Formula for a successful non-profit board volunteer

October 30, 2013 erik Board development, Board governance, volunteers

equation It seems like I’ve been on the road a lot this month, and this allows me to interact with all sorts of talented and amazing non-profit professionals. In fact, just last night I was at dinner with another non-profit consultant who shared with me his “formula” for a successful board volunteer.
Just so you don’t think that I am stealing, I told this person that I planned to share his formula with the world this morning via the DonorDreams blog. Needless to say, I have his blessing. 😉
Here is his secret recipe that he shares in his board development and governance trainings with board volunteers on how to be good at their job:

12 + (3+1) + 3 + 1 + 1 + 70% + 100%

Let me decipher this formula for you:

Make 12 thank you (stewardship) calls per year
Take three donors on a tour of your facility and also invite a prospective new donor on a tour
Make three in-person solicitation calls as part of your agency’s fundraising program (preferably the annual campaign pledge drive, but it can be a major gift solicitation or special event sponsorship call)
Spend one hour per year volunteering on the front line in a program (so that you can be credible when talking to others about your agency)
Participate in one standing committee or task force of the board
Attend at least 70% of board meetings
Be an advocate of 100% of the board making a personal financial contribution to the agency

There you go . . . pretty simple. Of course, this is one person’s opinion about what it takes to be a good board volunteer.
In your opinion, is there anything missing? Would you modify this equation? If so, then how would you do it? Do you have an easily digestible equation like this that you like to share with new board prospects? Please use the comment box below to share your thoughts and experiences. We can all learn from each other.
Here’s to your health!
Erik Anderson
Founder & President, The Healthy Non-Profit LLC
www.thehealthynonprofit.com
erik@thehealthynonprofit.com
http://twitter.com/#!/eanderson847
http://www.facebook.com/eanderson847
http://www.linkedin.com/in/erikanderson847

Non-profit governance: The work of the board, part 5

October 2, 2013 erik Board governance, Planning

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 5

Setting the Mission, Vision and Strategic Plan

By Dani Robbins

strategic planning Welcome to the final post in our five-part series on Governance. We have already discussed the Board’s role in Hiring, Supporting and Evaluating the Executive, Acting as the Fiduciary Responsible Agent, Setting Policy, and Raising Money. Today, let’s discuss the Board’s role in setting the mission, vision and strategic plan.

As previously mentioned, Boards are made up of appointed community leaders, who are collectively responsible for governing an organization. As outlined in my favorite Board book Governance as Leadership and summarized in The Role of the Board, the Fiduciary Mode is where governance begins for all boards and ends for too many. I encourage you to also explore the Strategic and Generative Modes of Governance, which will greatly improve your board’s engagement, and also their enjoyment.

At a minimum, governance includes:

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

One of my goals for this blog is to rectify the common practice in the field of people telling non-profit executives and boards how things should be done without any instruction as to what that actually means or how to accomplish it.

What “Board members being responsible for setting the mission, vision and strategic plan” means is:

The Board sets –meaning discusses and votes to adopt or revise — the mission statement, which answers why your organizations exist.

The Board also sets the vision of the organization. A vision statement is a description of what the organization will look like at a specified time, usually 3-5 years, in the future. There are two minds in the field as to if a vision statements should be a Utopian view such as “an end to hunger” or a more concrete view such as “to be the premier youth development organization.” I lean toward the latter; I find it challenging to set goals to get to Utopia.

The Board votes upon the strategic plan, after participating in a strategic planning process “in which the board, staff, and select constituents decide the future direction of an organization and allocate resources, including people, to ensure that target goals are reached. Having a board-approved, staff-involved strategic plan that includes effective measurements and the allocation of resources aligns the organization, provides direction to all levels of staff and board, and defines the path for the future of the organization. It also allows leadership, both board and staff, to reject divergent paths that will not lead to the organization’s intended destination.” (Innovative Leadership Workbook for Nonprofit Executives)

The process — and the document — can be very long or very short. In fact, I have a new theory that the longer strategic plan is, the less likely it is to be used. For my clients, I recommend a 4-5 meeting process: We start with setting or revising values, vision and mission and end with assignments, measurements and due dates.

Please do not accept a plan that does not include assignments, measurements and due dates. If you cannot answer the question “How will we know when we get there?” you will not get there. A plan without measurements, assignments and due dates is just a list of goals that are unlikely to be accomplished.

For information on what should be included in the process, please click here.

A strategic plan should be a living document that guides the organization and provides a point for ongoing programmatic and organizational evaluation. It should not sit on a shelf.

All organizations should have a strategic plan.

Strategic plans get everyone on same page as to where you are as an organization and where you are going. They allow the group to decide the goals moving forward; create measurements to determine if you met your goals and assign responsibility and due dates for specific goals.

Strategic planning is a process that results in not only a document but also a shared understanding among key stakeholders.

In the absence of that shared understanding and agreement, there are still moving parts, but they’re not aligned. The absence of a plan sets the stage for people to do what they feel is best, sometimes without enough information, which may or may not be right for the organization. It opens the door for one person’s vision to get implemented and others to feel unheard or unengaged. The absence of a plan allows for major decisions to be made on the fly and for potentially mission driven decisions to be compromised. As we all know, movement goes in other directions than forward.

What do you think? As always, I welcome your insight and experience.

Non-profit budget season: The old Texas Two Step

September 19, 2013 erik Board governance, Fundraising

The other day I received an email from an old friend asking me to share my thoughts about the “right way” for a non-profit organization and its board to construct a budget. Do you start with revenue projections and develop the agency’s fundraising plan first? This way everyone knows what the expense budget can’t exceed. Or do you start with the expenses and try to build a revenue budget that supports the organization’s mission, vision and programming?

My first thought when I got this message was: “OMG! It is budget season for many non-profit agencies. Ugh . . . it is almost October. Where did winter, spring and summer go?”

My second thought was actually more of a chuckle because I’ve always thought of budget season as a bizarre dance between board and staff that resembles something like the Texas Two Step as demonstrated in this YouTube video.

[youtube=http://www.youtube.com/watch?v=D_H1x2MpeEk]

For the record, I don’t think there is a right and wrong way to undertake budget construction. There are obviously very smart people who reside in both camps — revenue first vs. expenses first. When I was an executive director, I tried to do the uncomfortable thing and sit on the fence. Ouch!

budget The following is a thumbnail sketch of what my process looked like:

I put the budget process in writing with a narrative description and timeline, then built consensus around the importance of following process and adhering to deadlines.
I simultaneously started working with the finance committee and the resource development committee.
The finance committee and I worked with program staff, and everyone collaborated around constructing reasonable expense budgets with mission, vision and quality programming in mind.
The resource development committee and I worked on developing a detailed resource development plan chock full of reasonable revenue projections, range of gifts charts, goals, strategies, volunteer prospect lists, grant prospects, annual campaign prospects, special event prospects, fundraising calendar, and action plans.
Sometime in October or November the two committees met jointly. They shared and compared their work. The FUN was just beginning because there was always a gap on the bottom line.
Consensus was built and both committees went back to work. The finance committee was usually tasked with finding cuts that wouldn’t hurt the agency’s mission or damage its organizational capacity. The resource development committee went back to the drawing board to find reasonable revenue enhancements.
Both committee were tasked with reporting their progress back to the board every month throughout the process. The hard part was staging those board meetings in a manner where generative discussions would happen and result in: 1) board volunteers who didn’t sit on those committees an getting and opportunity to weigh-in and 2) both committees getting an opportunity to engage the larger board in decision-making focused on strategies and tactics (esp. those related to revenue generation).

When the committees converge in the process, the age-old Texas Two Step issue would always float to the top. Do we close the gap with budget cuts or revenue enhancements?

My philosophy was always “revenue first” because I felt like the mission of the organization called upon us to make that attempt first. However, this doesn’t entail just changing projections and modifying our best guesses. It involved adding more prospects, tweaking strategies, and adding revenue streams.

Some years I won this argument. In many other years, I lost this argument, and the finance committee would produce their hatchet. (I am embarrassed to admit that one year I lost the ability to send donors a newsletter thanks to that hatchet. I should’ve fought harder because donors need to see what their investment is doing.)

Ahhhhh . . . You gotta love the old Texas Two Step. 🙂

As I sat on my couch and texted back-n-forth with this old friend, my mind wandered (as it tends to do) and I had a third thought:

If you like sausage, you don’t want to know how it is made!

making sausage I am not suggesting that my process is the right way to put a non-profit budget together. However, I do believe strongly in the following few budget construction principles:

Budgeting is a collaborative activity between board and staff. (Avoid a situation where staff puts it together and the board either behaves like the two Muppets who sit in the balcony or simply just rubber stamps it.)
Projection of numbers (esp. revenue) isn’t a dart throwing activity. It is rooted in historic data, trends, actual prospect names, and strategies. Don’t ever use “plug numbers“.
There is a process with an explicit timeline. It is written out. It is created collaboratively and agreed to by all parties.

Enough of my waxing poetic about how your non-profit should tackling budget season. Here are a few online resources and documents that I found:

Nonprofit Accounting Basic$: “The Budget Process“
Larsen Allen LLP Effect Magazine: “Nonprofits: Improve Your Budget Process“
Clifton Gunderson LLP Count on Insight: “Best Practices for Nonprofit Budgeting and Cash Forecasting“

Is your organization in the middle of its annual budget construction process? What works for you? What doesn’t work? What do you plan on doing differently next year?

Please use the comment box below to share your thoughts and experiences.

Here’s to your health!

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

Non-profit governance: The work of the board, part 4

September 4, 2013 erik Board governance, Fundraising

Governance: The Work of the Board, part 4

Raising Money

By Dani Robbins

board fundraising Welcome to part four of our five part series on Governance. We have already discussed the Board’s role in Hiring, Supporting and Evaluating the Executive, Acting as the Fiduciary Responsible Agent, and Setting Policy. Today, let’s discuss the Board’s role in raising money.

As previously mentioned, Boards are made up of appointed community leaders who are collectively responsible for governing an organization. As outlined in my favorite Board book Governance as Leadership and summarized in The Role of the Board, the Fiduciary Mode is where governance begins for all boards and ends for too many. I encourage you to also explore the Strategic and Generative Modes of Governance, which will greatly improve your board’s engagement, and also their enjoyment.

At a minimum, governance includes:

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

One of my goals for this blog is to rectify the common practice in the field of people telling nonprofit executives and boards how things should be done without any instruction as to what that actually means or how to accomplish it.

What “Board members being responsible for raising money” means is:

The Board sets the fund raising (also called resource development) goal; embarks on the campaign; opens doors; introduces staff; “makes the ask” when they’re the most likely person to get a yes (regardless of title or ranking, you always send the person who is most likely to get a yes to a gift request); picks up the tab for lunch when possible; and thanks the donor. The Board is also responsible for setting the strategic plan which may include a goal to increase contributed income. Each Board member should be expected to make a significant gift, reflective of their personal circumstances, as well as raise additional money.

I do not recommend give or get policies.

Give or get policies allow Board members to avoid personally giving; and 100% Board giving is critical for a successful campaign. Potential donors will ask if there is 100% Board giving, and the answer must be “yes“. Why should anyone else support an organization whose Board members do not? Moreover, how can you ask for someone else to financially support an organization you do not financially support? I can hear someone out there saying “I give of my time,” and that is wonderful, but it’s not enough. Board members should also financially support the organizations they serve.

I also don’t recommend set giving requirements.

Set giving policies, intended to be minimum gifts, actually end up being the entire gift. Such policies alienate potential board members who may bring a lot to the table but cannot personally give at the set level. It also leaves money on the table for people who can give more. Finally, it eliminates the Resource Development Committee’s opportunity to seek out and personally ask each Board member for a specific (to their circumstances and level of engagement) gift. It takes away the chance to say thank you for your engagement, removes the possibility to steward Board members as donors and minimizes the chance of a larger gift. Any policy that works against your goals is not a good policy.

The Board cannot and is not expected to raise money alone.

The staff is responsible for training the Board; coordinating the assignments; preparing the askers with relevant donor information; drafting and supplying whatever written information will be left with the donor, including a case statement (also called case for support) and a letter asking for a specific dollar amount; attending the ask meetings as appropriate; documenting the meeting in the database; writing the formal thank you note; and creating a plan to steward (or circle back to) the donor going forward.

The executive director cannot raise money alone. The development director cannot raise money alone. Fundraising works best in a culture of philanthropy when both the staff and the Board are working together to increase contributed income.

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

What does the non-profit leader of tomorrow look like?

August 27, 2013 erik Board development, Board governance

sleepless1 Last week a dear non-profit friend of mine from California couldn’t sleep. She tossed and she turned. Ultimately, she got out of bed, turned on her computer and started talking into a microphone. When I woke up in the morning in my bed in Elgin, Illinois, there was an email sitting in my inbox with a voice file attachment. Her words have tumbled around in my head for a week, and I’ve decided to enlist your support in dissecting them.

The gist of her recording pertained to non-profit boards. Here is a synopsis of what she said:

There are too many non-profit boards that just don’t work.
Too many board members either don’t understand their roles/responsibilities or turn a blind eye to certain roles that make them feel uncomfortable (e.g fundraising and resource acquisition).
Are there occupations that are better suited for non-profit board leadership (e.g. finance people compared to artists)?
Should non-profit agencies incorporate personality testing into their board development process because certain personalities are better suited to serving on a non-profit board?

After a week of contemplative thought, I honestly don’t know how I feel about anything she said. I am looking forward to you weighing in with your thoughts using the comment box at the bottom of this blog.

Here is what I have concluded:

Boardroom diversity is important. We don’t need all of the same types of people sitting around a table in a simulated echo chamber. (I am not implying that was what she was saying, but I do worry that it could be an unintended consequence.)
Understanding roles/responsibilities and executing them are vital to non-profit health. The non-profit sector needs to get better at recruitment, management and evaluation or suffer the consequences.
The characteristics and traits of an effective non-profit executive director (aka CEO) are changing with the times, and hiring the right person might make all the difference in the world when it comes to board development, board governance and team cohesiveness from the front line to the boardroom.

sleepless2 After listening to my friend’s recording, I started Googling around and searching for anything that anyone might have written about characteristics and traits of effective boards. I was especially intrigued by her question about incorporating personality testing into the board development process. After all, many workplaces are incorporating this type of assessment into their employee hiring process.

I didn’t really find much of anything that resonated, but there was some interesting stuff on Myers-Briggs personality testing that pertained to the non-profit sector. Here are some of the better links:

Nonprofit People blog: “An Introduction to Myers-Briggs“
Brad Rourke’s blog: “Myers-Briggs in the Nonprofit Workplace: How to Lead with J’s and P’s“
Nonprofit Resource Network: Resources Page

While I suspect you may find these links interesting, they still didn’t help me process what my sleepy California friend had ignited in my head. And then I came across an online post at Ivey Business Journal titled “Profiling the Non-Profit Leader of Tomorrow“.

This article focused on the executive director as the linchpin to what my friend had identified. They identified 15 “must-have” attributes that a non-profit leader must possess in order to be successful. Those attributes are as follows:

Competencies

Strategic thinker
Relationship builder
Collaborative decision-maker
Entrepreneurial achiever
Effective communicator
Change leader
Inspiring motivator

Personality Traits

High integrity
Adaptable/Agile
Perseverant/Patient
Interpersonal sensitivity
Passionate about the mission

Knowledge/Expertise

Financial acumen
Deep sector-specific knowledge
Understanding & valuing diversity

I suspect a number of these competencies and skill sets also can be applied to your board development process.

If I’ve piqued your curiosity — and I suspect that I have — then I encourage you to click-through to the Ivey Business Journal article and keep reading. Enjoy!

Take a good hard look in the mirror this morning. How many of these attributes do you possess? How do you know you possess them? Do you conduct 360 assessments asking for your employees’ feedback? If so, what do they say about you and these attributes? Does your board development process look for volunteers with these attributes? If so, what tools do you use to help identify these attributes?

In addition to sharing your thoughts about these questions in the comment box below, I welcome your thoughts about the question I asked earlier in this post about my friend’s online recording.

We can all learn from each other. Please take a minute out of your busy day to share with your fellow non-profit friends.

Here’s to your health!

Non-profit Governance: The Work of the Board, part 3

August 8, 2013 erik Board governance

Governance: The Work of the Board, part 3

Setting policy

By Dani Robbins

policies1 Welcome to part three of our five-part series on Governance. We have already discussed the Board’s role in Hiring, Supporting and Evaluating the Executive and Acting as the Fiduciary Responsible Agent. Today, let’s discuss the Board’s role in setting policy.

At a minimum, governance 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.

One of my goals for this post is to rectify the common practice in the field of people telling nonprofit executives and boards how things should be done without any instruction as to what that actually means or how to accomplish it.

What setting policy means is:

The board discusses and votes to approve (or not) all policies and plans. Policies are usually recommended by (and often written by) the CEO, also called the Executive Director. Plans are usually drafted by committee. Both must be approved by the Board.

Procedures, on the other hand, are set by the CEO, often in consultation with the staff. The difference is the difference between the rules and the law. You can get fired for violating a policy (law), but not usually a procedure (rule).

Policies, plans, and procedures set the boundaries for people to act.

policies2 I recommend organizations have the following policies:

Personnel
Financial
Crisis Management and Communication
Conflict of Interest
Confidentiality
Whistle Blowing/Ethics

Policies dictate what happens in defined set of circumstances. I occasionally get calls from people who want to create a policy they don’t really need because they are trying to avoid addressing an issue directly. Do not create a policy to avoid having a conversation. Have the conversation, and then decide if you need a policy.

That said there are policies you definitely need.

For example (and among other things), the personnel policy determines what benefits staff get; the financial policy sets who can sign checks and for what amount; the crisis communication policy determines who speaks for the organization; the crisis management plan dictates what to do if there is an intruder; the conflict of interest policy states how conflicts are managed; the confidentially policy requires a process to protect information; and a whistle blower policy provides a path to report violations.

A reporter sticking a camera in the face of your most disengaged staff member is not the time to decide who speaks for your organization. Having a crisis communication policy will make all the difference in the organization’s ability to continue to provide services after a crisis, and the community’s ability to be confident in your ability to do so. The absence of a single point of contact allows for a variety of messages from a multitude of people — who may or may not be affiliated with your organization — to be shared with the community, which at a best will dilute your ability to control the story and at worst will open the door to a new set of issues for people to judge you by. As all of our moms taught us, a reputation takes a lifetime to build and just a few minutes to destroy.

plans1 Policies address today. Plans take you into the future.

I recommend organizations have the following plans:

Board Development
Marketing
Resource Development
Strategic Plan
Succession Plan

Plans determine what path you will follow in what circumstances.

For example (and among other things), a Board Development plan dictates what process will be followed to bring on new Board members; a marketing plan determines what materials you will create and how they will be disseminated; a resource development plan lays out how you will raise contributed income; a strategic plan states where you are going as an organization and how you plan to get there; and a succession plan ensures continuity by outlining how leadership will be perpetuated.

Plans, policies and procedures can address or eliminate many of the issues that come up on a day-to-day basis that distract from your mission and moving the needle for your community.

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

Non-profit Governance: The Work of the Board, part 2

August 7, 2013 erik Board governance

Governance: The Work of the Board, part 2

Acting as the Fiduciary Responsible Agent

By Dani Robbins

fiduciary2 Welcome to part two of our five-part series on Governance. The first post reviewed the Board’s role in Hiring, Supporting and Evaluating the Executive. Today, let’s discuss the Board’s role as the fiduciary responsible agent, which is quite different from the fiduciary mode outlined in my favorite Board book Governance as Leadership and summarized in The Role of the Board. Fiduciary responsibility is one of the 5 pieces of the fiduciary mode, which is where governance begins for all boards and ends for too many.

As previously mentioned, 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.

What it means to meet your fiduciary responsibility is:

It is the Board’s role to:

Read, understand and approve the financials
Review, understand and approve the audit, as appropriate
Review and sign the 990
Understand how the programs tie to the mission and the number of people served in those programs as well as the program’s impact

What that means is:

Financial statements should be prepared by the assigned staff or volunteer and reviewed by Finance Committee, often Chaired by the Treasurer, and then presented, by that Treasurer, to the full Board every time the full Board meets. Members of the Board should receive and review the information in advance and come to meetings prepared to ask questions and continue to ask questions until they understand and are willing to have their name listed as having approved the financials. Once questions have been answered and all members are satisfied, the financial statements should be voted upon and either approved or sent back to committee with instructions to be addressed.

Please do not vote for something you do not understand. When I do this training with Boards, I often say, the Exec will just get fired; Board members will go to jail. I’m only mostly kidding. The Exec will likely go to jail too. Either way, the community and the law will hold you as a Board member responsible.

audit4 The audit is prepared by an independent accounting firm in an effort to assess if the organization is operating in accordance with Generally Accepted Accounting Principles (GAAP) and also within their commitments. Different audits are required based on the amount of government funding that is received. The costs of such audits vary depending on the budget size, revenue streams, and also the quality of the financial systems and the need to for the auditor to clean up those systems.

Audits should be bid out, in conjunction with organizational policy, every few years. The auditor that is selected should conduct the audit and also come to the Board meeting to present their findings and answers any questions that Board members may have.

Auditors also prepare and should explain a management letter which includes suggestions on improvements that could be made. Such letters didn’t used to be, but are now regularly requested by funders so it is imperative the Board is aware of what’s included within and have discussed the ramifications of accepting, and also not accepting the recommendations.

Most agencies pay for an audit to be done every year; some less often but still on a specific schedule driven by policy. The audit is submitted with most grant requests, to the national office of most affiliated organizations, as applicable and is given out frequently to anyone who requests a copy. Some organizations post a copy on their website.

The firm that prepares the audit is usually also the firm that prepares the 990, which is the tax return that non profits file each year. The 990 should be reviewed by the Board, prior to being submitted, and should be signed by the Treasurer. It is often signed by the CEO, but it should be signed by the Treasurer or another member of the Executive Committee.

mission Finally, as part of meeting their fiduciary responsibility, the Board should understand how the programs tie to the mission, the number of people served in those programs as well as the impact of that program.

This does not mean the Board needs to be –- or even should be — in the weeds of programming.

It is the CEO’s responsibility to ensure the program’s creation, implementation, management and evaluation. It is the Board’s responsibility to understand how such programs are aligned with the mission and the vision of the organization, the impact of that program on the clients your serve as well as the number of people served by those programs.

Fiduciary responsibility means that the Board –- and not just the Treasurer but the whole Board — is responsible for safeguarding the community’s resources and ensuring accountability and transparency.

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

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

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

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!

Get your ducks in a row if your non-profit accept government grants

July 2, 2013 erik Fundraising

govt funding2 The news last week that the Justice Department will freeze grant funding for Big Brothers Big Sisters (BBBS) should send a chill up the spine of every non-profit organization who accepts government funding.

Here is the CliffNotes version of what is going on:

BBBS co-mingled its federal grant dollars with its general fund,
Oversight of disbursements from the national organization to its local affiliates was allegedly lacking,
Documentation required by the grant agreement allegedly wasn’t well or is missing, and
Grant dollars were allegedly spent on things it shouldn’t have been.

If you’re interested in more information, here are a few links you may want to click on:

CBS News: “Justice Dept. freezes funding to Big Brothers Big Sisters“
Fox News: “Justice Department freezes funding to Big Brothers Big Sisters following audit“
News Talk Radio KRMG: “Big Brothers Big Sisters funds frozen by Justice Department“

As I said in the title to this blog post, I see this as a cautionary tale for all non-profit organizations who accept public funding from any level of government (e.g. local, state or federal).

Why?

govt funding I believe that when money is abundant controls are less strict. Conversely, when resources are scarce . . .

every penny is watched,
those agencies that don’t have the money are making the case for why those who do have the money shouldn’t have the money (e.g. classic have’s versus have-not’s),
there is a debate occurring among policymakers about the “role of government” and whether or not government should even be in the business of allocating money in this manner (e.g. redistribution of wealth versus letting private philanthropy markets do so), and
decision-makers are looking for reasons to take money away because it is easier to tell voters that funding was eliminated when there are good reasons (and alleged mismanagement of funding is always a great reason).

Here are a few simple and cheap things you can do to ensure your agencies doesn’t end up in the same place as BBBS:

Assemble a task force of board volunteers to help you conduct an internal review of your government contracts.
Pull out your grant agreements and carefully review the items you are contractually obligated to deliver.
Randomly conduct spot checks of documents you are contractually obligated to keep.
Randomly conduct spot checks of expenditures charged to the grant and ensure they were allowable expenses.
If you find discrepancies, put together action plans to fix the problems and monitor implementation. If money was inappropriately used, re-appropriate / re-budget the money and use it in the manner that it was intended.
Document this process simply by keeping meeting notes. This way, if you get audited, you’ll be able to demonstrate your due diligence and commitment to internal controls.

Are you concerns about the recent developments between the Justice Department and Big Brothers Big Sisters? Are you taking special precautions at your agency to get your ducks in a row? Do you think I am overreacting? Please scroll down and share your thoughts in the comment box below.

Here’s to your health!