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Board and finances
4/28/2015 12:00 AM

In this Board & Administrator feature, Editor Jeff Stratton said not to allow the board to pass the buck when it wants to see the nonprofit’s revenue stream diversified.

It frustrates the executive director when the board tells her, “We should cut down on the amount of government funding we receive,” and then settles back and allows her to work on the problem.

A board is on the right track when it wishes to diversify the nonprofit’s funding, but it needs to play its part in making sure that occurs.

Consultant Carol Weisman (boardbuilders.com) said it drives her crazy when a board member says smugly: “We need to run this organization like a business.”

The problem comes from having too many funding eggs in one basket to begin with, Weisman said.

Nonprofit organizations are funded differently. Some receive government funding, Weisman said, and some rely on earned revenue or a large gift from an individual, she said.

It’s risky for the nonprofit when too much revenue comes from one source, Weisman said. “There is no way any nonprofit should ever receive 50 to 70 percent of its revenue from one source,” Weisman said. That makes the organization “highly vulnerable” to future financial difficulties, she said.

“I tell boards and executives these percentages and they sit up straight and their jaws drop,” Weisman said. “They look at me like I am walking outside with no clothes on.”

Board and staff members who hear this message don’t operate this way in their personal lives. “They don’t put all their money in any one vehicle, a house or a stock,” Weisman said.

The best practice is to have diversified revenue, whether you are a business, a family or a nonprofit, Weisman said.

How can board members help the organization achieve more stable funding? What they often believe is the answer turns out to be no answer at all, Weisman said.

“The first thing board members often suggest is ‘Let’s get a bunch of fundraisers in here and pay them a percentage of what they raise,’” Weisman said.

“That might not be illegal,” Weisman said, “but it is considered unethical.”

And if you are a member of the Association of Fundraising Professionals, it violates their Code of Ethical Standards, she said.

Another harsh reality board members encounter if they wish the organization to develop its fundraising capacity is that the return on investment for various fundraising strategies varies wildly, Weisman said. For instance, the average return for special events, Weisman said, is 50 percent.

Depending on the mailing list used, the ROI on direct mail can be as little as 1 to 3 percent, while phone solicitation when using a vendor returns about three cents on the dollar, she said.

But board members don’t think about fundraising return on investment, Weisman said.

“I have been doing nonprofit consulting work for 23 years and worked with nonprofits for 40 years, and in that time I have never had a businessperson/board member ask me the ROI question,” Weisman said. “And plenty of them work in very tight-margin businesses.”

The executive director can help his board by helping them ask the right questions, Weisman said. In the case of fundraising to diversify revenue, the question for the board to ask is “What works best?” she said.

But beware: It’s not easy to launch into planned giving and major gifts—where the money is—as a starting point, Weisman said.

So what does the board and administrator do? Be aware of trends in government funding and ensure your board is active and informed on the funding diversification issue.

  • Have your finger on the pulse of where government money is flowing. “The only thing politicians agree on now is funding for preschool education,” Weisman said. “But that won’t last forever. If it is your day as a nonprofit to benefit from this, step out now or lose it.”
  • Give the board data, let them analyze it and then probe. How do you get your board involved in discussing solutions to the “diversify revenue” mandate? “You don’t lecture them: You ask them questions,” Weisman said.
  • That means showing them the data. If you are receiving 50 percent of your revenue from one source, ask your board: Where do you think we should be going for diversification? What are our options?

    “Keep feeding the board data, and let them discuss it so they own it,” Weisman said.

  • Tie strategic planning to a fundraising plan. If you have a strategic plan for your organization, make sure there is a fundraising plan attached to it, Weisman said. “Too many strategic plans don’t,” she said.
  • That mistake is like missing a step in the strategic planning process if you make it, Weisman said.

  • Seek the services of an outside expert. Consider hiring a consultant to lead this discussion with your board. “The outsider can ask the rude questions of board members,” Weisman said.
  • The consultant can grill board members as to why they ask things of the nonprofit they serve that they would never even consider in their own business, she said.

  • Train your board. If you expect board members to fundraise, you have to teach them how to do it. Most board members have never raised money for a nonprofit and they don’t want to look like a fool when they try, so teach them how or arrange for a trainer, Weisman said.

For more information, contact Weisman at 314.863.4422.

Board Policy
4/24/2015 12:00 AM

CEO Linda Osmundson and her board in St. Petersburg, Fla., are thoughtful in their approach to board contact with program participants.

If your board recruitment pool has candidates from your organization’s volunteers, from the executive’s perspective, this can present a thorny board member/program participant contact issue.

After all, a former volunteer may have had some regular—and meaningful—interaction with program participants.

CEO Linda Osmundson (St. Petersburg, Fla.; LOsmunds@casa-stpete.org) said her board makes it policy that board members cannot volunteer in the organization’s programs. “That makes it generally unlikely that they would have interactions individually with program participants,” she said.

There are better ways for board members to “touch” your nonprofit’s programs and interact with those you serve. Osmundson shares some ideas that work at her organization, CASA (Community Action Stops Abuse):

  • Have program participants participate at board meetings. Osmundson says the board might hear a presentation from a client on a particular topic or simply hear his or her story at the meeting.
  • Have program participants present at fundraisers. Board members can interact with your clients in that type of setting, Osmundson says.
  • Count on interaction during facility tours. This is a logical time for board/client interaction. “Program participants may meet and speak with our board members when the trustees tour our facilities,” she said.
  • Run into each other at the organization’s annual meeting. Osmundson said that board members often attend potlucks and picnics at the organization and interaction occurs during these settings.

Client/board member contact shouldn’t be flatly discouraged because it’s the type of interaction that taps into board members’ passion for your cause and keeps them engaged, but one issue to be considered regarding board/program participant contact is a strong confidentiality policy, Osmundson said. Her organization has a very specific policy about the confidentiality of program participants, she said.

“Thus, if a board member referred [his] neighbor to our CASA emergency shelter, the board member could not call her and ask to speak to the neighbor in our shelter unless the neighbor has given us a release for the board member to talk to her,” Osmundson said.

The need for client confidentiality creates another issue, Osmundson said. Board members are prohibited by policy from reading confidential files on a program participant for any reason, she said.

Strategic Planning
4/17/2015 12:00 AM

President/CEO Lloyd VanderKwaak (Johnston, Iowa) said his board uses a Governance Agenda to concentrate on strategic issues.

President/CEO Lloyd VanderKwaak (Johnston, Iowa) said both his organization’s board and foundation board benefit from the use of a high-level Governance Agenda that focuses board members on four key strategic areas:

  1. Governance. Activities designed to strengthen and revitalize the board.
  2. Strategic. Activities from the organization’s strategic plan that require the board’s attention throughout the year.
  3. Operational. Results that must be achieved based on board-approved documents such as the budget.
  4. Development. Fund development activities that require board involvement.

“Key board committees and our foundation board receive assignments from this list, and that becomes the boards’ agenda for the year,” VanderKwaak said. “Each quarter, the board receives a Governance Scorecard using red, yellow and green as indicators of their progress.”

It can be tricky for the nonprofit executive to keep his board focused on board issues and let the staff handle operational matters. With his board’s attention focused squarely on strategic items included on the Governance Agenda, VanderKwaak said they have “negotiated that divide.”

“We’ve identified those items that require the attention of the board during the year,” he said. “This makes it okay to focus on those items that require a governance partnership between our directors and the leadership of the organization.”

VanderKwaak said that during his 22 years at the organization, strategic, high-level work has played a key role in driving organizational growth and the expansion of the nonprofit’s mission. “Our strategic plan is a dynamic document that doesn’t sit on a shelf,” he said.

The organization’s success is due in part to the integrated processes they use that promote an effective governance partnership between VanderKwaak and the board, he said.

The board has been working at strategic planning for so long that it’s become their mode of operation, VanderKwaak said. “The strategic plan is a governance document that drives annual planning for the board and staff,” he said. “The board’s annual Governance Agenda is aligned with the organization’s Operating Plan. The board-approved operating and capital budget are aligned with strategic priorities as well as operating priorities.”

The board’s Governance Agenda is used by two boards: the organization’s governing board and the foundation board of trustees.

The Governance Agenda is designed to be brief and high-level. Detailed versions of the Governance Agenda for both the governing board and the foundation board outline the strategies the boards will use to meet their goals in the coming year, VanderKwaak said.

 

Governance Agenda

2013–14

We will be uniquely positioned in Iowa to improve the health and well-being of children with special health care needs.

October 15, 2013

Governance Agenda

Overview

Governance

  • Recruit and/or retain 7 directors and 4 trustees
  • Complete governance and financial audits — 2012/13
  • Review the quality oversight system

Strategic Focus Areas in the Strategic Plan

  • Positioning
  • Health and well-being
  • Children and families
  • Iowa

Operations Areas

  • Review the 2012–13 Organizational Evaluation
  • Achieve financial targets
  • Continue the ChildServe Center expansion and capacity planning
  • Continue succession planning and leader development

Development

  • Raise $650,000 for the ChildServe Fund
  • Host three events: Bubble Ball, Golf Fore the Kids, ChildServe Run
  • Complete the $3 million I AM ONE capital campaign
  • Formalize a donor awareness and cultivation program

Source: President/CEO Lloyd VanderKwaak, ChildServe, Johnston, Iowa.

Board of Directors

Detailed Agenda

  1. Governance and Oversight
    • Recruit and/or retain 7 directors
      • Recruit 4 new directors to succeed John T., Linda K., Bill L., Mike G.
      • Retain 3 directors to serve a second term: John B., Dave M., Jim S.
    • Recruit and/or retain 4 trustees
      • Recruit 2 new trustees to succeed Chris R. and Marshal P.
      • Retain 2 trustees to serve another term: Brian L. (1), Pete C. (2)
    • Complete 2 organizational audits
      • Governance audit
      • Financial audit
    • Review the quality oversight system
  2. Strategic Focus Areas
    • Positioning
      • Population health and medical home
      • Marketing
    • Health and well-being
      • Physiatry and physician clinics
      • Care quality
    • Children and families
      • Pediatric rehabilitation
      • Home and community services
    • Eastern Iowa opportunities
  3. Operations
    • Review the 2012–13 Organizational Evaluation
    • Achieve financial targets
    • Net income of $400,976
    • Program contribution of $9,262,921
    • Continue the ChildServe Center expansion and capacity planning
    • Complete the ChildServe Center expansion/begin remodeling
    • Begin implementing the capacity expansion plan
    • Continue succession planning and leader development
    • Senior leaders and ChildServe councils

Source: President/CEO Lloyd VanderKwaak, ChildServe, Johnston, Iowa.

Board of Trustees

Detailed Agenda

  1. Board Development
    • Recruit 2 new trustees to succeed Marshal P. and Chris R.
    • Retain 2 trustees to serve another term: Brian L. (1), Pete C. (2)
  2. Fund Raising and Resource Development
    • Raise $650,000 for the ChildServe Fund
    • Complete the $3 million I AM ONE capital campaign
  3. Special Events
    • Golf Fore the Kids on September 16, 2013
    • The Bubble Ball on March 29, 2014
    • ChildServe Run for the Kids on May 10, 2014
  4. Donor Awareness and Engagement
    • Identification of key current and potential donors
    • Host individual donors and groups at ChildServe
    • Build awareness and donor engagement

Source: President/CEO Lloyd VanderKwaak, ChildServe, Johnston, Iowa.

Resources
3/27/2015 12:00 AM

This chart from Board & Administrator Editor Jeff Stratton provides guidance on roles for the board and staff.


Resources
1/9/2015 12:00 AM

This board evaluation instrument from Board & Administrator Editor Jeff Stratton is a tool the CEO can use to see how well the board is set up to govern effectively.


Resources
12/19/2014 12:00 AM

Executive Director Susan Levy assists her board committee chairs by helping them develop a Chart of Work outlining the committee’s responsibilities for the year.

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  • Meet the Editor

    Jeff Stratton
    Editor

    Jeff Stratton has edited Board & Administrator since 1992. As the Board Doctor, he has advised thousands of executive directors and board members on issues like prevention of
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