Getting nonprofit governance right critical
By Charles Maxey and Lauren Arzu
Management guru Peter Drucker once wrote that nonprofit institutions are not only central to American society but that they are its most distinguishing feature.
Nonprofits provide a vast range of critical services and programming to enhance the quality of life through arts, education, environment, healthcare, animals, and human and social services.
Even relatively small organizations can provide a variety of beneficial services. The Museum of Ventura County, as just one example, serves at once as a history society and archive, art museum and gallery, and educational program provider, in addition to hosting many cultural and community events.
Nonprofits are also an important economic sector. According to the 2014 report “Causes Count: The Economic Power of California’s Nonprofits,” California’s nonprofit sector — including its more than 72,000 501(c)(3) public charities — generate more than $208 billion in annual revenue, receive $2 billion in grants and employ close to 1 million people.
Volunteers in California contribute the equivalent labor of 450,000 full-time workers. Here on the Central Coast, we have 2,249 public charity organizations that generate $4.3 billion in revenue.
Californians understand the importance of nonprofit organizations and have confidence in them. The public rates nonprofits higher than for-profit organizations and government in terms of acting in the public interest, providing quality services, operating effectively and spending money wisely.
Getting and keeping this respect and trust is essential to nonprofits because so many depend heavily on charitable donations and volunteers to serve at all levels from their boards of directors to boots-on–the-ground delivery of programs and services. From millennials to baby boomers, many Americans want to volunteer. Nonprofits must be prepared to match volunteers’ skills with their assignments and recognize volunteers’ contributions to retain this free, valuable talent.
One essential factor in earning and keeping community respect and support is getting your governance right. This is no easy assignment. Nonprofit boards and staff must balance the desires of their donors and volunteers with the needs of their clients and their mission. All of these groups must work together with limited resources, which can make the politics of governance and management especially complex.
Many of these stakeholders have a strong sense of ownership of the organization and mission and exercise political power in disproportion to their formal roles or titles. Thus, the typical nonprofit organization is not the simple ordered hierarchy of authority and communication found in many businesses. It is an organic, political web. At best, this makes the organization flexible and adaptive. At worst, it can degenerate into internal bickering, gossip mongering and Machiavellian plots and counter plots. Getting the best and avoiding the worst requires the following:
• A strong relationship between the board chair and CEO built on mutual respect and trust. They have to have each other’s backs.
• A strong and positive organizational culture emphasizing vision, mission and value at the board level and constructive working relationships and respect at the operational level.
• A clear and firmly adhered to demarcation between the strategic governance responsibilities of the board and the operational prerogatives of management and staff.
• A clear understanding of board members’ roles, responsibilities and legal requirements as fiduciaries.
• A willingness to work out honest (and inevitable) disagreements constructively and for the benefit of the organization. Egos have to be checked at the door.
Be clear on your business model. How will you generate a sustainable mix of income? It is important that your staff and board members are aligned with your nonprofit’s revenue model.
Also be clear on your mission. The best statements are clear and concise: this is what we do. This helps staff, volunteers and board members keep their eye on the ball. And, if fundraising is essential, include it in the mission statement so no one is surprised when you ask for donations.
Vision statements are equally important. The best ones concisely state how things will be better because of what you do. This helps the board stay focused on productivity and results, rather than just activities.
People come to nonprofit work — paid or volunteer — out of a passion for the mission. But being effective and sustainable requires the hard, sometimes tedious, work of managing well. It is important for the mission to get your governance right.
• Charles Maxey is a professor at the California Lutheran University School of Management and Lauren Arzu is a field representative for Ventura County Supervisor Kathy Long.
