Balancing the Mission Checkbook

For those of you who are not familiar with Alltop, it’s a place that gathers and posts stories on a particular topic, in this case nonprofits. You can visit Alltop and see the most recent posts from a range of news sources and bloggers, as well as find new sources of information to expand your online resources. In their own words,”You can think of an Alltop site as a ‘dashboard,’ ‘table of contents,’ or even a ‘digital magazine rack’ of the Internet…we are trying to enhance your online reading by both displaying stories from the sites that you’re already visiting and helping you discover sites that you didn’t know existed.”

We’re pleased and honored to be featured on Alltop. We’d like to thank our readers for their support and participation – we would not be a part of this exiting project without you. A special thanks to Guy Kawasaki and Nononina, Nedra Kline Weinrich, and everyone else at Alltop for including us in your site.

For more information on the story behind Alltop, to see their full list of categories, or to browse the latest top stories, visit http://alltop.com/.

Last week, I unplugged from email, Blackberry, and voicemail for a nine-day vacation. I’m sure you’ve all enjoyed the times when you change pace, slow down, and relax. It was indeed a great break – but interestingly, I was not taking a break from nonprofits. They’re everywhere – and that’s a wonderful thing. Our trip started with a few days in Virginia in the Shenandoah Valley and the Blue Ridge Mountains and ended with some time in Washington, DC. With that itinerary, I’d expected that our time would be dominated by businesses, like hotels and restaurants, and by the National Park Service for our visits to the Skyline Drive, the National Mall, and other historic sites. What I hadn’t really thought about was how much nonprofits would be woven into the trip. Both Thomas Jefferson’s home at Monticello and George Washington’s Mount Vernon are owned and operated by nonprofit organizations, and are supported by fundraising, fees, and gift shop sales. In DC, the National Mall is a public park, but many of the events and special features are created and supported by nonprofits. We were lucky enough to be there at the peak of the cherry blossoms and the (nonprofit) National Cherry Blossom Festival. I know that this photo looks like a postcard, but I really did take it myself! To round off our nonprofit immersion, we had dinner at the funky Busboys and Poets restaurant, operated by a nonprofit, Teaching for Change.

It’s probably not a surprise that nonprofits are everywhere – and that’s a good thing, right? So maybe we should push back the next time someone brings up the argument that there are too many nonprofits, or that “someone” should prevent new nonprofits from forming. While I was on my nonprofit tour, in fact, there was a blog exchange on this very topic that you can find at Give and Take. I’ll confess that I’ve contributed to this idea on occasion, but my trip and the time I had to reflect on the presence and role of nonprofits has made me re-think this. Come on in! If a group of people have the commitment and passion to help the community, and are entrepreneurial enough to pull together an organization and programs, then I hope they can find their role and support. It isn’t easy. The field may be crowded, and funding is competitive, but important work is being done. Thanks.

The theme for the Carnival of Nonprofit Consultants this week is “What one thing should we do to improve the state of the sector?” My nomination is to declare 2008 the year that the program service-administrative cost ratio formula became irrelevant.

Yes, the good old 70%-30% ratio has been declared officially useless in identifying whether or not a nonprofit organization is effective in accomplishing its mission and helping the community. Most readers of these blogs have probably been beating their heads against the wall about this anyway. I read a lot of research reports and I have never read one that demonstrated that the expense ratio is a clear indicator of the quality of programs or management, or impact on the lives of people. One reason why we continue to chase this argument, though, is because the ratio is prominent, well known, and easily calculated.

We need a two-step retirement plan. First is to jointly stop using the ratio as a way to distinguish our organizations from others, in an unhealthy type of competition, as in “our administrative ratio only is 5%, so your donated dollar will go farther with us.” The second is to find a better way to convey the quality and effectiveness of the work that you do, which requires a real method of evaluating and communicating the programs and impact on clients.

So don’t be irrelevant – join the movement.

My last post of 2007 is a few suggestions and recommendations for your leisure time review.

Tucked in the Business section of the Saturday, December 22, 2007 New York Times was a wonderful story, Emerald City of Giving Does Exist, about the Twin Cities’ enviable amount of corporate philanthropy and commitment. I hope you don’t miss this in the flurry of the holidays. We may wish there was even more to go around, but we are the envy of many nonprofit leaders in other cities, and I thank the business community for that.I have three books to suggest. First, I recommend that everyone interested in developing great boards read Governance as Leadership: Reframing the Work of Nonprofit Boards by Richard Chait, William Ryan, and Barbara Taylor. This book, published in 2005 by BoardSource, starts with the premise that many boards do not really have a problem of performance, they have a problem of purpose. The book will open your eyes and mind to a new way of thinking about board roles and leadership.

The two other books were published in 2007 and offer interesting ideas and thinking on important nonprofit management topics. I’m still reading both of them, so my reviews will wait for another time. Forces for Good: The Six Practices of High Impact Nonprofits by Leslie Crutchfield and Heather McLeod Grant offers an analysis of twelve organizations that the authors selected based on their impact, reputation, and scale. One important finding was that the high impact nonprofits achieved this impact not only through their direct services, but also by deliberately rallying others to the bigger cause through networks.

ROI For Nonprofits: The New Key to Sustainability by Tom Ralser (published by Wiley) offers a detailed study of how to translate the work of nonprofits into the increasingly important frame of venture capital and business. Whatever your personal opinion of this trend, it is here now and it’s worth your while to understand it.

Finally, a few favorite blogs to read next year:

• Mission-Based Management: Smart, interesting, and useful management perspective
• Gift Hub: Incredibly timely and interesting references, links, and thoughts on philanthropy
• Stanford Social Innovation Review: In-depth analysis and ideas, requires some time to read and consider.
• Nonprofit Technology Blog: Even if you’re not a tech person, we all need to pay attention to trends and new uses.
• Nonprofit Accounting Boot Camp: How can I resist a regular blog about nonprofit accounting issues?
• Give & Take from The Chronicle of Philanthropy: The editors read all the blogs and compile interesting posts in one place – a timesaver.

Cheers, and Happy New Year to you all!

Since I am supposedly an expert in nonprofit financial matters, I shouldn’t be surprised that I am frequently invited to join nonprofit boards. I am surprised, though, when I’m recruited for the board of a nonprofit that I have no knowledge of, with no past relationship, and in a field of service in which I’ve never shown a particular interest. What do they think I will bring to this board? The honest answer is that I will be able to read their financial statements. I agree that financial oversight is an essential board role, and one that boards do not always perform well. For evidence of that, just read any of the recent stories about fraud, misuse of funds or insider transactions. I also know that it’s challenging to recruit board members who understand financial reports, budgets, cash flow, and audits. But is a specific skill – financial knowledge – enough of a reason by itself to invite someone to join the board? As the invitee, I would say no. I have some questions that I ask when I’m recruited for a board. First, of course, is whether I believe that the work the organization does, and how they go about it, is exciting and important to me. I’ve been asked to serve on boards of social service, health care, performing arts, literary arts, visual arts, community development, faith-based, education, and youth service nonprofits. I care deeply about some of these issues and not so much about others. Uninterested board members are often unengaged board members. My next question is, “why me?” The fact that I can read and understand financial reports is not a good enough answer.

The starting point of board recruiting needs to be a broader understanding of what kind of governance and leadership the organization needs, and how the board as a whole and as individual members can deliver on those needs. A common tool for board recruitment is a matrix that lists the skills and other attributes that are needed on the board on one side and current board members across the top. Fill in the boxes and, voila, you see the holes that need to be filled. Too often, though, this results in a board from central casting – an attorney, a CPA or banker, a business person with a marketing background, someone who (it is hoped) has access to potential donors, and then one or two people with long histories with the organization. All of these board members have skills and abilities but don’t always add up to become a great governance and leadership board. How can you get the board you need? First, open your mind beyond technical skills about what you need from individual board members. I’ve seen grids that list not only the specific skills like marketing, fundraising, financial, etc. but also personal qualities like “boat rocker” and “challenges status quo”. The list of skills and attributes needs to change over time, too, and project into the future – aligned with the strategic plan – what the organization will need to get it where it wants to go. I think that this enhanced grid can start to get closer to the broader needs. Second, think about the board as a group, not as a collection of individuals. Think about what styles, attributes, and skills will work together to create the best board team. Third, consider how you actually develop a list of nominees. Too often, a spontaneous and short brainstorming session evolves into a definitive list. The board, or a nominating committee, thinks of names of people they know of – off the top of their heads – and that becomes the list. I think that this is where my name tends to come up. Better to take some time to research and find people who will be the best match with the organization’s work, the skills and leadership attributes needed, and the dynamics of the group. Ideally this is an ongoing process so that you always have a list of potential board candidates. While this post is on the topic of recruiting new board members, many of the same ideas can apply to sitting board members through an assessment process. I have found some very practical and concise thoughts about board assessments on the Starboard blog by Jeff Wahlstrom like this excerpt from a recent entry - Board member, assess thyself.

• Do I know what is expected of me?
• Do I have what it takes?
• Do I have the necessary tools, information and instruction to succeed?
• Is what I’m doing on the board making a meaningful difference?
• Is there an opportunity here to make better use of my abilities/skills/experience/knowledge?
• Am I enjoying the experience of serving on the board?
• What would make my board experience even better?
• And (most importantly) what goals should I set for myself and my board experience?

This month, Nonprofits Assistance Fund announced a new training service designed to help members of nonprofit boards understand and use their financial reports titled Financial Clarity for Nonprofit Boards. This idea has been brewing for a couple of years in response to the many nonprofit directors who come to one of our workshops and say, “I wish my board were here.” One of the most important factors that we considered as we were developing this new training was the diversity of nonprofit boards. Not all nonprofit boards are the same – and that’s a good thing. Unfortunately, I have read too many books and articles about board roles and responsibilities that describe a one-size fits all approach.

In a typical chapter about boards, the list of responsibilities includes: hiring and evaluating the executive director, fundraising, strategic planning, financial oversight, and identifying future board members. Beyond that list, board members are warned, they should not meddle. Well, this list may be appropriate for organizations with sufficient resources and staff to carry out all of the ongoing activities but there are many nonprofits that are not at that point – and may never be. Young organizations with a small staff need more involvement, and nonprofits that are reaching into communities with deep and specific needs may need a different kind of board – community involvement. How the board actually gets its work done needs to vary depending on the organization’s current needs (which will change). With this understanding, we created the financial training for boards to be flexible and allow us to meet the board where they are and build the capacity that fits them.

I recommend a report from a study that was completed in fall 2006, “Coloring Outside the Box: One Size Does Not Fit All in Nonprofit Governance” by Kim Sundet Vanderwall and Ellen Benevides for MAP for Nonprofits. The study reports on discussions about how boards work in 40 small grassroots nonprofits and organizations based in cultural or rural communities. What they found was a variety of different ways that organizations had created to get the work of the board done. In few cases were the boards following the “textbook” model.

Common strengths the researchers discovered were the level of shared commitment, values and connection between board members. Common struggles were attendance and engagement, clarity of roles, and some of the specific roles and structure. It’s interesting to read the differences in perceptions about the board given by board members compared to directors and staff members.

The report concludes not with a prescription for all boards to follow, but a list of five core recommendations:

1. Know what you must do as a board.
2. Find a way to make that happen in as streamlined a way as possible.
3. Be creative and think outside the box.
4. Keep the spirit of the organization alive in all you do.
5. Challenge those who provide technical assistance to boards to present standards and best practices in a way that takes size, resources, and culture into account.

Another consultant who frequently writes about a variety of approaches for boards is Mike Burns at Brody Weiser Burns. Mike’s article “Avoid Pigeonholing Your Board into Traditional Models” was written almost 10 years ago but it’s still very timely. Mike also has a blog on nonprofit board issues now, Nonprofit Board Crisis.