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board give/get requirement

The Debate: Should Boards Raise 10% of a Nonprofit’s Budget?

nonprofit debateIt seems I raised controversy with my recent post, “Is Your Nonprofit Board Avoiding Their Money Role?”. The hot button issue, not surprisingly, was my assertion that boards should be charged with raising 10% of a nonprofit’s budget.

As I put it:

I know it’s heresy, but I believe that a board should be charged with raising at least 10% of a nonprofit’s annual budget. But that doesn’t mean they all have to write personal checks (or get their friends to write them). Rather, there is an endless list…of ways board members, who are fundraising shy, can bring money in the door. Because why should the entire financial burden be left on the shoulders of the staff? That’s just not sustainable. And if you can’t get your board to step up to the financial plate, how will you have any hope of getting others to do so?

Several people disagreed, and consultant Gayle Gifford (who very respectfully argued with me in the past about my take on nonprofit events) took real issue, commenting (in part):

In my 30 years of experience, the most sustainable organizations financially are those that rely little on their board of directors for their financial success. I just wonder why it is that these governing volunteers, who are charged with so many more weighty responsibilities for sustainability, are held to such a double standard when it comes to revenue development. Imagine the absurdity of you pronouncing: The Board of Directors must be responsible for managing at least 10% of the organization’s programs.

I argued back that we must define board contribution to the financial model of a nonprofit much more broadly:

The point is that board members should not be allowed to ignore the financial realities of the organization, and it is impossible to ignore something when you have a responsibility for a piece of it. In the examples you give, I would wager that if you calculated board involvement in a much broader way, you would find that at least 10% of that money could be attributed to board involvement. And if not, yikes! Because that means it is all resting on the shoulders of the staff, and that simply is not sustainable. The board must be much more supportive of the nonprofits they serve, and in my mind that means they need to show up, and show up in a significant way, to the financial engine of their organization.

But Gayle was not having it. She responded that just as the board should not be expected to deliver on programs, they should also not be expected to contribute to the financial model:

In very brief, the role of the board as governors is to ensure that the organization is delivering on its mission, that it has a business model that supports its ability to deliver its social impact and that the organization has a human resource and operation plan to make that happen. That it is trustworthy and worthy of support. This is the absolutely best fundraising work that they can do. Boards are totally within their governing role to decide that the way to meet the organization’s revenue needs is hire professional staff and have them do what they are in fact trained to do. I would hypothesize that organizations that do that are more likely to successfully achieve their revenue goals (actually, there is research data to back this us -see “Nonprofit Fundraising Study” of Nonprofit Research Collaborative 2012 ) than the wishful and largely unmeasurable objective of 10% standards pulled out of a hat. BTW, I don’t understand why it is unimaginable to say that the board is responsible for delivering 10% of programs, or 10% of operations, if you set up a standard of attributing 10% of revenues? What makes one different from the other in terms of sustainability or professional expertise?

But in my mind, there is a critical role for the board in both mission and money, and you cannot have one without the other, as I replied to Gayle:

I completely agree with how you characterize the role of the board (“to ensure that the organization is delivering on its mission, that it has a business model that supports its ability to deliver its social impact and that the organization has a human resource and operation plan to make that happen. That it is trustworthy and worthy of support”). However, the missing link (so very, very often) in nonprofit organizations is that the board thinks that showing up to meetings and hearing the development report is enough. Raising money requires that the board take an active role. And that active role means opening doors, making connections, providing intelligence, offering insight. This can actually also be true in delivering programs — the board should not only help provide the overall program strategy and theory of change for the organization, but also help to open doors and make connections to key decisionmakers, advocates, or others outside the organization walls who are critical to effective delivery of the organization’s mission. In all of this, I am simply asking that the board step up and take an ACTIVE role, as opposed to a passive role of “hiring professional staff and have them do what they are in fact trained to do.” There must be an effective partnership between the board and staff in developing and executing on a robust financial model, just as this partnership between board and staff must exist in delivery on mission, because at the end of the day there is no mission without money. Maybe 10% isn’t the right number, but I believe you have to set a significant goal if you truly want the board to take notice and actually step up.

You can read the full debate here.

To me, this is such an important topic because it helps uncover our underlying assumptions about the role of the board versus the role of staff. In my mind, we must elevate the expectations we have for the nonprofit board of directors, and one way to do this is to set clear, specific, and lofty goals for them.

What are your thoughts?

Photo Credit: Ron Cogswell

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Why Every Nonprofit Board Member Should Fundraise

I mentioned earlier this year that I would start using Google Hangouts (on the Social Velocity Google+ page) for interviews, videos, Q&As, etc. Well, I’m excited to share with you my first video from the Social Velocity Google+ page. I want to begin doing regular videos that describe an aspect of moving your nonprofit forward. And next week I’ll share my first video interview.

Today, I’m talking about why I think every single nonprofit board member should be involved in bringing money in the door. I know this is a controversial topic, so take a look at why I believe it so strongly.

My hope is that these videos will spur new discussion in your nonprofit. So, you might consider having your board watch this video at an upcoming meeting and then discussing whether your board starts moving in this direction. If nothing else, it’s food for thought.

If you have a topic, issue or question you’d like me to cover in an upcoming short video, let me know in the comments below. And if you want to be notified whenever there is a new Google Hangout, join the Social Velocity Google+ page.

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

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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Financing Not Fundraising: Find and Keep a Great Fundraiser

handshake2The news is not good lately about how effective the head fundraiser is at nonprofit organizations. A new study by CompassPoint reveals some startling realities about the fundraiser role in the nonprofit sector:

  • 25% of executive directors fired their last development director
  • 33% of executive directors are lukewarm about their current development director
  • More than 50% of executive directors say they can’t find well-qualified fundraisers
  • 50% of development directors plan to leave within the next two years
  • And 40% plan to leave fundraising altogether

That sounds like a fundraising crisis to me. And it’s just another example of why fundraising in the nonprofit sector is broken. So in today’s installment of my regular Financing Not Fundraising blog series, I’m talking about how to find and keep a great fundraiser.

If you’re new to this series, Financing Not Fundraising recognizes that fundraising in the nonprofit sector just doesn’t work anymore. Nonprofits have to break out of the narrow view that traditional FUNDRAISING (individual donor appeals, events, foundation grants) will completely fund all of their activities and instead work to create a broader approach to securing the overall FINANCING necessary to create social change. You can read the entire series here.

What I find most troubling about CompassPoint’s recent study is that it makes nonprofits sound so powerless to do anything about this deep dissatisfaction with fundraising performance. But I think it’s not staff, board or donors who are lacking, rather it’s the entire fundraising approach.

Here is how to go about finding and keeping a great fundraiser.

  • Hire a Money Head. Don’t hire someone who can just write grants or someone who can just work with individual donors. Take a look at the entire financial engine of your organization and hire someone who can develop and execute a strategy for strengthening and growing ALL aspects of that financial engine. If you have significant government grants or earned income, make sure you have someone on board who understands and can work with those aspects as well as the private money that flows to the organization.

  • Develop a Financing Plan. Don’t just expect to hire someone who will magically make money appear. Your head fundraiser has to be in charge of developing and executing an overall financing strategy for your organization. And that means that you need an overall financing strategy for your organization. Without a strategy, your chief fundraiser and your nonprofit are sunk.

  • Pay a Real Salary. It amazes me how many nonprofits expect to entice a great fundraiser by offering a salary that is comparable to someone with only a few years of experience . If you don’t have the current budget to pay a market rate, raise capacity capital to fund the first 1-2 years of the position. Once you have a great fundraiser on board he will raise his own salary while growing your nonprofit’s overall revenue.

  • Work WITH Them. It drives me crazy how many times a nonprofit’s lone fundraiser is trying to raise all the money by herself. If you are going to align mission and money, you have to make sure that EVERYONE in the organization (board and staff) understand their role in bringing money in the door. Create a culture of philanthropy among the staff so that even a staff member who doesn’t have dollar goals in her job description understands that talking to prospects and donors, giving tours, writing thank you notes are critical to keeping the organization going. And make sure the board is trained in fundraising, has a give/get requirement, and has specific individual and board money goals.

  • Hire Enough Fundraisers. The rule of thumb is that it takes one full time person to raise $500K, including anyone who touches prospects and donors (database manager, prospect researcher, etc). If you are asking a single fundraiser to raise $1.5 million there is little wonder why she is (and you are) miserable.

  • Give Them Tools. Don’t hire a great fundraiser and then fail to give him a donor database, an interactive website, marketing materials, prospect research, support. It does no good to hire someone with great ideas but no way to bring those ideas to fruition. If you don’t have the budget for additional support and tools, raise capacity capital to find it.

  • Train Them. No one knows it all. In every other profession we expect to send employees to conferences, provide them classes, coach them along the way. Don’t expect that your fundraiser automatically knows all there is to know. Give him opportunities to gain new knowledge, meet others in the field, and continue to grow his skills.

If you want to attract and retain someone who will develop a sustainable financial engine for your nonprofit, don’t leave her out in the cold. Fully integrate your head fundraiser into your organization and give her the tools, support and resources necessary to succeed.

If you want to move your nonprofit from fundraising to financing, check out the Financing Not Fundraising page of our website with articles, e-books and webinars to get you started. Or if you’d like to find out more about how I could help your nonprofit develop a financing plan or coach your fundraising staff to greater success, send me an email at nell@socialvelocity.net.

Photo Credit: Sahaja 

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Nonprofits Must Stop Fearing Money

I was in Birmingham, Alabama this past weekend showing a nonprofit board of directors how to finance, not fundraise for, their organization. I love leading these sessions because there is always a point, about 45 minutes into the session, when I see the light bulb go on around the room. Board members become energized when they realize that instead of fearing money as they have always done, they can employ it to create more social change.

Like it or not, money is an incredible tool. If nonprofit leaders could better understand, stop fearing, and learn how to wield money effectively, the results could be transformative.

Here’s what it means for a nonprofit to wield the money tool:

  • Add Money to Every Conversation
    When you have a board meeting to discuss a new potential activity, make sure someone is asking the question “What are the financial implications of this decision?” And when you are developing a new strategic plan, make sure you spend as much time on program goals as you do on financial goals. Money should never be far from your thoughts because there is no mission without money.

  • Create a Financing Strategy
    To effectively use a tool you must have a strategy behind it. You cannot just hope that the right amount and kind of money will magically appear at your doorstep. Instead, you must develop a financing strategy that answers the question “How will we raise the money we need to achieve our goals?” A strong financial plan demonstrates how much money you need, over what time frame, how it will come in the door, and what activities are required to make it happen. A comprehensive financing plan creates long-term sustainability for your organization, which means you are more likely to create social change.

  • Make Every Board Member Contribute Financially
    You simply will not have every board member thinking about money if they don’t each have a role in the financial engine of the organization. I am a firm believer in a mandatory give/get requirement for every board member. But let me be clear, I am not suggesting that every board member must write a big check, or even have friends who can write a big check. Rather, there are countless ways for board members to contribute to the financial bottom line of their nonprofit. Make sure that every single one of them does.

  • Ask For Investments, Not Donations
    If you are begging for money you aren’t using money as a tool. Money is what makes your theory of change a reality. So don’t put out the tin cup, rather create a message of impact that describes how your organization takes community resources and transforms them into better lives and better communities. Your organization is about solving problems. Articulate that and find partners who want to invest in that social change work.

  • Raise Capital, Not Just Revenue
    A critical, but rarely employed, use of money is to build a nonprofit organization. Nonprofits can no longer scrape by with inadequate technology, staff, materials, systems. They must create strong, sustainable organizations around their mission. And they need capital (money for technology, revenue-generating staff, systems, etc.) to do that. Instead of piecing your infrastructure together day after day, launch a capacity capital campaign to raise the money you really need.

Money doesn’t have to be a feared, uncomfortable element in the nonprofit sector. It can be an incredibly powerful tool for creating social change. Indeed, the only way for a nonprofit to really succeed is to embrace all that money has to offer.

If you’d like me to come speak to your board about getting over their fear of money, send us an email.

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10 Traits of a Groundbreaking Nonprofit Board

Again and again, I’ve heard people say that innovation will never become part of the nonprofit sector — that nonprofits are too set in their ways. Or that the sector is too broken to emerge anew. And a particular area of dysfunction that people point to is the volunteer group that leads the nonprofit sector: the board of directors. But that attitude is unacceptable. There is great danger in dismissing the nonprofit board. The new Social Velocity e-book released today, “10 Traits of a Groundbreaking Board” sets that attitude on its head.

Sure, boards tend to be inefficient, dysfunctional and broken. Yet there is tremendous potential for innovation. Indeed, without innovation at the board level, the broader movement to solve social problems is doomed.

A groundbreaking board can lead the reinvention of the nonprofit sector. A groundbreaking board demands more from itself, its nonprofit and the sector as a whole. It leads the nonprofit it serves to greater financial sustainability, more effective use of resources, and ultimately more social change. Through its excellence, a groundbreaking board can transform the nonprofit they serve, the community the nonprofit impacts, and ultimately the sector itself.

This 28-page e-book examines the 10 traits that define a groundbreaking board. Each of the 10 chapters of this book describe in detail how a groundbreaking board operates:

  1. Defines Itself: The board as a whole decides what it should do and how.

  2. Assembles the Right People: A groundbreaking board doesn’t leave recruitment up to chance or circumstance.

  3. Drives Strategy: A groundbreaking board leaves the day-to-day operations of their nonprofit to the staff and instead grapples with the big picture, strategic, visionary questions of the organization.

  4. Ensures Mission, Money & Competence Alignment: A groundbreaking board ensures that the nonprofit they serve is positioned for greatest success.

  5. Craves Impact: A groundbreaking board shows up because they care deeply about the change their nonprofit is making in the world.

  6. Raises Money: A groundbreaking board understands that every single board member must be responsible for helping to bring money in the door.

  7. Wields the Money Sword: The groundbreaking board continually analyzes the financial model of the organization and monitors the ability of that model to deliver on mission.

  8. Pursues Excellence: The groundbreaking board never rests on its laurels, but constantly strives to improve itself and the nonprofit it serves.

  9. Builds the Organization: A groundbreaking board never stands in the way of organization building, in fact they are their nonprofit’s biggest advocates for that critical support.

  10. Asks Hard Questions: A groundbreaking board understands the harsh realities of the nonprofit sector and is honest and transparent about the state of their nonprofit.

It doesn’t have to be so hard. The nonprofit board can be reinvented and in so doing become a powerhouse for social change.

Download the e-book.

Photo Credit: haydnseek

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