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!

Erik Anderson
Founder & President, The Healthy Non-Profit LLC
www.thehealthynonprofit.com
erik@thehealthynonprofit.com
http://twitter.com/#!/eanderson847
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Are fundraising professionals “ashamed”? Too busy? Too lazy?

June 21, 2013 erik Fundraising

Welcome to O.D. Fridays at DonorDreams blog. Every Friday for the foreseeable future we will be looking at posts from John Greco’s blog called “johnponders ~ about life at work, mostly” and applying his organizational development messages to the non-profit community.

In a post titled “I’m Ashamed?,” John talks about an old Danish proverb that goes something like this: “He who is afraid to ask is ashamed of learning.” This post and the proverb made me think of so many of my friends who are fundraising professionals, and it got me wondering if “shame” has something to do with how they shy away from engaging board members, donors and fundraising volunteers.

Some of you are probably wondering what the heck I’m talking about because every time you show up at a fundraising event you see volunteers running in every direction. So, let me provide a few examples:

Too many resource development plans (aka fundraising plans) are written behind close doors without any input from those who we depend upon to help with implementation. And then we wonder why no one is jumping in to help and why board members are acting as if to say: “That’s not what I agreed to do … go implement YOUR plan.”
Too many donors make one charitable contribution and then are never heard from again. I don’t see many fundraising professionals picking up the phone, organizing lapsed donor focus groups, meeting individually with, or surveying these donors and asking a few simple questions.
I certainly hear many of my fundraising friends complain about how their executive director is disengaged from the fundraising program. However, I don’t see many of those folks exhibiting tenacity by asking-asking-asking. There are so many different questions to ask an executive director, and I witness lots of surrendering before they get to the second question.

I could go on and on with examples, but I’ll stop here because I think the better question, which is posed by the Danish proverb, is WHY don’t we ask more questions and WHY don’t we ask for more help?

So, I thought about the WHY and here are some of the possibilities I came up with:

The Danish are right . . . some people feel a sense of shame in asking for help. It gives people the impression that you’re not capable of doing the task at hand, even though you might be perfectly capable and trying to cultivate, engage, steward, etc.
It is easier to just do it yourself. Asking and involving others usually means investing more time in doing something. Even though a case can be made for it being time well spent, it is easy to rationalize and justify not doing so because your calendar and task list is slammed.
There is a sense of having “job security” in being the only person making the agency’s fundraising program work.
Perhaps, it is simply a matter of not caring???

I’m sure there are a number of other possible explanationz, but it is Friday and thought I should ask you for some help. 😉

Please take a moment to ponder WHY and then scroll down and share one additional explanation in the comment box below.

Have you ever sat in a meeting or training, had a question and not asked it? Have you ever been in a board meeting marveling at why a board was making a particular decision and not jumped in with your questions? Have you ever been in front of a donor and not asked a ton of questions about what makes them tick, who they really are, and why they’re giving to you?

After you think through some of these questions, you’ve earned the opportunity to peek at some of the following websites that speak to the issue of asking good questions:

The Resource Alliance: “7 questions every fundraiser should ask a potential donor“
GuideStar: “Fundraising’s Four Magic Questions: Answer These and the Gifts are Yours“
Joan Garry: “10 Good Questions Board Members Should Ask“
Denver Post: “Five questions every nonprofit donor should ask“

You should also go back to a series of posts I wrote a year ago on this subject:

DonorDreams blog: “Questions every non-profit board member should be asking“
DonorDreams blog: “Questions you need to get answered before asking people to join your board“
DonorDreams blog: “Fundraising questions to ask donors and anticipate from them“

Here’s to your health!

Outcome measurement madness

June 20, 2013 erik Uncategorized

Today’s DonorDreams post is from a guest blogger, Rose Reinert. Rose is a young non-profit professional who happily serves in the trenches and grapples with our sector’s newest challenges as they relate to data, impact, and program outcomes. When it comes to data systems, she has experience with membership management databases, financial management software, donor databases, and program outcomes measurement systems.

Outcome measurement madness

By Rose Reinert

In a former life, I served as an Executive Director of a youth serving organization. As you can imagine, as in any non-profit, the heat was on illustrating short-term and long-term impact. These efforts, of course, were to show that we were fulfilling our mission of preparing young people to be contributing citizens. Unfortunately, more often than not, we focused on short-term impact in order to keep funders and donors engaged and happy so they would renew their investment.

One of those funders, who I would work at keeping happy with their investment of money and time, was my board of directors. I used to love packing my board book with tons of statistics “showing” our hard work. I would use pretty graphs and pie charts, comparisons from the previous year, week, minute.

I was so proud of those thick board packets!

Now, the tables have turned and I serve on a board of directors for another area non-profit. In a recent board meeting, as I was overwhelmed with pages of statistics I sat thinking, “So what! What does this all mean?”

Oh the irony!

When I was leading my organization, we used to measure anything that moved. We were swimming in pre- and post-tests. By the time we closed out one session, we were at it again with pre-testing.

There were days, amongst the insanity, where I would have moments of clarity. I realized how many opportunities had been lost. We were caught up in the “Outcome Measurement madness“. We lost opportunities to truly, without defense, use the data to assess how we were doing and if we were moving the needle.

What would happen if we got off the hamster wheel and took a step back? What questions could we ask about our outcome measurement strategy?

One great tool that I found to help re-frame and create a strategy is a publication titled “Intermediary Development Series: Measuring Outcomes” at DareMightyThings.com.

If you are just starting or if you could use a fresh look, these questions can help:

Where should we focus?
What do we want to accomplish?
Who is on the team, and how do we involve others in organization?
What resources will you need?
Do we need additional help?
What is our timeline?

Taking a step back to reframe, or create a strategy to ensure that we are measuring what matters is critical. There is no escape from outcome measurement, and there shouldn’t be. Data is critical; it guides decisions, informs investors, and points out areas for improvement. However, you can measure a lot and still have no clue.

How have you found clarity in the outcome measurement madness? How does your organization involve all levels in developing the strategy and executing it? How do you share your data with stakeholders? Please share your experiences in the comment box below.

Is “fear of failure” defining your fundraising program?

June 18, 2013 erik Fundraising, Planning

Last week I was on the road working with clients. One evening when I was out to dinner, a revelation about your fundraising program struck me like a bolt of lightning while in the restroom of a restaurant. Yes, you read that last sentence correctly. I was thunderstruck in the bathroom. Inspiration came in the form of a little sign sitting by the sink.

This is kind of what that sign looked like:

I’ve been chewing on this question for a week now, which tells me that there is a good blog post somewhere in there. 😉

Failure and your fundraising plan

The first flurry of thoughts that ran through my head pertained to many fundraising programs I’ve seen throughout the years. Here are just a few questions I find myself asking about many agencies’ annual resource development plans:

Why are they running so many special events?
Why aren’t they measuring return on investment (ROI) on each of their events and campaigns?
Why aren’t they evaluating and critiquing each event and campaign?
Why aren’t they innovating and trying new things (e.g. email, social media, etc)?

I’m now wondering if the answer to these questions is that we’re afraid of failure, and it is just easier to keep doing the same thing over and over again. After all, if we evaluate and ask questions, then shouldn’t we “do something” about those things that don’t look so good?

As for innovation and trying new things, there has to be all kinds of “fears” associated with venturing off into the great unknown. Right?

I know that talking about those things we’re afraid of is difficult for many of us. It is this simple truism that keeps countless counselors, therapists and psychologists employed every year. However, I encourage you to take 30 seconds our of your busy day right now and consider these questions and the possibility that your fundraising program is in the grip of fear-based decision-making by staff, fundraising volunteers, and board members.

What would you do . . . if you knew?

What an interesting question to ponder. Dontcha think?

What would I do, if I knew, I could not fail?

Let me step off that cliff first. The following is a list of things (as it pertains to non-profit management and fundraising) I thought of in 30 seconds:

I would call the top 10 most influential people in town and ask them to join my board or get involved in some aspect of my fundraising program.
I would kill every special event fundraiser that was older than 5 years old and replace it with something new and fun.
I would calculate ROI on every event and campaign and stop doing everything that didn’t bring me at least a 75% return (and I’m talking about using both direct AND indirect costs in that calculation)
I would find the time to add an ePhilanthropy aspect to my annual fundraising plan that includes blogging, social media, email and website (and I’d add a robust evaluation component to this program).

Now it is your turn. Please take a few second to contemplate the question at hand. What would you do? Once you have one thing in your head, please scroll down and share it in the comment box below. Let’s inspire each other today.

Here’s another thought. Why not start off your next board meeting and all of your upcoming committee meetings with this question. You might just be surprised by what your volunteers tell you. If you do, I hope you’ll circle back around to this post and share what they said.

Here’s to your health!

Donors don’t like deception

June 14, 2013 erik Fundraising

In a post titled “Fire and Rain,” John talks about the story behind the story with regard to James Taylor’s song “Fire and Rain” and his personal reaction when he discovered some of the urban legend associated with it. While it is obvious that John will use this post as a springboard to another post, I think John’s reaction as he describes it in his post speaks to a basic truism:

No one likes to feel like they’ve been deceived.

Even when there are elements of truth, I’ve seen people react strongly just because it “FEELS” deceptive.

This idea is something that non-profit organizations deal with all of the time as it relates to donor communications. Right?

The following few examples spring immediately to mind for me:

Example #1: Agency X is experiencing cash flow issues, but doesn’t share this news with its donors. Why? They are afraid that this news will deter donors from writing checks.
Example #2: Agency Y is getting ready for it annual audit. In preparation for a visit from their auditor, they discover that their administrative and fundraising costs were a little higher than they anticipated. So, they change some of their salary allocations in order to put their numbers back where they should be. Why? They know that individual donors, United Way agencies, foundations, and even the Better Business Bureau have expectations (and standards) associated with how much money a “responsible” non-profit organization spends on fundraising and administrative costs.
Example #3: Agency Z is developing a direct mail appeal and knows that people don’t like to give money to the “general fund”. So, they craft a letter that says something like “It costs $X to run program A, it costs $Y to purchase equipment B, and $Z to purchase program supplies”. When the responses start rolling in, the money is not used for A, B or C and instead put into the general fund to pay for the electric bill or employee salaries. Why? The intent of the letter was to raise unrestricted income, and the organization thinks donors understand that “cash is fungible“.

These are fictitious examples, but do you remember the 1994 Christian Children’s Fund scandal? Here are a few other recent examples of when donors were deceived or “felt” deceived:

Susan G. Komen for the Cure threatening to not fund Planned Parenthood. How was this deception? Donors never thought their contributions were supporting an organization with an alleged political agenda.
LIVESTRONG’s founder, Lance Armstrong, admits to doping. How was this deception? The foundation co-branded itself with its founder’s image and donors invested based on his story, character and credibility. After the confession, donors couldn’t help but openly wonder: “If he lied about doping, what else is he lying about?“
Boy Scouts of America and their long standing battle with the LGBTQ community. How was this deception (after all haven’t they been very vocal about their membership restrictions)? Some donors see hypocrisy with this policy because a case can be made that the policy contradicts some of the 12 points of the Scout Law. Moreover, the Scouts announced to the world a few months ago that they were poised to re-visit and possibly reverse this policy. As the date got closer, they postponed and stalled. “Deception” is sometimes as simple as saying you will do something and then dragging your feet on doing it.

In John’s post, he admits that his feelings for James Taylor’s song “Fire and Rain” changed after he learned the truth. The reality is that your donors’ feelings for your agency will change if they feel deceived. The point here is that it doesn’t even have to be outright deception. It only has to be the “feeling” of deception.

What does your agency have in place to insure honesty, transparency and ethics? Please use the comment box below to talk about things like ethics policies, whistleblower policies, evaluation practices, etc. We can all learn from each other.

Here’s 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!

What should you do when hiring a non-profit consultant?

June 12, 2013 erik Uncategorized

When a non-profit organization wants to secure my assistance as a consultant, it always seems to happen like this:

Someone calls or emails me.
We sit down (or at the very least talk via phone)
They tell me a sad story.
They ask for my assistance.
I share with them a variety of different services I can provide. I try to engage them in a discussion to narrow the scope of work so I can write a proposal and ultimately a contract.
They don’t really do a very good job of narrowing that scope of work because they want everything (and oh yeah . . . there is typically little to no money available to pay for anything).
I go back to my office and take a stab at writing a draft proposal for their consideration.
They review the proposal and want to make changes to the scope of work.
The proposal bounces back and forth a number of times until the client is happy.
A contract is produced and signed by both parties.

It doesn’t have to be this way.

Many of you have already diagnosed your own problem, and you know what you need from the consultant to help you fix what ails your agency. If this is the case, then I suggest you take a little time to write a request for proposals (RFP).

OK . . . so you don’t have the time to write a RFP? I get it. I’ve been in your shoes. How about sitting down for 30 minutes and doing this:

Write down in a few paragraphs what you see the issue being.
Write down what the situation looks like after it has been fixed.
Jot down a few bullet points that speak to your thoughts on possible deliverables (e.g. things you want to see produced by the consultant).

Doing these three simple things before sitting down with a consultant will save both you and the consultant time in the beginning.

Here are a few additional blogs and online resources I found online, which I think give some good advice on this subject:

Philanthropy News Digest: “What to do when hiring a consultant“
Philanthropy News Digest: “Lessons Learned: Hiring Consultants“
Grand Victoria Foundation: “The Insider’s Guide to Outside Advice“

Have you ever hired a consultant? If so, what would you have done differently in the beginning? Please share your thoughts and experiences in the comment box below. We can all learn from each other.

Here’s to your health!

Unhappy non-profit situation? Don’t worry! Be happy!

June 7, 2013 erik organizational development

In a post titled “Don’t Worry. Be Happy,” John pays tribute to his wife on their 35th wedding anniversary and makes a great point about change management and unhappy employees in the workplace. Specifically, John’s point (which he backed up with research) was:

“It seems once we stop worrying/doubting/resisting and start accepting and committing; we work — subconsciously if not consciously — to be happy.“

When I read this, it made me think about all of my non-profit friends who keep telling me how unhappy they are with their work situation.

The board isn’t committed to fundraising.
The staff is unhappy and it shows in their work.
Our donors seem more reluctant than ever to support our programs.
We’re losing a few major grants, and we don’t have a sustainability plan in place.

Every once in a while, I come across a study like the one reported in the Chronicle of Philanthropy on October 24, 2011 that says:

70% of non-profit employees are either somewhat fulfilled or outright dissatisfied with their job.
60% of employees said they don’t feel valued.
40% said the following important factors that aren’t being exhibited at their agency are: respect, trust, support, and a compelling mission.

So, what is an executive director or senior manager supposed to do when faced with stuff like this? Simple . . .

Don’t worry. Be happy. In other words, stop worrying and obsessing about it. Accept it as your reality. Worrying and doubting and resisting are a waste of time. A better use of your time will be to focus on solutions and what you’re going to do about it.
Figure out a way to teach others how to do the same thing (aka Don’t worry. Be happy.) If you can help board volunteers and employees adopt the same approach to whatever is bothering them, then you’ll be well on your way to changing culture and addressing the challenge.

So, let’s use a real non-profit example to illustrate this suggestion.

Your board volunteers are afraid of all things related to fundraising. They are frozen with fear and the result is inaction and lots of red ink on your financial statements.

Don’t worry! Be happy! Try to employ the following approach:

Stop blaming board members.
Stop asking them to do the same thing but in different ways.
Accept the fact that fundraising isn’t the easiest thing in the world to do.
Try to empathize and put yourself in their shoes.
Schedule a series of one-on-one meetings with board volunteers. Focus those meetings around the questions: “What are you willing to do in the area of fundraising (if anything)? What can I do to support you?“
Work with your board development team to do a better job with identifying and recruiting additional board volunteers who have a proven track record with fundraising at other organizations.

I have a confession to make. I am as guilty as anyone else when it comes to obsessing about problems and challenges. I will wring my hands. I will look at the situation from every angle. I will keep asking the same questions over and over again, which of course are “Why? Why? Why?”

Don’t worry. Be happy. This solution is easier said than done. However, when I look at the last six bullet points that illustrate how this change management approach can be practiced, it certainly seems logical and a lot more effective than focusing on: “Why? Why? Why?”

Have you ever tried using this approach? What was your experience? Please share your thoughts in the comment box below.

On a side note, congratulations to John and Jamie Greco for 35 years of marriage. This is a true testament to Jamie’s patience and perseverance. LOL Just kidding, John. It is a testament to your compatibility and love for each other. HAPPY ANNIVERSARY!

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

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.

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!