If this recession has any silver lining it could be that it’s forcing nonprofits to completely re-evaluate how they use money. There is a tendency in the sector to shy away from, ignore, fear or dismiss money. But when there is less of it, you are forced to learn how to use it more effectively.
And it is up to the board, who has a legally-defined fiduciary duty, to step up to the plate and provide a strategy for how money is used. But because boards are such a bizarre mingling of volunteer strangers it can be difficult for the group as a whole to take a leadership role, especially in the taboo area of money. The solution lies in encouraging a single individual board member to rise up.
Several recent articles have illustrated the need for nonprofit boards to become better financial managers. From Jan Masaoka’s (Blue Avocado) call for boards to use a budget more strategically, to Rick Moyer’s argument in the Chronicle of Philanthropy that boards need to find “crystal clarity about their financial situations,” to Bob Carlson’s warning that poor nonprofit financial management can end up with legal nightmares.
But what all of these articles fail to address is that boards are ineffective fiscal managers largely because of their group dynamics. Countless times have I seen a nonprofit board of directors suffer from group think, head off in tangents, or avoid difficult conversations.
The opportunity lies in getting a single board member to play a leadership role. A nonprofit’s executive director can be instrumental in encouraging this coup d’etat by finding an individual board member who:
- Is passionate about the cause and the organization
- Has the respect of the majority of the other board members
- Understands, or is willing to be educated about, the basics of financial management
- Is confident enough not to be easily dismissed or swayed
And what does it look like when an individual board member takes a stand to move the board towards better financial management?
- Interrupting the annual rubber-stamping budget approval meeting to ask how the budget fully finances the overall strategic plan of the organization
- Asking for, and ensuring creation of, monthly financial statements that are understandable
- Ensuring basic nonprofit financial management training for board and key staff so everyone speaks the same language and understands the key ratios they should be analyzing
- Standing up to board members and staff who dismiss or discourage deeper conversations about how the nonprofit budgets, uses financial vehicles, handles financial reporting
- Interjecting, cajoling, persuading, and inspiring fellow board members to USE money to strengthen the work of the organization
As David Bornstein said, social change is often driven by “one obsessive individual who sees a problem and envisions a new solution.” So, too, in the world of the sometimes intractable nonprofit board. It may require a single board member to stand up and demand that financial business as usual doesn’t work anymore. If it takes a recession to make money a true tool for social change, so be it.
Photo Credit: faungg
As a reaction to our organization starting to head toward financial crisis, we had a board member take all these steps and it has been an amazing transformation. It has taken a year and there is still a long way to go. Have to be careful the the board doesn’t get too involved with the budget and start micromanaging tiny little line items so the staff is being limited in the work they do.
Sandy, yours is a great case study for this concept that one board member really can turn things around. Congratulations! I absolutely agree with you that you don’t want the pendulum to swing the other way and have the board start to micromanage. You must constantly balance the need to let the board take leadership on the big picture, strategic issues, with the need to keep the management of the day-to-day with the staff.