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Why Your Board Should Raise 10% of Your Nonprofit’s Budget

By Nell Edgington



Nonprofit BoardIt’s no secret that nonprofits struggle with money. In fact, the Nonprofit Finance Fund’s most recent State of the Nonprofit Sector Survey found that 41% of nonprofit respondents ran a deficit in 2012. If we really want to rewrite this rule for the nonprofit sector, we need to make some pretty big changes.

So here’s a radical idea.

What if every nonprofit board were responsible for bringing in 10% of their nonprofit’s annual operating budget?

That means that if your nonprofit’s budget is $1 million, your board would be responsible for raising $100,000 each year. They could do that through a combination of give/get activities, meaning they could all write personal checks (at whatever level makes sense for them individually) and then use their unique skills, experience and networks to raise the remaining amount.

That’s a crazy idea, right?

I don’t think so. Here’s why.

The Board Must Really Understand the Money Engine
A board of directors simply cannot separate themselves from the financial engine of their nonprofit. The entire board must fully understand and contribute to how money flows to the organization. They cannot argue that money is the purview of the staff; money HAS to be part of the board’s job. Until we make the board really participate in making the financial engine run, they won’t be able to have substantive conversations about how to raise or spend that money.

The Board Must Share the Burden
I’m so tired of silly, small board fundraising goals. Does a 15 member board that brings in only $15,000 out of a $1 million budget really make a difference? Absolutely not. That’s pennies. If they are truly going to lead the nonprofit that they serve, they must share the financial burden. Ten percent of the operating budget starts to make a significant dent, so let’s start there.

The Board Must Tap Into Their Unique Assets
I am not suggesting that we force every board member to ask individuals for money. Far from it. Rather, I’m arguing that nonprofits start getting really strategic about tapping into each individual board member’s strengths and assets in order to make a bold fundraising goal a reality.

But you can’t just turn to the board and tell them to bring 10% in the door. Some things are going to have to dramatically change in order to make 10% a reality.

Here’s what you have to do:

If we really want to see a shift in how the nonprofit sector is funded, we need to make some pretty radical changes to business as usual. So start to entertain the idea. What would it look like if your board brought in 10% of your annual budget?

If you want help transforming your board, download the How to Build a Groundbreaking Board On Demand Webinar or the 10 Traits of a Groundbreaking Board E-book.

Photo Credit: Richard Matthews

 

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About the Author: Nell Edgington is President of Social Velocity (www.socialvelocity.net), a management consulting firm leading nonprofits to greater social impact and financial sustainability. Social Velocity helps nonprofits grow their programs, bring more money in the door, and use resources more effectively. For more information, check out Social Velocity consulting services and clients.


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21 Comments to Why Your Board Should Raise 10% of Your Nonprofit’s Budget

Keenan Wellar
June 11, 2013

I disagree with most of this on a fundamental basis. The function of the board is to govern the organization. While some board members may we interested in fundraising (and they should certainly be welcomed to do so) to me that is neither the legal nor moral responsibility of a board member. There are great board members who are not great fundraisers. There are great fundraisers who are not great board members. There is plenty of work and opportunities to go around without an artificial insistence that board members must also be fundraisers. By may way of thinking, if an organization wants an increase in individual fundraising, you would go after that goal and not tie it to the work of board members.

Nell Edgington
June 11, 2013

Keenan,

The board of a nonprofit does actually have a fiduciary responsibility to their nonprofit (see this article: http://www.grantspace.org/Tools/Knowledge-Base/Nonprofit-Management/Boards/Legal-duties-of-the-nonprofit-board).

In addition to that legal responsibility, a nonprofit organization that aligns mission, money and competence will achieve more impact and financial sustainability (see this post http://www.socialvelocity.net/2009/03/the-critical-alignment-of-mission-money-and-competence/). So nonprofits that want to survive and thrive must get their boards involved in the financial engine of the organization.

I agree with you that there are great board members who are not great fundraisers, and that’s completely fine. There are countless ways for board members to contribute to the financial engine WITHOUT fundraising (see this post http://www.socialvelocity.net/2012/01/9-ways-board-members-can-raise-money-without-fundraising/)

The insistence that board members must contribute to the financial engine of their nonprofit is not “artificial,” rather it reflects a real necessity if the organization wants to create long-term social change.

Keenan Wellar
June 11, 2013

Of course one of the critical legal and moral responsibilities of a board is fiduciary oversight. But neither that document nor anything else you can point to will say “boards should fundraise.”

Our organization is in the black and has established reserves, and with all due respect, I don’t think we are lacking in our pursuit of long-term social change. And whether or not our board members participate in fundraising (they don’t, formally) has not had anything to do with that success.

I have to stand by my opinion that any insistence that board members participate in fundraising (particularly delivery on fundraising targets) has little to do with good governance. I think it’s a huge and inaccurate stretch to suggest that board members participating in fundraising is essential to creating long-term social change. In fact, this makes little sense to me at all, and I have to really struggle to see any logic to it.

You are welcome to explore our organization (where board members do NOT have a fundraising role) and explain to me why you feel we are falling short on creating long-term social change as a result.

Nell Edgington
June 11, 2013

Keenan,

Congratulations on running such a financially strong nonprofit. However, you are sadly in the minority in the nonprofit sector.

You say that your board doesn’t formally participate in fundraising, but I would hazard to guess that they all somehow contribute to the financial bottomline because if truly the only people touching money and/or donors in any way at your organization were staff members, I doubt that you would be as financially strong as you are.

Board members don’t have to fundraise, I agree. But they do have to understand and somehow contribute to the financial engine in order to have a strong nonprofit. And therein lies the distinction that I am always making on this blog: nonprofits (and board members) must Finance, not Fundraise for, their organizations.

Keenan Wellar
June 11, 2013

Thanks Nell, I would like to think we are in that minority because we have solid governance that is accompanied by an enlightened understanding of responsibilities and how ownership, board, staff, and community are called to contribute to our mission.

Our board (and certainly I support this) has worked very hard to focus on the reality that their job is to govern. It is not to count pencils, run garage sales, or contribute 10% of the value of the annual budget.

While by necessity a board of a start-up is almost always involved in fundraising, our organization is now 18 years old, and for me/us to see “board fundraising” as a regular on the agenda would be a very disturbing development – a sign that something has gone wrong or is going wrong.

An individual board member who happens to also have a passion for fundraising is easily accommodated – but that takes place outside of governance. The fact that Susie Q board member had a wine and cheese and raised $10,000 is awesome, but it’s not a board member responsibility. We have lots of Susie Q who are not board members who raise money. I just don’t see the connection.

Of the many problems I have with this idea, it’s also a reality that some board members have money in the bank, and others don’t. The actual job of governance is a big one, and I completely blanched at the suggestion board members would have a sit-down to develop a plan for how they are going to raise their share of the 10%.

We have a broad base of people and organizations that contribute to our mission because they believe in our work. Board members are among these. I am sure they feel good about this, but it has no relation to their quality of governance and I’d vociferously advise against any distraction from their focus and responsibility on bridging with ownership, monitoring the executive, and pursuing forward-thinking ends-focused policy development.

Nell Edgington
June 11, 2013

Keenan,

I think you are missing my point about Financing instead of Fundraising. I am not at all suggesting that every board member act like Susie Q. Rather, I am suggesting that every board member understand and contribute to the financial engine of the organization. I would encourage you to read my description of Financing instead of Fundraising (http://www.socialvelocity.net/2009/12/financing-not-fundraising/) and also my post on 9 Ways Board Members Can Raise Money Without Fundraising (http://www.socialvelocity.net/2012/01/9-ways-board-members-can-raise-money-without-fundraising/).

Once you have read these I think you will understand that what I am arguing is that financing is inextricably bound with governance. You simply cannot have “forward-thinking ends-focused policy development” if you don’t have a financial engine behind it. You cannot have mission without money. And if you leave money solely up to the staff, you will have a less robust financial engine.

Keenan Wellar
June 11, 2013

Sorry, I’m still in fundamental disagreement. Those roles in my opinion having nothing to do with governance.

As I said, in a start-up phase boards are often by necessity involved in finance or fundraising, and if I look at the progress of our own organization, the board has increasingly had LESS to do with finance and we’ve experience financial growth virtually every year. In other words, board involvement in the financing of our organization has an INVERSE relationship to financial growth, including diversification.

Which also means the board has been focused on doing its actual job – which in relation to financial matters is a MONITORING process, not a generative process. Which is why I believe in addition to financial progress (which may or may not tie in to mission-oriented progress) we’ve made great strides towards our organizational ends – our board has been focused for example in servant leadership for important shifts in the expression of our mission, vision, and values.

I have to tell you, we DO simply have “forward-thinking ends-focused policy development” on our board and it is explicitly NOT the role of the board to create the financial engine behind it. It is the role of the board to be fully informed about our financial situation and how that limits or opens doors to our ability to pursue our ends.

If we as an organization need to expand our financial engine through the contributions of individuals, we’ll go out and get them – we won’t turn it into a board responsibility. I would argue that this perspective is what has an enabled us to grow at a time when most in our particular sector have retracted or stagnated.

Nell Edgington
June 11, 2013

Keenan,

I’m glad that what you have worked out with your board works well for your nonprofit. But I think you are still fundamentally not understanding my overall point. I’m not arguing that all board members raise money from individuals, some may have the talent and networks for that, some may not. Rather I am arguing that every board member be directly connected to (in whatever way plays to their skills, abilities and experience) the financial engine of the nonprofit. So, for example a lawyer on the board may be involved in negotiating for lower vendor fees, an entrepreneur on the board may be involved in business planning for an earned income venture, etc. The idea is that the nonprofit creates a financial engine that is aligned with the mission and competencies of the organization, and the board (as part of their role leading the organization) plays some role in that. Again I think you are using the normal, and very limited, definition of fundraising, when I am talking instead about the board being involved in the nonprofit’s financial model.

Keenan Wellar
June 12, 2013

I am pretty sure I understand what you are saying, and I continue to disagree. Your example of the lawyer negotiating lower vendor fees – that is not a board responsibility. It has nothing to do with governance. We do have a lawyer on the board. She is not involved in means-oriented tasks. We have a lawyer who is NOT on the board who helps in that way. Confusing the board role between means and ends is the reason so many non-profit boards have lost their way, in my opinion.

Keenan Wellar
June 12, 2013

I think we have a fundamental disagreement about governance. To take your example of a lawyer on the board that negotiates lower vendor fees – that to me is NOT a governance role. We have a lawyer on our board, but she does not get involved in those sorts of means-related issues. We have another lawyer who is not on the board who would assist us in such matters if we require help of that nature. I believe the confusion of means and ends is one of the reason that so many non-profit boards have lost their way. It is easy to become attracted to and involved in the day to day operations, but that is not actually what governance is supposed to be about.

Nell Edgington
June 12, 2013

Keenan,

I’m not suggesting that the board become involved in the day-to-day, in fact I am arguing that they become involved in the overall financial strategy of the organization, and as part of that strategy, the board must be involved in somehow making that financial strategy a reality. A nonprofit’s board of directors has the potential to exponentially grow a nonprofit’s network and access to resources. I’m not sure why you are so adamant about not tapping into that.

But I will say again, you have found a path that works for your organization and that’s great. I simply don’t think your experience is the norm.

Keenan Wellar
June 12, 2013

Nell, it’s simply incorrect to state that “The board must be involved in somehow making that financial strategy a reality.” Raising money and/or bringing financial resources to the board table is not in fact a governance responsibility. Some organizations may choose to confuse things in that way, but I do not see that as positive or progressive – unless the organization’s mission is “to raise money” which is unlikely.

As I’ve already stated, we welcome all sorts of people to contribute their networks and financial resources. That is where our exponential growth comes from. If we are doing a fundraising event and inviting people to participate, then an interested board member could join that committee – but it is not (and hopefully never will be) some sort of expectation that gets tied into board membership.

Our quality governance comes from being very clear about board roles and not confusing them with obligations that are not in fact governance responsibilities. The example regarding the lawyer is in fact a confusion of means and ends, and as non-profit boards struggle to understand their role and our sector is full of organizations beset by mission drift, it’s critically important that boards (and staff) don’t confuse governance with other roles.

Fred Stock
June 13, 2013

Interesting discussion Nell and Keenan. I agree with some pieces of what both of you are talking about. Different Board members bring different talents to this role and I believe it is important to have the right kind of “mix” of talent. I also believe that as organizations evolve, they may require a different “mix” depending on the challenges facing the organization. Finally, I do believe in the premise that an important role of the board involves sustainability or as you put it Neil, financing the organization. Thanks for your “food for thought.”

Nell Edgington
June 13, 2013

Thanks for your thoughts, Fred.

Keenan Wellar
June 14, 2013

Now Fred could send me off on a whole other tangent. Not only is there a common confusion that non-profit board members are (or should be) responsible for raising money, I have also seen many a board gone wrong because individual board members are assigned particular responsibilities (financial oversight being a common example). That’s not what Fred suggested, but it is a common problem that his comments brought to mind.

While a board can decide to take responsibility for generating revenues, it simply is not part of governance, and to suggest that it is, is misleading. One can argue that board members getting involved in fundraising is a good idea, but it will never be accurate to say that it is a governance role.

As you can guess, I am strongly opposed to associating revenue generating with board membership. It’s a big world out there and there are many alternatives for recruiting people with fundraising roles, and no need to confuse that with governance. It is not limiting in the least that our board does not share in that confusion. If anything, having governance roles appropriately defined ensure has helped the organization look outwards and increase our base of contributors.

As to my second point, while bringing board members with a different mix of talents is important, it’s important to note that the board as an entire entity has fiduciary responsibility. This means the rather common practice of assigning one board member a title like “Treasurer” and leaving it to that individual to monitor finances is not in fact a healthy means of meeting that core governance obligation.

It is a sad irony that I’ve seen many boards where the board members are involved in all sorts of non-governance activities, but then the core responsibility of financial monitoring is being managed by a single person or a small group of people.

Shane
June 18, 2013

Thanks for the post and the very helpful follow-up discussion in the comments section. As a board member, both points of view are challenging and encouraging to me.

[...] I catch your attention? If you haven’t seen this article, give it a [...]

[...] I strongly disagree. I’m a firm believer that every single board member should participate in the financial engine of the nonprofit they serve (in fact I recently argued that boards should raise 10% of a nonprofit’s budget). [...]

Chris
November 10, 2013

Oh my goodness, Keenan thank you so much for your thoughts. I am a founder of a brand new non profit and currently in the process of approving our budget, after reading this article, my heart just sank. I was thinking I have to go to my founding members of the board, who are already swamped with everything from articles of incorporation to figuring out the calendar and say to them, you are all responsible for 10% of this budget… good luck. I thought for sure, they would all quit. It’s good to keep them in the in the governing role and keeping “funding the budget” in it’s proper place. I’m new to running a non profit and I know I have a lot to learn, but something didn’t feel right about this article. Like we were defeated before we even started. Thank you again!

Nell Edgington
November 12, 2013

Chris,

I’m sorry that you felt overwhelmed by my blog post. Obviously you have to do what you think is right for your nonprofit. And it may be that your board is not currently in a place where they could be expected to raise 10% of the budget, and that’s fine, for now. But at some point you will reach a level where you need a board who will step up and put some real muscle (and networks and skill) behind the financial engine of your organization. Because if your board remains distanced from the financial engine it will always fall to you (and your staff if you have them) to make it run, and that’s not sustainable.

[…] Should the board be responsible for raising 10% of our budget? […]

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