Directors. They should also be invited to consider their own goals for service.

Once the Board has been appointed, the Board Development committee moves into its other two roles evaluation and education.

board evaluation

Evaluation is the process of assessing the progress of the board and identifying changes that will bring greater achievement of the organization’s mission. Evaluation is a developmental process, not a report card.

The Board Development Committee will ask individual board members to complete an annual self-assessment, including a section evaluating board process, which the committee will use to complete the board assessment. When a board assessment takes place, the Board Development Committee will compare the board’s individual assessments, identify areas of consensus, and develop a plan of action for strengthening the board.

This process can also include an opportunity for Board members to request trainings. Annual board education is integral to a successful board. There are a variety of training options, an example of some include:

The Art of the Ask
Board Process – agendas setting, committee, topics, strategy, structure, engagement
Basic Board responsibilities (fiduciary and legal)
Board vs Staff roles
Best Practices of Effective Boards
Governance as Leadership: Fiduciary, Strategic and Generative Modes of Governance

I encourage every organization to create a formal plan to annually assess, develop and grow their board. Strength begets strength and strong boards ensure strong, sustainable organizations.

As always, I welcome your experience and insight.

How much money should your non-profit have in reserve?

June 4, 2013 erik Board governance, Fundraising, organizational development, Planning

operating reserves Identifying blog topics can be hard. Sometimes you find a comfort zone and ideas flow freely. Other times, it is next to impossible and the writers block is crippling. So, I love it when readers sometimes email me on the side and suggest topics.

Yesterday, a reader did exactly that when she emailed me with the following request:

“Do you take requests? If so, I would love to hear your take on social service agencies that have more than 6 months of money on hand and the impact of that on fundraising.”

When I first read that email, I planned on squirreling the topic away for one of those days when topic ideas are difficult to come by. However, there was something about this topic that possessed me. I opened up a few Google searches, read a few white papers and blog posts, and found myself whipping out this post.

First, let me start with a very direct response to the question posed by the reader.

I have worked with a disproportionately large number of small non-profit organizations. Organizational capacity for these agencies is always an issue and the amount of cash on hand is typically very small. So, I’ve always advocated to CEOs and their boards that they put plans in place to build operating reserves equal to three to six months.

Only one client to my recollection every worked with more than a six month operating reserve, and I don’t think it impacted their fundraising efforts. If I were to speculate as to why that was, I think the explanation is simple . . . that agency did an excellent job with donor communications and made their case as to why operating reserves of that size were important.

Setting this one example aside, I do generally believe that building large operating reserves larger than 6 months or one year causes problems with donors. I say this because of everything Dan Pallotta writes in his book Uncharitable and how donors hold the non-profit sector to a different standard than the for-profit sector.

In his book, Pallotta talks eloquently about how for-profit corporations are rewarded by investors for generating profits, banking cash and growing organizational capacity. He contrasts this point with how donors punish non-profit organizations for doing the same thing.

For actual examples and a better explanation, I encourage you to read his book. I promise that it will be an eye opening experience. Additionally, you’ll likely walk away from the exercise and find yourself muttering the words: “Damn Puritans!”

In my clicking around and Googling, I found a number of interesting facts including:

Charity Navigator reserves its top ratings for organizations with 12 or more months of working capital.
The Nonprofit Finance Fund reported in its 2012 State of the Sector Survey that only one-fifth of survey respondents said they felt their donors were comfortable talking about operating reserves.
In 2011, more than three-quarters of non-profit organizations had less than 4 months of expenses in operating reserves (60% reported less than 4 months and 28% reported one month or less).

I strongly urge you to click-through and read more startling statistics on this and similar subjects at:

Executive Service Corp, “How Much in Reserve Funds Should Your Nonprofit Have?“
Nonprofit Finance Fund, “2012 State of the Sector Survey“
Nell Edgington’s Social Velocity blog, “A Financial Taboo Nonprofits Must Get Over“

I want to thank the reader who suggested this blog topic because they have caused me to change my thinking on this topic. From now on, when agencies ask my advice on what they should strive towards with regards to building an operating reserve, I plan on telling them . . .

12 months or more! ! ! !

With this Big Harry Audacious Goal (BHAG), the next words out of my mouth will be . . .

“Create a strong case for support or prepare to incur the wrath of donors.”

For those of you who don’t think this is possible, please take a moment to think about why that much cash on hand is important to your organization.

Many agencies are using their operating reserves as cash flow cushions as they wait for their accounts receivable from government grants. (Believe it or not some states are six to 12 months late in paying their bills.)
It is a sign of financial health to have operating reserves of this size.
One of the lessons learned from the recent economic recession is that larger rainy day funds are a necessity and not a luxury.
Stuff breaks and your organization needs to be in a position to fix the roof or replace a HVAC unit without running off to donors with an urgent case for support that sounds like a crisis or fire drill.

My advice to anyone who cares to hear it is:

Set a goal to increase your operating reserves to 12+ months
Work with the Finance Committee to develop a plan to achieve this goal (Yes, it will likely be a plan that spans many years). Perhaps, include in your plans to use a portion of your operating reserves to invest in organizational capacity building once certain targets are achieved.
Work with the Resource Development Committee to write a case for support that supports these actions.
Don’t hide from donors. Get out there and start talking to them. Weave the talking points from this new case for support focused on increasing reserve levels into your stewardship efforts. Donor engagement and education is the key to success.

So, I’m curious how many of you think I’m crazy? How big are your reserves? How big would you like them? What do your donors say about your reserves? Please use the comment box below to weigh-in on this discussion.

Here’s to your health!

“V” is for victory

May 30, 2013 erik Board development, Board governance, Fundraising, volunteers

One of my favorite training curricula that I’ve ever had the privilege of teaching is titled “Inspiring & Managing Your Board for Fundraising Success.” In that curriculum, there are nine keys to accomplishing what the title promises its participants. One of those nine keys is celebration & recognition, and it is the inspiration for today’s DonorDreams blog post.

As most of you know, I’ve spent the last 30 days working hard at hosting the Nonprofit Blog Carnival (which officially went live yesterday). Click here to see the carnival and all of its participants . . . you don’t want to miss this month’s carnival.

During the month of May, a few major milestones were achieved at DonorDreams.

We surpassed 34,000 all-time page views.
We achieved more than 1,000 all-time comments.
We eclipsed the 500 post mark (Phew, that’s a lot of content).
We hit an time high in daily visitors and page views during the last month.

I ask for your forgiveness as I take a moment to celebrate.

I know that for some of the big time bloggers out there, these might seem like small things to celebrate. However, DonorDreams blog has only been around for two years, and I am a staunch believer in celebrating the small victories along with the big ones.

Ahhhhhh, that victory lap certainly was sweet. Thanks for indulging me.

Now, let me take a moment to recognize those people who made it possible to celebrate.

YOU

That’s right. None of this would’ve been possible if not for you and all of the other DonorDreams blog subscribers, social media followers, readers and guest bloggers.

From the bottom of my heart, thank you very much for tuning in and reading this blog. Thank you for your comments. Thank you for your subscriptions. Thank you for your LIKES and RETWEETS.

This victory lap isn’t mine. It is OURS.

OK . . . I’m done (until the next milestone is eclipsed). 😉

With all of that being said, I would be remiss if I didn’t end this post with a thought provoking question:

“What do you do at your agency to celebrate and recognize achievement of milestones, goals, and successes with your board volunteers? Do you have any good examples that you are willing to share with your fellow non-profit professionals?”

Please mull this over for a moment and take a second out of your busy day to share your response in the comment box below.

Here’s to your health!