Balancing the Mission Checkbook

At the pace we’re all traveling it’s easy to forget what you said last week, much less a few months ago. It’s interesting, then, when we receive a comment on a past post and go back to re-read it. So much is happening and developing in the nonprofit world that I’m taking this week to update three topics.

Transparency

In December 2007 I wrote about Transparency and Financial Information:

I would strongly suggest that nonprofit organizations make the effort to make usable financial information available on their website. The IRS 990 is already a public document, so it seems like the obvious tool for financial disclosure. However, I think we should go past the 990 to share better information, especially since everyone seems to agree that the current version of the IRS 990 is overly complex, confusing, and very difficult to use. A better solution would be having the audited financial statement easily available on the website.

Guidestar recently published The State of Nonprofit Transparency Report, which included these findings:

A high percentage (93 percent) of nonprofits are embracing the Internet to disclose information about their programs and services.

Only 13 percent posted their audited financial statements on their Web sites. The results of our survey show a reluctance to disclose audited financial statements publicly. Although not all nonprofits obtain audits of their financial statements, our survey sample reflects organizations of the size for which an audit is both prudent and a necessary tool for assessing management’s financial capabilities and the organization’s financial health.

Let’s hear it for more audits online!

Mergers and Strategic Collaborations

In June 2008 I suggested Speed Dating for Nonprofits:

No one would say that mergers are the right answer for every nonprofit, but if you do think that joining forces would make sense and help your organization maintain stable services, where do you find your mate? I think I’ve found the answer - speed dating for nonprofits! Speed dating is an organized event to help singles meet a number of people in one evening with the intent of finding one or two for an actual date.

I’m excited that MAP for Nonprofits and the MACC Alliance for Connected Communities have organized a Speed Dating event on May 20^th to explore strategic partnerships.

Low-profit, Limited Liability Corporation (L3C)

And in May 2008 in Where For-Profit and Nonprofit Meet I was excited about the new hybrid Low-profit, Limited Liability Corporation (L3C) that had been adopted in Vermont.

The idea is to create businesses that can attract some private capital, bolster that with more patient philanthropic or socially motivated investment, and result in value to the community (jobs, housing, local revitalization) and a below-market return to investors. This structure is not a fit for every nonprofit, or even for every social enterprise. The L3C is all about raising capital, and when the need for capital is significant, this is worth considering.

This post continues to attract readers and questions. The most common confusion is about the fit for nonprofits that need subsidy (i.e. grants and contributions), rather than capital. The L3C is designed for capital but doesn’t offer any incentive for contributions. For more information, the experts on the L3C are Americans for Community Development. We’ll explain this new hybrid form at the May 14^th meeting of the Social Enterprise Network.

Since the post was written several other states have adopted the model, with others in the legislative process. I’m hoping that Minnesota can get on the bandwagon in the next year.

The Minnesota Council on Foundations invited Judith Alnes from MAP for Nonprofits and me to contribute an article for their current issue of Giving Forum. The title is Nonprofit Survival: Four Steps to Take Now. Add this article to the dozens that have been written in the past few months about what nonprofits should/could/might/ought to do in order to maintain their organizations and community services in the face of the harsh economic environment.

Harsh is the word for it. When I read the article in print today, this statement in the conclusion really jumped out for me:

“Those of us in leadership roles should remember that this time will be judged by the actions we take or the actions we fail to take.”

That’s a lot of weight being carried by leaders of nonprofits.

David Brooks described the pressure in his column in yesterday’s New York Times:

“It’s no fun being a leader in a financial crisis. You’ve got to be bold but reassuring, free-spending but disciplined. You must decisively crush the short-term problem without freaking everybody out and leaving a long-term mess.”

He was writing about Treasury Secretary Tim Geithner, but I think many nonprofit directors share the feeling.

Nonprofit Leadership

Leadership in nonprofits has been the subject of many articles, studies, forums, and institutes. I have benefited from some of these greatly, learning about my personal style and how to nurture my strengths, include other viewpoints, and work collaboratively to create a team. Sometimes, being a leader requires you to take responsibility for tough problems and be held accountable for the results. Commenter Claudia Dengler’s response to one of my December posts really hit a nerve. She said:

“And on the personal side, if you thought you were lonely at the top before…even the most transparent leader will find they have to hold information close, thinking deeply, often privately, about the full weight of their impending decisions.”

If you’re the one who has to stare at the budget column or read the letter informing you of a funding reduction you know what this feels like. As David Brooks said, it’s no fun.

Ideas about Support and Resources

What kinds of support and resources do leaders of nonprofits need to manage the personal demands and the pressure of leading in this environment? Based on the number of people I’ve seen at the various meetings and forums about managing in difficult times, there are a lot of people looking for something - some skills, some information, even some secret solutions (there aren’t any). I also think that we’re all looking for some reassurance that we’re not alone in the struggle.

This is a time to learn a new leadership approach or adapt well developed leadership practices. I have some ideas about what needs to change and I hope that you will weigh in as well.

I offer three suggestions to start:

• Nonprofit directors often lack support networks of true peers because they’ve learned to manage the relationship with their board and to treat other nonprofits as competitors. We need to lower our guards and be more honest and open with others in our field.

• There are hundreds of different ways that staff leaders and board leaders work together. Many executive directors don’t really know what to expect from with their boards right now. Executive directors and board chairs need to have a conversation about how the board’s role, practices, and composition will need to change to adapt to long-term financial and community uncertainty.

• Find a friend with whom you can confidentially share your fears and pressures, get some reassurance, sympathy, and care - and then do something fun.

What are your ideas?

Yesterday I had the great pleasure of helping to launch the Social Enterprise Network for nonprofit social entrepreneurs in the Twin Cities. Initiated by Nonprofits Assistance Fund and MAP for Nonprofits, this new monthly peer gathering attracted 40 people who braved the brutal cold to attend a lunchtime discussion hosted by Jim Thalhuber at Goodwill/Easter Seals. We couldn’t have had a better start for the network. The group represented a broad range of nonprofits - social service, arts, youth development, employment services, and educations - and types of enterprises including manufacturing, a bakery, thrift stores, consulting, and various services. Most of the nonprofits are already operating an enterprise and are eager to share their experiences about building their venture, as well as learn from their peers.

The best part about the event was the positive, upbeat tone of the ideas, questions, and discussion. I’ve been to a lot of pretty downbeat meetings lately that have focused on reductions, cutbacks, and shortfalls. While the social entrepreneurs at the network all recognize the difficult economic realities that we all face, there was an energy that I really needed to renew.

Adding to the positive momentum of the Social Enterprise Network is the possibility of a real commitment from the new administration to nurture innovations for the common good. Featured in President-elect Obama’s Blueprint for Change are a number of ideas to expand service and innovations, including a Social Investment Fund and Social Entrepreneurship Agency for Nonprofits. Government is an important player in the nonprofit sector, as contractor, funder, and policymaker, and a new, more innovative approach could help lead to real change for some big challenges. A recent blog post from Public Innovators describes this rich opportunity.

A final gift at the Social Enterprise Network was hearing Kevin Lynch, President of Rebuild Resources in Saint Paul, that he and Julius Walls, Jr. of Greyston Bakery, just authored Mission, Inc., The Practitioners Guide to Social Enterprise, which was just released and is available for sale online.

Thanks to everyone who came to the first network lunch - I needed the boost of energy and optimism. I can’t wait for the next meeting in February.

Update:

Photos from the event are available on our facebook page.