nonprofit board of directors
In the nonprofit world there is often a disconnect between funders of nonprofits and their understanding of the fundraising activity necessary to secure their gifts. Funders (and board members) rarely understand how critical fundraising is, how it works, and what’s required to do it well.
But in the hope that greater understanding leads to better actions, I’d like to offer 7 of the most important things funders (and really the sector as a whole) should understand about fundraising:
- Nonprofits Must Fundraise or Perish
It seems so obvious, but so many in the nonprofit sector act as if fundraising can be ignored or shuffled to the side. Board members hate to do it, and foundations refuse to fund it. But let’s be clear. Without a strategic, sophisticated mechanism for bringing regular revenue in the door there is no organization and certainly no social change. Fundraising must happen, and it must happen effectively in order for a nonprofit to survive and thrive. So funders (and board members) do not have the luxury of saying they don’t want to talk about, think about, or fund fundraising efforts.
- There is a Sector-wide Lack of Fundraising Knowledge
Because fundraising has for so long been ignored or sidelined, most nonprofit leaders and their board members don’t have sufficient fundraising experience or training. And neither do funders. There hasn’t been enough research into the fundraising discipline broadly and little investment in educating nonprofit leaders about how to do it well. The end result is that few people know how to crack the fundraising nut.
- Every Nonprofit Has Two Customers
Part of the solution to cracking that nut is understanding that unlike for-profit entities, nonprofits have two (not just one) set of customers. Nonprofits provide products and/or services to the first customer (“Clients”), but “sell” those services to the second customer (“Funders”). Therefore “sales” in the nonprofit world is much more complex than it is in the for-profit world. Yet for-profit businesses can spend much more money on their sales and marketing staff, training, systems and materials than a nonprofit is allowed to spend on fundraising.
- It Takes Money to Make Money
So in order to do fundraising well nonprofits must invest in their fundraising function (planning, staff, training, systems, materials). Those nonprofits that develop a strategic financial model that is fully integrated with their mission and core competencies will be more sustainable and more effective at creating social change. So nonprofit leaders must start asking for the money necessary to build effective financial models.
- Sustainability is a Funder’s Problem Too
And funders must start providing it. Funders often want a nonprofit to demonstrate financial sustainability, but those same funders won’t invest in the capacity necessary to create that sustainability. Instead of just pointing out the sustainability problem, funders must become part of the solution. Funders should step up to the plate to help nonprofits create a capacity building plan and then provide capacity capital (along with other fellow funders) to build a more sustainable organization that will survive once a funder is gone.
- Earned Income is Not a Solution
But a more sustainable organization does not mean one based on earned income, or selling a product or service. Nonprofits will always be subsidized, at least in part, by private and/or public contributions. By definition, nonprofits exist to address a failing in the market economy (i.e. not enough food or jobs). Thus, those failings will never be overcome purely by market forces. So while earned income is something every nonprofit should explore, it is not right for every organization and will never become 100% of a nonprofit’s revenue model. So don’t confuse sustainability, which means a longterm financial model, with earned income.
- Nonprofit Leaders Fear Funders
Let’s just be honest. A funder is providing much needed resources to a nonprofit and that automatically creates a power imbalance. Until we figure out a way around that inherent dynamic, funders must limit the hurdles they put in the way of nonprofit leaders and instead give them the financial runway to make their social change vision happen.
Let’s face it, without money there is no social change. But the knowledge, experience and infrastructure necessary to generate enough money is woefully short in the nonprofit sector. That could change if funders lead the way toward more investment in strategic, sustainable financial models.
Photo Credit: 401K Calculator
One of the things I love about my job is that I get to travel to different parts of the country talking with groups of social change leaders about how to think about their work in new ways. I speak to nonprofit and philanthropic conferences, events, groups, even boards about trends in the nonprofit sector and how social change leaders must adapt.
Recently I have spoken to groups in Portland, Seattle, Sacramento, Dallas, and Idaho. You can see a video of me speaking to the Seattle Association of Fundraising Professionals Conference below (or click here) where I was talking about one of my most popular topics, How to Move From Fundraising to Financing.
I speak about any of the topics covered in the Social Velocity blog, but here is a general list of topics:
- Moving From Fundraising to Financing
- The Future of the Nonprofit Sector
- Overcoming Nonprofit Myths
- Reinventing the Nonprofit Leader
- The Power of a Theory of Change
- Getting Your Board to Fundraise
- How To Raise Capacity Capital
- Creating a Sustainable Financial Model
- Messaging Impact
- Creating a Succession Plan
- Honest Conversations Between Funders and Nonprofits
- The Critical Connection Between Mission and Money
Photo Credit: Social Velocity
Building and keeping a highly effective nonprofit staff is really tricky. The recently released 2015 Nonprofit Employment Practices Survey from NonprofitHR found that 50% of nonprofits surveyed plan to add new positions in 2015, compared to 36% of private companies. But, staff recruitment and retention are still significant hurdles for nonprofit leaders, with 52% of nonprofits lacking a recruitment strategy and 27% reporting their greatest retention challenge is low wages.
So how can nonprofits grow their staffs when they are hampered by significant recruitment and retention challenges?
Here’s how I coach my clients to build a highly effective nonprofit team:
Recruit Outside Your Comfort Zone
The 2015 Nonprofit Employment Practices Survey found that the top recruitment strategy for nonprofit leaders is to “use a network of friends and colleagues.” But that’s not a strategy. As with everything, nonprofit leaders must embrace the idea of a “networked nonprofit,” growing their connections to people and organizations outside their comfort zone. To find your next staff rockstar, be strategic about getting your job in front of new audiences and networks. Come up with a list of 50-100 people who might be connected to someone who fits the job’s qualifications. Think of strategic allies, leaders in the field, funders, volunteers. Send the job posting and ask them to direct great candidates to you. And in addition to posting the position on regular job sites, send it out through all of your social media channels and ask your board, partners, allies, funders, etc. to do the same. Cast your net far and wide in order to recruit the best and brightest.
As I said, one of the biggest challenges to retaining staff is low salaries. But the fact is that staff turnover is an enormous cost to an organization (recruitment, lost time, retraining) so convince your board that you should pay competitive salaries in order to save the organization money in the long run. Do salary research (at salary.com, or from nonprofit salary surveys in your region) and determine what a competitive wage for your position really is. Then convince your board to increase the budget to accomodate it. Move from the scarcity mindset to the abundance mindset, or if you just don’t have the funding right now, raise capacity capital to elevate your fundraising function so that you can recruit and retain top talent.
Hire The Right Person
Nonprofit leaders must go against the default, which is to hire someone with less experience than the position requires (since it’s cheaper). Instead hire someone who can take the position to the next level. Hire the person who has the demonstrated experience you need and is hungry to build that function in your nonprofit. But keep in mind that finding that person takes time. Many nonprofit leaders make quick hiring decisions because they are desperate to fill a position and end up suffering a poor fit later. Instead, create a detailed due diligence process which includes multiple rounds of interviews (quick screening phone calls, longer one-on-one interviews, interviews with their future staff colleagues, interviews with key board members), a written “homework assignment” to gauge their skills, and detailed reference checks. Be thoughtful and methodical in your process and spend the time it takes.
Once you have a great person in place, make sure you lead them effectively by using goals and strategy, not micromanagement. The best way to do this is to schedule a 30-60 minute, weekly, one-on-one meeting with each of your direct reports that focuses on your goals for their position. This allows you to give your staff ample leeway to shine, while monitoring their progress along the way. You will also have fewer interruptions during the rest of the week because your staff feels they get the attention and feedback they need in a regular, dedicated meeting. This creates an empowered staff, a confident leader, and a productive organization.
Like anything else, doing something well takes strategy and the will to effectively implement it. You can recruit and retain a phenomenal nonprofit staff, but you must be thoughtful about it.
If you want to learn more about the coaching I provide nonprofit leaders — on staffing, board development, fundraising, strategy and more — check out my Coaching page.
Photo Credit: Maurice Bramley
Today I am in Sacramento (it’s a busy travel month) speaking at the Nonprofit Resource Center’s 2015 Conference “Building a Mission Focused Community.” I am honored to share the stage with amazing nonprofit sector visionaries like Jan Masaoka from the California Association of Nonprofits and Blue Avocado, Jeanne Bell from CompassPoint, and Robert Egger from LA Kitchen (and past Social Velocity interviewee and guest blogger).
My topic for today’s conference is “Reinventing the Nonprofit Leader.” Amid growing competition, decreased funding sources, and more and increasingly complex social challenges, nonprofit leaders must reinvent themselves. They must unlock the charity shackles, embrace strategy and impact, use money as a tool, refuse to play nice, and demand real help. We need a new kind of nonprofit leader.
Below is a Slideshare synopsis of my talk today, and it joins the growing library of Social Velocity Slideshare presentations.
As the year draws to a close, and you (I hope) make time to relax, reconnect with friends and family, and reacquaint yourselves with some much-needed quiet, you may also want to reflect on your role as a social change leader. Effective leadership is really, really hard work, but it is also incredibly necessary and needed.
So if you find time over the next few weeks to take a look at your role as social change leader and you want some help along the way, download the Reinventing the Nonprofit Leader book.
Here is an excerpt:
Chapter 3: Refuse to Play Nice
As a by-product of the charity mindset, nonprofit leaders often suffer from being too nice. The thing I love most about nonprofit leaders is that, for the most part, they are truly good, decent people. They are trying to make the world a better place, so by definition they are considerate of others. But sometimes you can take being nice too far. Being nice to the donor who leads your nonprofit the wrong way, or the staff member who is not performing may work for the individual relationship, but is detrimental to the larger organization and ultimately your mission.
Indeed, according to a 2010 study by researchers at Stanford University, nonprofits are perceived as “warm, generous and caring organizations, but lacking the competence to produce high-quality goods or services and run financially sound businesses.” In other words, we think nonprofit leaders are nice — but not competent.
But this reality is often imposed on nonprofit leaders. Nonprofit leaders are encouraged to collaborate instead of compete, hold onto under-performing staff, accept martyr-like salaries, smile and nod when funders push them in tangential directions, and keep quiet when government programs require the same services at a lower price.
This demand that the nonprofit sector play “nice” is the result of (at least) three aspects to the sector:
- A Focus on the Social. The sector exists to address and (hopefully) solve social problems. Thus, by definition, it is socially oriented and has an inclusive, consensus-based approach to doing business.
- More Customers. Nonprofits have two customer groups, as opposed to the single customer for-profits have: 1) those who benefit from the services a nonprofit provides (clients) and 2) those who pay for those services (funders).
- Multiple Players. In addition to their customer groups, nonprofit leaders must corral their board of directors, which often includes individuals with competing interests, and external decision-makers (policy makers, advocates, leaders of collaborating organizations) who have an impact on the change the nonprofit seeks. The end result is that multiple players must somehow be brought together and led in a common direction.
But in order to work toward real solutions and get out from under consensus-based mediocrity, you need to break free from the niceness trap. Rest assured, I am not asking you to get mean and ugly. But there is a way to politely, but assertively, make sure you get what you need to succeed.
In other words, the reinvented nonprofit leader needs to:
- Say “No” to funders who demand new programs or changes to programs that detract from your nonprofit’s theory of change and your core competencies.
- Diversify revenue streams so that you are not beholden to any one funder or funding stream.
- Demand that board members invest significant time and money in your nonprofit, or get out.
- Fire under-performing staff. This is such a taboo in the sector, but with limited resources and mounting social problems to be addressed, we do not have time to invest in people who cannot deliver.
- Be brutally honest with funders and board members about the true costs of running operations effectively and stop apologizing for, or hiding, administrative expenses.
- Create a bold strategic plan that will drive your nonprofit toward social impact and sustainability, not mediocrity.
- Make an honest assessment of your nonprofit’s core competencies, competitors and consumers so that you understand and can articulate where you fit in the marketplace — and act accordingly.
- Stop waiting for your board chair, or a big donor, or a government official to allow you to do something that you know is the right way forward.
- Refusing to play nice is not easy. And it often culminates in a difficult conversation, perhaps with an underperforming staff member, an ineffective board member, or a time-consuming funder.
In order to manage these difficult conversations for success, you need to approach them in a thoughtful and strategic way. Here are the steps…
Photo Credit: Satish Krishnamurthy
One of the most difficult decisions a nonprofit leader faces is whether to cut a program. The program might be draining staff and offering few results to clients, but once a nonprofit launches a program it becomes almost instantly institutionalized. Even if the program eventually no longer makes strategic sense, it is almost impossible to convince board, staff and donors to end it.
But for a nonprofit to be most effective, its leaders must understand the financial and social impact of all of its programs and make strategic decisions accordingly. And the way to do that is with a Program Analysis Matrix.
Nonprofit leaders are driven by the desire to provide as many services as possible, so to shut down an established program seems so wrong. But nonprofit leaders must regularly analyze their portfolio of programs in order to understand how well each program contributes to the organization’s mission and financial sustainability.
When I assess a client’s financial model, one of the first things I employ is a Program Analysis Matrix that analyzes the social and financial impact of their entire portfolio of programs. I chart all programs and activities comparing each program’s ability to:
- Contribute to the social change the nonprofit is working toward (“Social Impact” on the x axis), and
- Add or subtract financial resources to/from the organization (“Financial Returns” on the y axis).
A Program Analysis Matrix looks like this:
Each program that a nonprofit operates is placed in one of the four boxes depending on how well that program contributes to the social impact (or mission) the nonprofit is working towards and the financial sustainability of the organization. The four options are:
- Sustaining: the program has low social impact (it doesn’t appreciably contribute to the nonprofit’s ability to create social change), but does provide financial resources to the organization.
- Beneficial: the program has high social impact and provides financial resources to the organization—this is the best of both worlds.
- Detrimental: the program provides low social impact and drains financial resources from the organization—this is the worst of both worlds.
- Worthwhile: the program provides high social impact but drains financial resources.
This Program Analysis Matrix helps to surface issues that a nonprofit must address, for example when some programs are providing no benefits, or there are too many mission-related programs that don’t attract funding. Typically, a nonprofit has an abundance of “Worthwhile” programs that are integral to the mission and provide important social impact but are financially draining to the organization. In a situation like that, board and staff need to get strategic about developing programs that are “Sustaining” or “Beneficial” and provide a positive financial return.
Board and staff should work together to plot all current programs in the matrix. Once completed, the matrix can help make the appropriate strategic decisions (labeled as “Strategy” above) about which programs to “cut,” “maintain,” “nurture,” or “expand.”
This analysis can help a nonprofit take a hard look at everything they are doing and start to make some hard decisions. A conversation about cutting programs is always incredibly difficult, but with the right data behind it, the conversation can be a logical, as opposed to emotional, one.
Photo Credit: Bart van de Biezen
There is a fundamental error that nonprofit leaders make when recruiting new board members. And that is to be vague about the kind of board members they need. Nonprofit leaders often think in very general terms about the makeup of their board while ignoring their nonprofit’s specific needs. It then becomes almost impossible to get new recruits (let alone old board members) active or engaged because they are unclear about the unique role they should play in the organization.
A board matrix is a tool that many nonprofits use to analyze what traits their current board has and where the holes lie. Often the traits used include very general things like:
- Gender diversity
- Racial diversity
- Geographic representation (for national and regional organizations)
- General sought-after skills like marketing and fundraising expertise
- Access to vague networks, like “connections to people with deep pockets”
But this is the wrong way to think about who your board members should be.
To recruit the board you really need, you have to connect the skills, experience, and networks of your board to the specific goals of your long-term strategy.
Here are the steps to get there:
- Divide Your Strategic Plan Into Board Vs. Staff Roles
Take a hard look at each goal of your strategic plan and ask what the board needs to do versus what the staff needs to do to make that goal a reality. For example, if your nonprofit runs an in-school literacy program and your first goal is to grow the number of students by 50%, you probably need your board to open doors to school district decision-makers so that you can grow to additional schools and secure more district support. So at least one or two of your board members must have connections to school district leaders.
- Analyze Current Board Members
Once you’ve made a list of what you need from your board for each of your goals, add those elements to the top of your new board matrix. Make sure these are very specific skills, expertise areas, and networks. So for the example above, they would include things like: “Connections to School District Decision-Makers,” “Experience Growing Organizations,” and “Ability to Understand and Articulate Literacy Data.” At the end of the process, you should have 10-15 skills, expertise areas, or networks that your board must possess. Now list all of your current board members along the left side of the matrix and mark the characteristics that each member has.
- Recruit To Fill The Specific Holes
Once you’ve completed the matrix, you may see areas where your board falls short. Now you know exactly what kinds of board members you need on your board. Give this list of missing skills, expertise, and networks to your Board Recruitment Committee so they can find the specific people necessary to fill those holes.
- Give Each Board Member a Unique Job
Once you are clear about what you need from your board to deliver on your strategic plan, give each board member (current members and new recruits) a unique role to play. People function best when they are very clear about their specific role. If each individual member knows exactly what piece of the strategic plan is theirs to carry out, they will be much more engaged and active. So get specific: “We need you to secure meetings with district-level staff,” or “We need you to look at our growth model and ask hard questions.”
If you want a board that works for you, get specific about the kind of board you really need. To learn more about building a groundbreaking board, download the 10 Traits of a Groundbreaking Board book, or the How to Build a Groundbreaking Board webinar.
Photo Credit: Library of Congress
It is such a common complaint. Nonprofit boards are notorious for shirking their fundraising duties. But the good news is that there is a solution, and it doesn’t involve pleading or bribery. As part of the growing Social Velocity Slideshare library, today I offer the 9 Ways to Get Your Board Fundraising Slideshare.
If you want your board to share the responsibility for creating a sustainable nonprofit, you must get strategic. And you must stop apologizing. This Slideshare helps you begin to understand the steps for transforming your board into a financial workhorse.
And if you want to learn more about getting your board moving, download the the How to Build a Fundraising Board on-demand webinar.
You can see the entire library of Social Velocity Slideshare presentations here.