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by: Andrew Greenfelder DDS

ManagementofUrbanNonprofitAgencies URS475

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Andrew Greenfelder DDS
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This 275 page Class Notes was uploaded by Andrew Greenfelder DDS on Thursday October 29, 2015. The Class Notes belongs to URS475 at Wright State University taught by JenniferSubban in Fall. Since its upload, it has received 14 views. For similar materials see /class/231100/urs475-wright-state-university in Urban Affairs&Public Policy at Wright State University.

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Date Created: 10/29/15
M l i HG quotASED MRN M N EEEMENT in the 2131 Cem39t39y PETER C BRINCKERHOFF MissionBased Management Leading Your NotforPro t in the ZISt Century Third Edition PETER C BRINCKERHOFF John Wiley amp Sons Inc MissionBased Management MissionBased Management Leading Your NotforPro t in the ZISt Century Third Edition PETER C BRINCKERHOFF John Wiley amp Sons Inc Copyright 2009 by Peter C Brinckerhoff All rights reserved Published by John Wiley 8 Sons Inc Hoboken New Jersey Published simultaneously in Canada No part of this publication may be reproduced stored in a retrieval system or transmitted in any form or by any means electronic mechanical photocopying recordin scanning or otherwise eXcept as permitted under Section 107 or 108 of the 1976 United States Copyright Act without either the prior written permission of the Publisher or authorization through payment of the appropriate perecopy fee to the Copyright Clearance Center Inc 222 Rosewood Drive Danvers MA 01925 9787508400 faX 97876468600 or on the Web at wwwcopyrightcom Requests to the Publisher for permission should be addressed to the Permissions Department John Wiley amp Sons Inc 111 River Street Hoboken NJ 07050 2017486011 fax 20174876008 or online at http wwwwileycom go permissions Limit of Liability Disclaimer of Warranty While the publisher and author have used their best efforts in preparing this book they make no representations or warranties with shall be liable for any loss of pro t or any other commercial damages including but not limited to special incidental consequential or other damages For general information on our other products and services or technical support please contact our Customer Care Department within the United States at 80077622974 outside the United States at 51757275995 or fax 517757274002 Wiley also publishes its books in a variety of electronic formats Some content that appears in print may not be available in electronic books For more information about Wiley products visit our Web site at httpwwwwileycom Library of Congress CazaloginginPablicazion Data Brinckerhoff Peter C 19527 Missionebased management leading your noteforrpro t in the 21st century Peter C Brinckerhoff 7 5rd ed p cm Includes index ISBN 97870470452075 Cloth acidefree paper 1 Nonpro t organizationsiManagement 2 Associations institutions etciManagement I Title HD626B74 2010 658 04ampch2 2009019194 Printed in the United States of America 10 9 8 7 6 S 4 5 2 1 This book is dedicated to my mother Inger Melchior Hansen Brinckerhoff 1924 1994 by far the best writer in the family Contents Acknowledgments Xi Preface to the Third Edition Xiii About the Author XV CHAPTER 1 Introduction 1 A look at three core philosophies who the book is written for how the book is designed and how to get the most from reading it CHAPTER 2 Where We Were Where We Are Where We Are Going 13 A brief history of the nonpro t world an examination of the relationship between nonpro ts and their funders and an updated prediction of the nonpro t world for the neXt ten years CHAPTER 3 What Works The Characteristics of a Successful Nonpro t 31 An updated list of the ten things that a nonpro t needs to continue to do its mission well in the twentye rst century CHAPTER 4 The Mission Is the Reason 39 How to get the most bene t from the reason that nonpro ts exist For many the mission is an underutilized resource A discussion on updating and then using a motivational mission statement CHAPTER 5 CHAPTER 6 CHAPTER 7 CHAPTER 8 CHAPTER 9 CHAPTER 10 Contents Being Ethical Accountable and Transparent 55 Effective nonpro ts are highly ethical accountable to their communities and transparent both inside and outside the organization The best Ways to do this on the highest moral plane possible is covered A Businesslike Board of Directors 73 What an effective board is and What the board s and the staff s respective roles are Reducing board liability and recruiting and retaining a board Will be covered as well Leading Your People 97 A neW approach to nonpro t leadership that succeeds in today s highispeed informationidriven environment also including better communications evaluations and rewar s Embracing Technology for Mission 123 How to use technology to better serve manage inform market empower and compete in today s allitech alletheitime environment Creating a Social Entrepreneur 143 How to develop a culture that takes reasonable risks on behalf of the people it serves The criteria of a social entrepreneur How to focus on your core competencies and remain exible Developing a Bias for Marketing 171 The best Way to bring your entire team into the marketing process to discover who your markets really are and how to meet their needs and Wants The characteristics of a marketidriven and missionebased organization Why asking is so important Contents CHAPTER 1 1 CHAPTER 12 CHAPTER 13 CHAPTER 14 CHAPTER 15 Index Financial Empowerment 195 The eight key characteristics of a nancially empowered nonpro t better internal reporting and how a nonpro t can keep what it earns A Vision for the Future 233 How to plan where you are going and how to get the most from the planning process as well as from the plan itself Sample plan outlines The Controls That Set You Free 255 The way to get the most from nine different kinds of policies including a tested method for their development and enforcement A National Agenda Empowering Our Nonpro ts 275 A new way of looking at nonpro ts for everyone to consider funders donors volunteers staff board the public and the press What we all need to do together to improve free embolden and empower the nonpro ts that are so essential to our community Final Words 289 293 Acknowledgments 0 book like this is the author s sole product In my case much of the theory case studies and applications presented here have been developed over my thirtye ve years as a nonpro t manager volunteer board member consultant and trainer My consulting rm Corporate Altere natives has worked with thousands of nonpro ts since 1982 and the exceptional efforts of the staff and volunteers of the organiZations with which I have worked show up here repeatedly My students at the Kellogg School of Management at Northwestern University have also provided me with fascinating insights into their perceptions on what nonpro ts are and should be This book is therefore a compendium of consultation research applica tions and experience and like any observer in any eld I have incorporated ideas and experiences of others to apply to the eld of nonpro ts Where appropriate and when not violating con dentiality these people have been noted in the text Where they are not acknowledged they are still greatly appreciated For this third edition I would also like to particularly thank my tech nology experts Ben Brinckerhoff and Dan Mayer founders of Devvernet Their understanding of both technology and the potential for technology to help nonpro ts was crucial to major improvements to this text Preface to the Third Edition It has been a long strange road for all of us since the second edition of Missioanased Management was published in 2000 As I read through the second edition in preparation for writing this edition I was repeatedly amazed at how much of the world we and in particular the nonpro t sector have changed how many steps we have taken forward and how manyback While much of what I wrote in the last edition still holds true particularly the core principles so many of the trends that were just becoming evident then are completely absorbing now For example in 2000 most nonpro ts had just gotten their rst Web site were feeling their way on how to use email to its fullest extent and nobody not even a 16eyeareold had heard of texting Many of us still carried beepers so last century In 2000 the economy was booming federal de cits were a thing of the past and very few if any of us would have been able to answer the question Who is Osama bin Laden When the second edition came out Bill Clinton was president Al Gore was ahead in the race to succeed him and Barack Obama was a state senator in Illinois just beginning to think about running for the US Senate in 2004 So much has changed on so many levels and it is time for a refreshed set of priorities for the missionebased manager I have looked at and revised the characteristics of a successful missionebased organization I have given you an updated set of predictions for the next ten years added an entire chap ter on ethics accountability and transparency and brought the chapters on nancial empowerment marketing and social entrepreneurship into agree ment with the books I have written on those subjects since MissioneBased Management was published I have also edited and updated the discussion questions at the end of each chapter to allow you to generate better convere sations with your staff and board about which parts of the book most apply to your organization s unique needs It is a fascinating and exciting time to be in the nonpro t world We have more challenges more opportunity and more ways to respond to the increasing community needs that are at our doors As a nation as a planet we need our nonpro ts more than ever certainly more than we did in 2000 We have to take our mission to a new level and a new MissioneBased Management will help you your board and staff get there xiii About the Author Peter C Brinckerhoff has spent his entire adult life working in around and for nonpro ts He is dedicated to the concept that a nonpro t organization is a missionebased business in the business of doing its mission When Brinckerhoff formed his rm Corporate Alternatives Inc in 1982 it was the rst consulting and training company in the United States dedicated exclusively to the management concerns of 501c5 organi zations A former VISTA Volunteer Brinckerhoff knows how nonpro ts work from his experience as a volunteer his work as a staff member and later as executive director of two regional nonpro ts and from his service on numere ous state local and national nonpro t boards He brings this understanding of the many perspectives in a nonpro t organization to his work Brinckerhoff is an awardewinning author with eight books and two workbooks in print and more than sixty articles published in the nonpro t press Three of his books MissioneBased Management John Wiley 8 Sons 2000 Financial Empmuerment John Wiley 8 Sons 1998 and Generae lions The Challenge of a Lifetime for Your Nonprofit Fieldstone Alliance 2007 each won the prestigious Terry McAdam Award from the Alliance for Nonpro t Management The award is given for The Best New Nonpro t Book 7 each year He is the only author to win the award multiple times Brinckerhoff s books are used as texts in courses at the undergraduate and graduate nonpro t management programs in more than 100 colleges and universities worldwide Brinckerhoff is also a highly acclaimed speaker and lecturer presenting his ideas on how to make nonpro ts more effective to dozens of audiences throughout North America Europe and Asia each year From 2003 to 2007 Brinckerhoff was an Adjunct Professor of Nonpro t Management at the Kellogg School of Management at Northwestern Uni versity He taught the core graduate course in the Nonpro t Management program at Kellogg In addition Brinckerhoff has guest lectured at the grade uate level at Boston University University of Colorado University of Illinois and Vanderbilt University XVl Ahmltthp Amhnr Brinckerhoff received his bachelor s degree from the University of Penn sylvania and his master s degree in Public Health Administration from Tulane University Raised in Connecticut Brinckerhoff and his family lived in Spring eld IL from 1977 to 2007 He and his Wife now call Union Hall VA home The author can be contacted by email at petermissionbasedcom CHAPTER 1 Introduction Welcome This book is intended for you the leadership of our nation s nonpro t charitable organizations It is designed to give you a different insight into how topiquality nonpro ts really run what works what does not and how to ensure that your organization is one of the ones that works both this year and throughout the twentyi rst century It is intended to help you become a missionibased manager In this introductory chapter we ll review the core philosophies on which I have based the book examine the reasons that I feel the book is needed and then take the rst look at what the book holds and the best ways for you as a reader and a management practitioner to use it By the end of the chapter you should have a better understanding of my philosophical perspective and also be ready to get the most from the book as a whole Three Core Philosophies Before you continue you need to know that the material in this book is based on three philosophies These philosophies have been the core of my consulting training and writing since 1982 and they eXpress better than anything I have seen my beliefs about what your organization is and what it can become First Nonpro ts Are Businesses Your organization is a missionebased business in the business of doing mission Foripro ts chase pro tsinonpro ts pursue their mission But just because you are not primarily motivated by pro t does not give you a license to be sloppy or to ignore a good idea simply because it was initially devele oped for the forepro t sector Let s take another minute to examine this because it is really important to what you are going to read in the rest of the 2 MissionRn Pd Mnnmrpmpm In the past decade many nonpro ts made the decision to stop being a charity and start being a missionebased business What s the difference In both cases the stewards of the organization paid staff or governing and nongoverning volunteers are responsible for getting the most high quality mission they can out the door using all the resources available The difference lies in how a charity and how a missionibased business view their resources A cban zy views its resources as a combination of four things people money buildings and equipment If you think about it your organization has some combination of these four things too The charity uses these four resources to provide mission and when the resources are used up mission stops A missionebased business also has the same combination of four resources people money buildings and equipment But it looks beyond just those four and also considers business tools in performing mission Thus it utilizes the techniques that business has spent literally billions of dollars and thousands of personiyears honing and it turns them to mission What is the result Good marketing becomes good mission good human resources HR becomes good mission good inventory management good cash ow management good business planning all of these become good and better mission More highequality mission out the door And if this is done rightiand here is the keyithe other four resources last longer This philosophy is certainly not as shocking to most readers or perhaps even a new idea as it was when I wrote the rst edition of MissioneBased Management in 1992 Only eight years earlier in 1984 I had told a national audience that nonpro ts needed to become more businesslike in their pure suit of mission and I was not only booed people actually threw things at the stage We ve come a long way since then But there are still people who are uncomfortable with the idea of using business skills in nonpro ts They worry that if we act too much like a busi7 ness we ll become a business and lose our mission focus I agree mission is always rst Always But if we don t use these business tools we won t do as much mission as we could It s a balancing act Stay on the mission track but use the best tools of business when they are appropriate A story may illustrate this issue best In 2006 I was presenting for a full day on Missioanased Management to a group of board members and CEO executive directors from about two hundred nonpro ts in California I had given the content of this chapter and Chapter 3 in my rst segment of the morning and at the break a man approached me to tell me he was really uncomfortable with the idea of using business tools in nonpro ts I learned that he was the board president of a homeless shelter and in his other life the president of a local bank In fact I found out later that he had an MBA from Stanford as well as an undergraduate degree from Harvardia smart Introduction 5 highly educated businessman But he was really hung up on the concept of in his words using business tools in nonpro ts We re better than that I told him that he should never do things in his nonpro t that made him uncomfortable but that I d like him to answer three questions He agreed First question Do you have and use telephones in your homeless shelf ter He said they did but looked confused Second question Do you have and use a copier at the shelter Again his answer was a yes combined with a furrowed brow Third question Do you have and use computers A look of understanding came over his face Got it he said Okay Okay got it You see telephones and copiers and computers were invented rst for business not for nonpro ts They were business tools rst And telephones copiers and computers can be used for bad things but we choose to use them in ways that pursue our mission Likewise marketing and cash ow management and HR are business tools that can all be used for bad things but if we do not use them and use them as tools for good we won t be getting as much mission out the door as we could be We ll be failing as stewards Using good business skills as a missionebased manager does not I repeat not mean dropping services simply because they lose money nor does it mean turning people away because they cannot pay But it does mean paying attention to the bottom line having a strategic vision and negotiating in good faith and from a position of strengthiin short being businesslike in pursuit of your mission Your organization is a business and the more businesslike you are the better it will be for the people you serve Second No One Gives You a Dime This may come as a surprise but your organiZation does not get gifts Really No one gives you anything not government foundations United Way corporations or individual donors If you are confused that is okay This idea goes against all your training to this point Try looking at it this way and see if you feel different about yourself and your organization Let s assume that you come to me for a donation and you convince me that you really need the money for a service or a building I write you a check for 100 Am 1 making the donation to you personally Of course not Am 1 giving a gift to your organization You re getting closer But what I m really doing and what really happens in all of these transactions is that I am r 39 erut eesw quot Twt lneZert rteet l amwilling to give you money because you gave me what the business community calls an eagyectatt on of outcome When I send money to an airline to pay for a plane ticket I have an expectation of transportation in a few days or 4 MissionRn Pd MnnnvaFm weeks When I send money to a concert venue to purchase tickets I have an expectation of entertainment the night of the concert When I send money to a nonpro t I have an expectation ofserw ce In other words and here is the key You earn all the money you get Don t let anyone tell you that you are a subsidized organization Subsidies are things that people get without doing anything I lived in the farm belt in Illinois for thirty years We had many farmers who were paid by the federal government for not growing crops That s a subsidy What you get is earned income all 0ft t The problem with thinking of your income as gifts is that the organi7 zation then acts like a charity You become stuck in the mentality that you are so poor that the only way you can survive is by the bene cence of peo ple or organizations richer than you You continue to believe you are not earning your way when in actuality you are It is essential that you and your staff and board understand this and believe it if you are to adopt the characteristics of success that are presented in this book Why Because if you keep thinking of yourselves as a poor charity you will continue to be treated that way and not like the missionibased business that you are Third Nonpro t Does Not Mean No Pro t Let s cut to the chase Whether you call yourself a notiforipro t or a none pro t you should not ever feel bad if you end the year with more money in than out In short making money is good for mission Only by making a pro t yes a pro t can you grow serve more people and try new services Only by making money can you pay down any debts you have Pro t is not a bad thing in your organization it s a good thing It s also not always a possible thing but we ll get to that in later chapters Let s look at this idea in three ways the legal point of view the ethical perspective and from the vantage point of good management First making money in a nonpro t is legal Nowhere in any state or federal law and nowhere in any state or federal regulation dealing with taxation or corporate structures does it say that a nonpro t cannot make money cannot make a pro t In fact the Internal Revenue Service IRS code dealing with 501c5 organizations says the pro ts of the corporation shall not inure to the bene t of 77 This clause precludes staff or board from inappropriately bene ting from the organization s pro ts but the key to the phrase is that the IRS anticipates and accepts pro ts Pro ts in a nonpro t are legal If ou or anyone in your organization thinks that I am wrong about pro ts being legal consider this Your organization is considered taxiexempt by reason of your 501c3 status but from what kind of federal taxes I know you may not pay sales or property taxes but those are state or local Introduction 5 exemptions At the federal level you are exempt from what the IRS terms income tax Now for you and me income tax means that every April we add up all of our income from the prior year and pay the IRS a portion of that But the tax your nonpro t organization is subject to is a business tax and guess what Businesses do not pay tax on what you and I would term income they pay taxes on pro ts They add up all their revenue subtract all their expenses and pay in taxes a portion of their pro ts Income to the IRS means pro ts to you and me Thus your organization has an exemption against paying taxes on its pro ts Here is the question If you cannot make a pro t why do you need a tax exemption In fact the entire issue of nonpro ts not being able to make money is just so much smoke and it runs right in the face of the intention of Congress in giving you the charitable status you have In the early 1950s when the last substantive work was done on federal nonpro t statutes Congress decided we needed more nonpro ts so it allowed your organization to keep what it earns and reinvest it in the community They wanted to encourage our sector and did not think that we should be taxed for doing good things related to our mission What s happened since All of us have screwed it all up by not allowing nonpro ts to keep what they earn When I say all of us I mean funders the press the public and those of us in nonpro ts We all bought into the idea that nonpro ts should be poor and it has deeply damaged the sector and our ability to do good mission By keeping none pro ts poor always scraping by from year to year or from payroll to payroll we ve sapped much of the ability to innovate experiment and come out with better services for people in need Pro ts in your nonpro t are also essential a key element in nancial empowerment a subject that we will cover at length As I said earlier with out pro ts you cannot grow you cannot innovate and try new ways to serve your communities you cannot recruit and retain excellent staff and you cannot take prudent risks on behalf of your clientele You will see in later chapters that I contend that you need to make money as an organiza7 tion at least seven out of ten years To do less is not good missionibased management But what about the ethical perspective This is bard By not spending every dime you have every year on service you necessarily will wind up saying no to someone who needs or wants your services perhaps someone who is hungry undereducated or in need of spiritual help And I doubt that anyone reading this book came to the nonpro t sector to say No we won t help you But if you say yes to everyone now you won t have any funds for next year I am just as sure that your organization is not in business to solve a sbortrterm problem as I am that you do not want to turn people away Nearly all nonpro ts are struggling to solve longeterm issues hunger homelessness drug addiction the need for more education arts 6 MissionRn Pd Mnnmrpmpm environmental quality and on and on Longeterm problems require your organization to be around for the long term Keep your organization poor and it won t be Again this is a balancing act one of many you have to do Focus too much on mission and not enough on money and you are out of business Focus too much on money and not enough on mission and you become just a business One more point here I am not contending that you need to have every single service you provide be pro table every year You do not and you probably should not There will be services that are so missionerich that they can be moneyipoor Services that only you provide in your community that do not pay for themselves or that are missionicritical But if all you provide are missionerichmoneyipoor services you will soon be out of business and no good to anyone Again you need a balance and you need to use the business skill of retumeoneinvestment R01 to maintain the right balance Forepro t businesses are concerned about their nancial ROI and rightly so If they invest funds in a building or a piece of equipment or staff eXpane sion they want to know how quickly they get their investment back and at what rate Nonpro t businesses need to also be concerned about ROI as well but unlike foripro ts we have two returns the nancial return and the mission return Thus if you invest money in Service X you should be asking Does this service make money or lose money AND does it do a lot of mission or only a little HANDS ON Always consider the eXpenses in your income and expense form as investments in mission If you do that you will need to think about the return on that investment both in nancial and mission forms The nancial return is pretty easy to calculate but the mission return is much more dif cult We will talk about ways to do this calculation later I I m sure you have services that are missionerich and moneyepoor and if you are like 90 percent of nonpro ts you invest resources in a service that does NO mission For eXample if you run a soup kitchen you provide a very very missionirich service But it doesn t pay for itself because you are giving food away But this is ne because on the twoiROI scale it balances out missionirich moneyipoor So what s the service that does no mission It s variously called devele opment or fundiraising which by itself does no mission Only if the service makes money can it spin off funds to help other missionerichmoneye poor services like the soup kitchen Thus you need to make sure your Introduction 7 funderaising is not haphazard or done poorly It needs to make money This underscores another theme that we ll return to a lot in the book You have to do whatever you do well Really well These three philosophies that you are a missionibased business that you earn all your money and that making money is a good mission thing form the foundation for everything that follows in this book They are the core of missionebased management If you agree with them if you nd yourself nodding and saying That s great you are going to enjoy the book and get a great deal out of it If you are uncomfortable with the philosophies I hope that the remainder of this chapter and the issues raised in Chapters 2 and 3 will convince you of the validity of these philosophies If that does not work then I think that the remainder of the book will convince you that there are many many business applications that can improve your ability to do better mission more ef ciently and effectively We will return to these philosophies at the end of the book Chapter 14 to look at how your funders can adopt them to give you more leeway to do your job But for the majority of the book we will concentrate on how you can make them a reality in your own management style in your own missionebased organization Why Is This Third Edition Needed NOW The 1980s were an extremely turbulent time for US nonpro ts Dure ing the Reagan administration years of 1981 to 1989 the vast majority of nonpro tsithose that depend on government funding for the major ity of their incomesihad their perspective on life radically changed No longer could these organizations depend on government read taxpayer largesse to cover their eXpenses nor would regular cost of living adjuste ments COLAs solve their problems No nonpro ts would have to learn to make do as more independent more businesslike entities Wouldn t they Those of us in the eld thought so In many organizations things did change New businesses sprang up inside or outside the traditional organie zation s array of services Educational opportunities for nonpro t staff slowly became available across the country throughout the decade not only at the continuing education and seminar level but as graduate degrees in many topinotch educational institutions More and more staffs sought and received the one type of course work that they had previously never had access to basic as well as advanced management training Unfortunately many organizations continued to do business as usual After a brief foray into a new idea or service they returned to their traditional sources of funding squeezed more work out of their staffs and tried to serve the avalanche of new people needing help In the human service 8 MissionRn Pd Mnnmrpmpm nonpro t this higher need for service from homelessness to public health to literacyiwas another result of the Reagan years They continued to act like charities rather than nonpro t businesses Government foundai tions and United Ways for the most part only exacerbated the problems by emphasizing cost controls over strategic planning and marketing and fund raising over entrepreneurshipitwo essential components of an excellent organizationiforepro t or nonpro t The 1990s brought some needed change and some new challenges Hundreds more colleges and universities developed both undergraduate and graduateilevel nonpro t management programs Management support organizations sprang up in many states and metropolitan areas ready to help nonpro ts run their organizations more ef ciently and effectively Some funders began to move toward feeiforeservice contracting rather than grants But there were also new challenges Reimbursement structures based on the managed care model took hold in a wide variety of shapes at the federal and state level requiring measurement of outcomes rather than process for the rst time After decades of punishing duplication of service some fun ders started to worry about costs to such an extent that social service and educational organizations nationwide began a movement to merge Come petition for dollars for good staff for good volunteers and for people to serve became much more intense On the good side the federal de cit was closed and surpluses began The economy was good and technology began to provide real returns to all of us The other great change was the emphasis on what was termed capacity building by foundations This movement of funding training better use of technology bene ts and other indirect costs was a terri c improvement over the days when funders only funded direct costs and ignored the essential backiof ce functions that enable service for any nonpro t hen came the roller coaster ride of the Bush years in the early twenty rst century with the tech bubble the war on terror the housing bubble and the crash that followed The economy grew and contracted grew and collapsed Donors couldn t gure out dayitoiday how much money they had millions worldwide lost jobs and corporations cut back charitable give ing and some simply vanished We went from good times to bad times so incredibly quickly that our heads spun And all of us realized that the old rules prudent management prudent investing and prudent levels of debt were not outdated at all At the same time society began to be aware that the Boomer genera tion was aging and that a handioff to GenX was imminent The differences between the generations became near war in many organizations Excellent use of technology became more and more important in all parts of society and nonpro ts struggled to keep abreast of changes that could make the difference between connecting with a new generation and being ignored by the young Introduction 9 As a result of all these changes there is a pressing need for a rethinking of the best ways to govern and manage our nonpro ts This book is intended to help you nd those techniques that will help you do more mission and to make the transition from an administrator of a charity to a missionibased manager I know from consulting and training thousands of nonpro t staff and boards since 1982 that the organizations that are succeeding in meeting the needs of the people they serve the organizations that are nancially stable the organizations that will meet the challenges of the future have the characteristics discussed in later chapters 1 also rmly believe that if your organization has those characteristics or acquires them and conslstently works to lmproue them you will succeed in serving the people who are depending on you Unfortunately too many nonpro t managers nonpro t board members and nonpro t funders are still stuck in the 1990s And they are getting further behind every day Missionebased management is good management It is more than stew ardship a term that has become widely used in the nonpro t eld in recent years It is a philosophy that says I will use all the best tools at my disposal to help my organization excel in the pursuit of its mission The mission is the reason that we are here but that is no excuse for sloppy or slipshod management We would never tolerate poor quality in services We won t tolerate poor quality in management either MissionBased Management Third Edition You already know that much has changed since the rst edition of Mission Based Management in 1994 and the second edition in 2000 The format for all of the MissioneBased Management series books has evolved as well There are now more features in the chapters than before that should give you the reader more value for your time The book is designed to be used as a guide and as a reference for you to return to over and over I know that your time is limited and that you will be tempted to jump right to the parts that you are most interested in perhaps Developing a Bias for Marketing Chapter 10 or Financial Empowerment Chapter 11 To the extent possible I urge you to read the book from front to back The chapters are in the order presented for a reason They build upon one another lssues raised in the early chapters are discussed further in later ones problems that surface in one chapter sometimes reappear in another To get the most from the book read it in the order that it is presented Because much of what I talk about in the remainder of the book is based on teamwork and bringing in lots of staff board and outside experts to help I suggest that you work through this book as a team effort Have a small group of senior managers middle managers and direct service staff read a few chapters and then get together to discuss their application in 10 MissionRn Pd Mnnnvpmpm your organization Ask the group Is what is presented appropriate for our organization If so what do we need to do to facilitate any needed changes If it is not appropriate why not Are we doing the best we can in this area How can we be better Use the lists of questions that l have included at the end of each chapter to start these discussions By reading the book as a team and by reading it at the same time you will get a more complete more organizationewide use of the book and the bene ts of the book will be applied to your organization sooner Now let s turn to the format of the book By giving you an overview of both the format and the sequence as well as a brief peek at the bene ts that you will get from each chapter I hope that you will get more from our time together The Format Each chapter starts with an OVERVIEW intended to give you a brief sume mary of what the chapter will hold The body of the teXt comes next and I try as much as possible to give you illustrations and ideas for immediate use These illustrations and ideas are highlighted by the terms FOR EXAM PLE and m HANDSON respectively Look for them in nearly every chapter Near the end of the chapter is a RECAP which is a brief review of the points that have been covered in the chapter to allow you to draw all of the material together in your mind There is also a list of QUESTIONS FOR DISCUSSION which are intended to stimulate group conversations with your staff and volunteers about ways to best use the ideas included in the book The Content The book is broken down into whatl call conteXtesetting chapters working chapters and the nal chapter which is a call to action for the funders of nonpro ts Let s look at each chapter brie y 1 Introduction all This is the chapter you are reading now It includes a look at three core philosophies who the book is written for how the book is designed and how to get the most from reading it ContextSetting Chapters 2 Where We Were Where We Are Where We Are Going m A brief history of the nonpro t world an examination of the relation ship between nonpro ts and their funders and an updated prediction of the nonpro t world for the neXt ten years Introduction 1 l 3 What Works The Characteristics of a Successful Nonpro t in An updated list of the ten things that a nonpro t needs to continue to do its mission well throughout the twentyi rst century Working Chapters 4 The Mission Is the Reason E How to get the most bene t from the reason that nonpro ts eXist For many the mission is an underutilized resource A discussion on updating and then using a motivational mission statement Being Ethical Accountable and Transparent I The best nonpro ts are accountable and transparent both inside and outside the organization The best ways to do this on the highest moral plane possible is covered A Businesslike Board of Directors 5 What an effective board is and what the board s and the staff s respec7 tive roles are Reducing board liability and recruiting and retaining a board will be covered as well Leading Your People I A new approach to nonpro t leadership that succeeds in today s highispeed informationidriven environment also including better communications evaluations and rewards We will also look at ways to engage multiple generations in your mission Embracing Technology for Mission B How to use technology to better manage inform market empower and compete in today s allitech allitheetime environment Creating a Social Entrepreneur E How to develop a culture that takes prudent risks on behalf of the people you serve The criteria of a social entrepreneur How to focus on your core competencies and remain exible Developing a Bias for Marketing I The best way to bring your entire team into the marketing process to discover who your markets really are and how to meet their needs and wants The characteristics of a marketidriven and missionibased organization How to improve 1 percent every day Financial Empowerment E The eight key characteristics of a nancially empowered nonpro t better internal reporting and how a nonpro t can keep what it earns A Vision for the Future a How to plan where you are going and how to get the most from the planning process as well as from the plan itself Sample plan outlines 13 The Controls That Set You Free 5 The way to get the most from nine different kinds of policies includ ing a tested method for their development and enforcement V G l 00 D 0 N 12 MissionRn Pd Mnnnvpmpm 14 A National Agenda Empowering Our Nonpro ts til The other side of the coin what the funders need to do to improve free embolden and empower the nonpro ts with whom they con tract 15 Final Words Recap In this chapter we ve covered the key philosophies that are the basis for the book and why I think the book is needed We ve also taken the rst look at the contents of the book and how it is set up so that you can make the most use of it to bene t your organization and the people that you serve I know that you have a tough and challenging job As a leader of a twentyi rsticentury nonpro t you have to concern yourself with many diff fering and con icting needs and demands those of your funders the people you serve and your board staff community banker and peers You need to ensure that your organization is pursuing its mission with zeal that it meets the changing needs of the community that you serve and that you have enough money to make ends meet The tools to help you do those things are in the following pages Good reading and good luck CHAPTER 2 Where We Were Where We Are Where We Are Going Overview Before we start our journey together it is important to understand how we got here and for you to read my predictions for the next ten years Without those two pieces of context it will be harder for you to grasp my ideas for what your organization can become and can accomplish In this chapter we will examine how nonpro ts in the United States came to be where they are today and we will examine the three rules that funders use when they think of you and your organization We ll then turn to the future and review my six predictions for trends that will profoundly affect you your organization and its ability to perform its mission during the next decade HOW We Got Here The United States more than any other nation in the world is blessed with a volunteer spirit of helping others In other developed countries volunteering or charitable giving other than to the church is much less the cultural norm This is not to say that people in Europe South America Africa or Asia do not give of their time talent or treasure they do But not at the level that seems to be indigenous in North America for reasons we ll examine in a moment My personal experience with the difference in cultures began early on My mother was Danish by birth and emigrated to the United States as an infant There were and remain many relatives in Denmark and during my child hood many of those relatives came to visit us often staying at our home In those years my parents would often need to leave to attend one of the board meetings of the many organizations on which they served My parents were the original incorporators and rst of cers of what is arguably 15 l4 MissionRn Pd Mnnnvpmpm the rst Association for Retarded Citizens ARC in the country in 1951 and served on numerous other nonpro t boards over the succeeding thirtyi ve years When the reason for my parents absence was eXplained it was almost always greeted with puzzled expressions and questions from our Danish guests such as Why would you give your time away or Doesn t the government take care of that for you to which my parents would reply Here we have a tradition of trying to help each other Whether it sprang from a frontier necessity to help and be helped from our history as a democracy or just from our national economic abundance Americans have developed a vast network of charitable nonpro t organi7 zations that assist the poor rehabilitate the injured educate the young and old enrich our senses and sensibilities by providing access to the arts and ful ll our spiritual needs From the beginning of the twentieth century until the onset of Lyndon Johnson s War on Poverty most of the funding for these organizations came from locally donated funds raised in the community in which the organization provided services A few large foundations of national scope such as Ford and Rockefeller provided special projects assistance but mostly the nonpro t community made do with what its local community gave it Then in the 1960s all that changed Government particularly at the fed eral level began to provide funding rst in the form of grants and later in the form of purchase of service contracts to thousands of locally based private nonpro ts The feds and later the state county and local gov ernments bought such diverse services as preventive health care mental health screenings residential community care for the developmentally dis abled breakfasts and lunches for school children housing for the poor art for all economic development for disadvantaged communities books for libraries research on a broad array of social medical and scienti c issues and specialized transportation throughout the nation With this cascade of fundingithe good newsicame an avalanche of red tape bureaucracy fast growth reduced local control and a seemingly endless series of priority changes and reversalsithe bad news This period primarily 1964Kl981 also saw the enormous growth in the sheer number of 501c3s many created speci cally to tap funds authorized in a par ticular piece of federal legislation and the concomitant development of a huge cadre of vested interests embodied in the emergence of large pro fessional staffs within the nonpro ts rapidly growing trade associations and perhaps most importantly a steep rise in the number of govern ment employees whose sole job it was to fund regulate and audit these organizations In the miditoilate 1980s and early 1990s much of the federal funding for nonpro ts was passed on to states through what were called block grants The concept was that states knew better than the feds what should be done Where We Were Where We Are Where We Are Going l 5 locally To an extent this was and is true What happened though was another round of hiring this time of state employees whose job it was to liaise with the federal funding source write state regulations hand out funds and oversee their use And since the employees were in the same state they could oversee the funds more rigorously This rise of the staffs at both the service provider level and within the governments that increasingly were the service provider s sine gle biggestiand sometimes only customer led to the development of a set of philosophies of funding and oversight that were incredibly damaging to the nonpro ts at the time and are still hampering all of us today The basic tenets of these philosophies are as follows I What we say goes While being a logical assumption from the point of view of a major often the only customer this tenet often degenere ated into the feeling of Whatever the staff at the Department of XYZ decides is needed in YourTown is what we ll fund and if you do not need it or if you need something else well tough This attitude of course ew directly in the face of timeitested marketing theories of asking customers in this case the people who were ultimately receive ing services what they wanted Additionally this philosophy was in direct con ict with reality No single broad national or state policy could possibly take into account all of the local variety and uniqueness that shows up in fty states and 100000 municipalities By regularly not rec ognizing that different communities have different needs policies and regulations that owed from this philosophy were and remain doomed from the start But the sheer momentum of dollars owing from the state and fed eral capitals spoke louder than the voices of the service recipients So organizations acquiesced services were often funded that people neii ther wanted nor needed and when the rst budget of the Reagan years came along these programs were tough to defend against cuts More on that in a moment Second You can t do we doing good This tenet is based on the terribly outdated but still overwhelmingly accepted philosophy that none pro ts must virtually take a vow of poverty in order to not appear to be stealing from those to whom they are providing service This idea also of course nicely justi es minimal funding on the part of the main funders an abundance of auditing and in my view unnecessary over sight and a policy of use it or lose it probably the most shortsighted social policy of our generation For those of you not familiar with use it or lose it 7 it goes like this If you negotiate a contract or grant amount for service with a funderisay a 16 MissionRn Pfl Mnnnvpmpm state or your countyiyou get to use what is in the grant during the term of the grant period usually a scal year You may or may not be able to move funds from one budget line to the neXt depending on how nice your funder is but by the end of the year if you have saved funds or spent less than expected through excellent management hunting for discounts on purchases etc you lose the savings because you can t keep what you didn t spend Further if you bring in additional income from donations earnings etc it may reduce your income dollar for dollar With this policy in place normal and positive incentives get turned on their head Is there an incentive to save money Certainly not Saving funds is work and if your organization can t keep what you save why go through the effort What about earning more outside income No that s more work too and if the money is just going to be taken away why take the risk Does this encourage unnecessary spending at the service level Certainly and evenone knows it Why does it continue Because the feds and the states are not willing to let nonpro ts keep too much money keep what they earn or have many if any net assets 1 call this inane policy poverty chic and it has been beaten into all of our heads for so long that most of us believe it Funders do many United Ways do some staffs and boards still do and the public in general certainly does How many times have you been questioned about the purchase of nice furniture tried to rationalize raising salaries or not bought a piece of computer equipment because it wouldn t look rigat l have and I work with hundreds of nonpro ts who do so regularly Has poverty chic saved money In the short term certainly But it has also led in the long term to poorly trained staffs high staff turnover a pitiful condition of the national nonpro t physical plant usually rented instead of owned a grievous hole in our technological readiness and essentially no non xed assets with which to innovatively address community problems without the funders further assistance The bottom line is that poverty chic has led to many nonpro ts becomingiand remainingivirtual indentured servants of their funders at the same time that the funders are urging the nonpro ts to become more independent and selfisuf cient Use it or lose it is one way Underfunding or matching requirementsinot paying for the full cost of service is another Encouraging monopolies is a third By being encouraged and forced to be poor agencies think poor and stay poor They are underfunded so they must ght res today to stay alive rather than plan ahead for the future an action that can save money and provide better service They make do with old beatiup inef cient equipment and buildings losing money on repairs and the inef ciencies They are never allowed to have unseemly fund balances either by public pressure or regulation so they can never growiwithout further assistance from the funders Where We Were Where We Are Where We Are Going 17 to smaller nonpro ts Hospitals colleges and universities seem to be exempt I ve talked to hundreds of funders and as many reporters over the years who are appalled when a local non pro t has a small endowment or some unrestricted funds but who feel that a hospital or university having the same kind of reserves is ne They understand that these larger institutions need these funds to grow to invest in new equipment and services and to allow the cost of patients and students to be underwritten But sug7 gest that the same issues confront a local Red Cross or Goodwill and you get a bunch of outraged huf ng and puf ng I 9 FOR EXAMPLE Interestingly poverty chic only applies in practice IIIJ Third What lsyomslsoms This is perhaps my favorite because it under scores so much of what primary government funders and foundations really must feel that nonpro ts that receive their funds are their prop erty In my work I see this regularly with auditors of state funds which may account for say 50 percent of an organization s budget feeling that they must examine every transaction of the organiZation evaluate all of the assets look into all of the contracts and probe all the vendor rela7 tionships even if some or most of those assets and contracts and veni dors have nothing to do with the speci c programs that the state audii tor s department funds The attitude seems to be quotBecause we gleeyou money we have the rlght t0 strt pyou naked andjudgeyou at our whim This attitude while not only being insulting forgets the fact that the nonpro t is actually selling the government agency or foundation a sere vice and that the payment for this service should not come attached to an unrestricted license to snoop and poke around at will Remember this As a forepro t consultant and trainer I regularly contract with state governments and foundations and they don t audit me They do not ask me to submit every expense ask about my mortgage or look into the resume of my wife or kids once I do my work they pay my fee Why should they then take your organization apart for inspection during and after you do your work for them Does being a nonpro t make you automatically exempt from the constitutional protection from unreasonable search and seizure I think not The most incredible aspect of this attitude is that we all put up with it so wl lllrtgly It is a constant amazement to me that there has not been a general revolt against the level of scrutiny oversight and general arrogance of the funding sources How can this have been allowed to evolve How can the good intelligent and welleintentioned people at the local nonpro t level have become so subservient while the good intelligent welleintentioned 18 MissionRn Pd MnnmerPm people at the foundations and state and federal governments developed policies that in effect contradict nearly all of their stated intentions doing much more harm than good There are two answers one psychological and one political First The Psychological Answer The more I think about the relationship between nonpro ts and their fune ders the more curious it gets Look at it this way How many foripro t companies regularly publicly disparage their best customers Very few But how often do you and your peers gripe about the statecountyfeds foundations at your national or state association meetings Every time you are together right I thought so Moreover when was the last time that you went to your state federalfoundation project of cer and asked How can we make your job easier and do what you want done better and faster Never Again I thought so But understand that in the foripro t world marketidriven companies ask those questions of all of their customers especially the big ones all of the time They are constantly looking for ways to do things better faster easier and cheaper for their customers They would never fold their arms across their chests and say that the customer that constitutes 70 percent of their income is being unfair They d gure out what the customer wanted and give it to them If you don t think that your funders are your customers think again We ll cover this in great detail in Chapter 10 Over the years I have developed an analogy of the relationship between nonpro ts and their primary funders that I think unfortunately is very apt It goes like this In their relations9 l ps wit9 each other nonpro ts and tbelrprlmary tne ders government or foundations take on the roles and attitudes of eternal adolescents and parents Now this is not to disparage either group as both have contributed to the situation but imagine how you would feel as either a teenager or the parent of a teenager if you were going to be stuck in that often frustrating and antagonistic relationship forever In this relationship the nonpro ts lling the role of the teens audibly seek more independence question the wisdom of the funders who act the parents part ask to be left alone to do their own thing and generally resent the house rules But when the car breaks down or when something else goes wrong they always come to the parent for helpmoney For their part the funders parents audibly encourage the indee pendence tolerate the dissension and independence with irritation but Where We Were Where We Are Where We Are Going l9 benevolence knowing that they know better and urge the non pro t teens to try new things but nothing too new and experiment but not too far out ibut ultimately to always be home by midnight sub mit all friends for inspection and be prepared for a search of your room at any time house rules I m sure you have seen this relationship and probably been a part of it Once you recognize the relationship for what it is it is fairly simple to see how it evolved People who are giving away the money particularly those who work for the public want to control how it is spent Most nonpro ts and their staff and board really only want to be left alone to do what they do best provide mission Neither group really can envision true independence from the other And no tradition law or social norm makes a nonpro t inde7 pendent on its twentye rst birthday Thus it is easier to grudgingly accept the status quo than to really break apart This is crazy and I ve been part of it at both a board and staff level No wonder both sides are so frustrated And yet I see it continue over and over and over even when both sides are aware and acknowledge the problems inherent in not allowing the nonpro ts to grow up and leave home After all most nonpro ts are over 21 Second The Political Answer With the media excited about any and all scandals they can nd gov ernment is reduced to spending millions of dollars to provide oversight to prevent hundreds or thousands of dollars from being misspent And this is everyone s fault We don t demand that the media print the whole story We don t demand a costebene t analysis of the fraud prevention section of an agency We just listen to the story that says WELFARE MOM CHEATS AGENCY OF 40000 and get all worked up about how poorly the agency is run and what a bunch of cheats those welfare moms are What is the rest of the story The mom was one of 110000 funded of whom 109999 didn chew The 40000 stolen was out of 298 million of funding or less than JJOOIh of one percent And then no one ever asks how much the agency spent to nd and recover that 40000 Given the norm probably two or three times what was stolen Why do we allow this to happen Because no gov ernment agency of cial wants to be seen as advocating a laX policy that could allow anyone at all to cheat and in reality the 40000 is a lot of money to most votersino matter that it is an in nitesimal percentage of the total So we let it go and we waste a whole lot of money chasing very little Thus nonpro ts spend a great deal of their time and our money being accountable for the real or imagined sins of others in order to cover the derrieres of the funders Because there is a political liability for the funders MissionRn Pd Mnnmrpmpm if the public perceives that even 1 is misspent the funders want to control everylb Mg These three rules have done incalculable harm to nonpro ts They have prevented stability empowerment and dignity in our nation s charitable sector and steadily eroded our con dence in our ability to manage our own affairs FOR EXAMPLE To demonstrate this evolution and its downfall I ll use as an eXample a group of nonpro ts that was created solely to respond to a succession of federal laws in the 1960s and 1970s who in uenced health care policy for a while and faded away with the end of federal largesse in the 1980s health planning agencies The reader should note that l was integrally involved in health planning from 1974 through 1982 as a volunteer staffer and exec utive director and thus have a somewhat biased view of what happened Most of you will never have heard of HSAs health sys tems agencies or their predecessors CHPs comprehensive health planning agencies but both were funded primarily with federal funds and grew out of federal concern about rising health care costs duplication of health care services and a need to control both CHPs that were funded from 1968 through 1974 were to enable consumer participation in health policy In more than two hundred geographic health planning areas of the country CHPs were to develop health care plans and have limited regulatory authority over hospital and nursing home expansion HSAs 19744 1984 were the second generation of such agencies with more money eXpanded staffs a mandate for consumer majorities on all boards and committees and enhanced regulatory powers The result of this program was more than two hundred new nonpro ts with anywhere from four to two hundred staff each over 100000 volunteers on boards and committees and an entire federal and state bureaucracy l have heard numbers in excess of 350 federal staff when all the regional people were accounted for just to keep tabs on the locals Why To ful ll the federally designed mandates of cost cone tainment increased access to care and consumer empowerment Did it work No and in large part because of the three rules What we say goes turned out to be the most deadly The federal gov ernment decided in just one of many broad national regulations that there should be no more than 61 medical surgical hospital beds per 1000 population As a result HSAs were to turn down Where We Were Where We Are Where We Are Going Zl applications from hospitals for construction that exceeded that amount and the funding of the HSAs was in part contingent on achieving that goal This policy allowed for some local variance but it had to be rigorously justi ed and it never adequately took into account important issues such as patient preference rural accessibility and relative quality of hospitals Since these issues are common sense ones even to nonprofessionals the regulation was derided resented and disliked by almost all of the citizen volunteers upon whose service the entire system depended What is yours is ours and You can t do well doing good also had their own impact HSAs could not funderaise without penaltyiwhatever money they raised was reduced from the next year s budget allotment They could not keep assetsithey were really the federal government s although HSAs were indepen7 dent Is this the end of the HSAs Because the federal government funded the program but never really made it a local one when in 1981 the newly inaugurated President Reagan and his budget director David Stockman attacked the program and tried to zero out its budget even local volunteers were hesitant to come to its defense The HSAs were dead in the water I The HSA program cost hundreds of millions of dollars and had thou sands of good people at the volunteer board and staff level committed to its success but it went aground on the shoals of too much distrust of local autonomy an overzealous accounting mechanism and a high resistance to change As long as we do not demand some common sense in government we will have to live with the ludicrous level of oversight that reduces all regulations to catching the 2 percent of us who are crooks and or idiots and punishing the 98 percent who are honest and have a brain cell or two In this environment you cannot blame the state or federal employees who are caught in the oversight squeeze they have to assume guilt until innocence is proven and thus they are never going to fully trust us Now how can we go about breaking both you and your funders out of this relational purgatory We must you know if we are to actually bring the nonpro t world into the second decade of the twentyifirst century in some sort of reasonably effective shape That is really what the rest of the book is about Hopefully by giving you some idea of the world you will be working in and by increasing your skill base giving you tools and showing you how other agencies have broken free of the cycle of coidependence and that is eXactly what it is you will be better able to do it yourself Let s start with an examination of the environment you will be working in 22 MissionRn Pd Mnnnvpmpm What the Next Ten Years Will Bring When I look back on my predictions from the 2000 edition osz ssz oneBased Management my head spins with the changes we ve seen As I wrote that edition our economy was sound federal de cits were thought to be a thing of the past and we in the United States happily considered ourselves on top of the world So much for hubris No matter where we live or how large or small our organization is we ve become part of a global economy and what happens on the far side of the world this morning can affect us in very real ways later today not in weeks months or years as in the past We need and depend upon each other across national borders more than ever and this is true economically politically and socially Technology has woven us together tightly opened previously closed doors and raised previously shut blinds A donor can nd out what our nonpro t spent two years ago and what the CEO s salary was in less than a minute You can give a donation to a speci c nonpro t in India as quickly as you can give to one in Indiana And attention spans What attention spans We want it all now and we want it all customized to each of us And of course there is the global recession which is still growing as these words are written We ve been reminded that old rules are still valid Borrow very little diversify your investments there is no free lunch A much different much more challenging environment presents itself to us over the next decade and beyond Nonpro ts are of course impacted by all of this What follows is a set of trends that will affect you and that you as a missionrbased manager should consider and prepare for Governments With Fewer Resources We all know that the US federal government is broke as are most others but still pushing billions of dollars out the door to stimulate the economy Most states are in the same predicament but they can t manufacture funds to purchase services They have to balance their budgets every year As this is written in 2009 the most reasonable predictions 1 see are for a long deep recession perhaps bottoming out in late 2010 with a slow recovery starting no earlier than 2011 Thus we won t get back to solid state nances for at least three to ve years out the midpoint of my teniyear prediction horizon I hope I m pessimistic but as good managers we have to go by the mantra Hope for the best prepare for the worst So here s the deal You are going to have to muster every iota of time strength and savvy to ght for every dollar for the next decade Remember even if your nonpro t doesn t take government funds most nonpro ts do And since their prime source Where We Were Where We Are Where We Are Going 25 of funds is under real longiterm duress those organizations will continue to compete with your for other funds from foundations or corporate and individual donors If you believe your mission is essential you had better be out convincing others that it is too You should also be aware of four important points regarding this pre diction The rst is that even though the overall rate of funding from government is dropping the level of support for the speci c programs that your organization provides will vary greatly depending on the polite ical winds Think about how the feds spent lavishly for ten years in areas that prevent or treat substance abuse in response to the national movement toward semiitemperance Then funds owed to funding for AIDS research prevention diagnosis and treatment which have gone to entities as widely varied as health departments hospitals child welfare departments drug centers medical schools and arts organizations Now that AIDS is seen by the public and Congress certainly debatably as under control those funds are dwindling Up through the beginning of the recession in 2008 the US fundee of choice was schools and crime prevention which didn t last either The bottom line If your area of service is in vogue you will be hurt a bit less if not you may be hurt even more deeply The second point is that in addition to the fact that the rate of funding for your organization is falling if you are like the majority of your peers that rate of payment per mm ofserw ce is probably already woefully short of meeting the needs in your community and may not even be paying your full cost of service Thus even if your area of services is in vogue and stays steady that should not be a great deal of comfort You and your organization will have to look to new sources of income to meet the increasing needs of your community for services Moreover if your organization particularly those in human service or education gets paid on a feeiforeservice basis wherein you bill the city county state or federal government for services after those services are provided be prepared to be able to come up with more working capital the money that you need to pay the bills between the time you provide a service and when you get paid Why Because you will be providing more such services and thus oating more receivables and the government agencies will be paying you later One high of cial of a state welfare agency told me recently We postpone payment one day just one day and we save 29 million That s real money and they need real money now more than ever The third point is related to the second and it has to do with the need to go outside and look for new sources of funds As noted above the tra7 ditional place that nonpro ts do that is in starting to do fundraising and increasing applications to foundations Of course these have become much more competitive in the past few years as governmental resources stayed static in the face of growing demand Hundreds of nonpro ts that have never Z4 MissionRn Pd Mnnnvpmpm gone out to do traditional funderaising have started doing so in the past few years and more are entering the arena This change is occurring at the same time that corporate donations and sponsorships and foundation funding are all waning due to the economy s collapse Be prepared to improve your fundraising and grantewriting skills dramatically or fall by the wayside If you are in the development world you need to be good at it You had better be out there selling that mission as a core competence The fourth and nal point here is that the con uence of all the rst three is that your nonpro t will need to use volunteers more strategically and for more professional tasks over the neXt ten years I call these people unpaid professionals since the term volunteer too often and inaccurately brings to mind someone making copies or answering the phone These new volunteers are not the same as the traditional ones we value so much They come to the nonpro t giving of their very high talent and skill but often for a limited time Think of Doctors Without Borders as a good eXample I know that many readers will say But what we do is life and death It requires licensure certi cation and continuing education We can t just let volunteers do what we do I understand the barriers to entry but would point out that over 70 percent of the re ghters in the United States are volunteers and the same holds for emergency medical technicians EMTs and no one would argue they are not doing not life and death work And again think about Doctors Without Borders There are nonpro ts springing up to deal with this change including the Experience Corps and some new twists within AmeriCorps Teach for America is drawing many more applicants than it has positions available You will see more people being available to come to you for a three siX7 or twelveemonth internship during their careers not just before or after And with the Obama administration s call for national service there will simply be more volunteers out there to choose from The key for you is to think strategically about volunteers and to make sure you ramp up your volunteer management skills to make the best use of this remarkable resource Generation Change in Full Swing This is both good news and bad news and it is not a prediction but a simple fact Four generations now overlap in our nonpro ts and these four generations are all signi cantly different and sometimes clashing cultures The older generations the Silent and Baby Boomer have much different outlooks on workiljfe balance technology and management styles than do the younger generations GenX and what I call Gen In my 2007 book Generations The Challenge of a llfetlmefor Your Nonpro t St Paul MN Fieldstone Alliance 2007 I argue that understanding and harnessing the Where We Were Where We Are Where We Are Going 25 different skills and perspectives of these generations is crucial to the success of your nonpro t and its mission Not only will we be handing off the management of our national nonpro t sector to the younger generations in the neXt ten years at the staff level but we also need to back ll wi younger members on our boards the vast majority of whom were Boomers as of 2008 Here is some unsettling news if you are a Boomer or Silent Generation manager We and I am your age need to relearn and adapt our management style to t the younger generations who increasingly make up our staff and board If we do not we will alienate the best young people and leave our nonpro t weaker as a result More on that in Chapter 7 Leading Your People More Demand for Services Particularly in a Weak Economy The volume of demand will grow irrevocably irreversibly and probably faster than you anticipate in almost every area of nonpro t service but particularly in the social services in a weak economy If you are in educa7 tion the national concern with the decay in our educational structure has already led to more school choice and No School Left Behind has instie tutionalized testing often to the detriment of actual learning If you run a faithebased organization the continuing national return to the church synae gogue and mosque will lead to increased need for services and facilities as well as increases in competition for dollars as many reputable ministries vie for the same funding sources In the arts a bettereeducated public will want more theater music and displays of ne arts nearer and more accessible to them but only if they can afford them If you provide a social service whether to youth seniors the homeless or the mentally or physically dis abled the need for your services will grow faster than the population as a whole The reasons for the increase in demand outstripping simple demo graphic growth are multiple First we as a society have turned to nonpro ts increasingly for the past thirty years and we are used to seeking help there Second one of the legacies of the last thirty years is a chronic govemmene tal underfunding of social services particularly loweincome housing and job creation assistance that has led to the large number of chronic homeless and underclass citizens who are at signi cantly higher risk of needing services that you provide than the population as a whole Thus you cannot just use census projections to predict the need for your services Since 2000 the dis parity between the haves and the haveenots has grown alarmingly This rift is eXacerbated by the current economic downturn If you are in any eld within the nonpro t sector this fact should unsettle you and factor into your predictions of demand 26 MissionRn Pfl Mnnnvpmpm Finally there is one other key issue to ponder here Not only is raw demand the number of people presenting themselves for services going to continue to climb but the cost of serving each of those people will also rise at the same time that income will stay basically static People are showing up with many more needs than ever before and to adjust to and serve these needs costs money As a human services administrator told me in june 2008 The people we see are broken in so many more ways and all at once They come with layer upon layer of problems and drilling down through all those layers is an imposing and expensive task Words to remember A More Competitive Environment And More Failing Nonpro ts This is the biggest single change that you will see during the rest of your career whether you are 20 or 60 This competition between nonpro ts which began in the early 1990s has now shown up in everything you do You are now competing for clients students patrons or parishioners for funding from traditional sources and for funding from new sources for donai tions for United Way dollars for visibility for donated services such as air time and advertising for clicks and eyeballs on your Web site and for good volunteers and great staff The most disruptive nerveiwracking and positive change for many none pro ts is in the area of competing for people to serve In the past fteen years counties states and even the federal government have brought more and more programs into the competitive fold They did this because of the rst two trends listed above limited funds and nearly unlimited demand for services many of which are entitlements Caught on the horns of a scal dilemma the solution many purchasers of service have sought is anathema to our entire sector capitalism By this I mean putting agencies many for the very rst time into the riskreward cycle that is the engine that runs our economy This of course has challenged the monopoly that you once enjoyed Monopolyl you ask Absolutely How many times when asking for funding have you heard the question Does this program duplicate any thing already serving the same constituency Lots 1 am sure The reason Funders did not want to encourage duplicate funding ie competition Imagine the same scene with your city council approving only one fastifood restaurant or one grocery store in townito avoid duplication They would be run out of of ce for obstructing commerce interfering with competition and in general for being too regulatory But in the nonpro t arena this has been shortsightedly considered appropriate No more Funders are looking for the best productivity the most mission for the money Volunteers are looking to spend their time wisely Quale ity staff want to work with organizations that are nancially viable as well Where We Were Where We Are Where We Are Going 27 as stateeofetheeart in terms of service Businesses that donate services want to associate with topicaliber organizations not ones that will have their work nances or reputation show up in the scandal sheets And all that information can be had online in a heartbeat Here is the good news from the perspective of a funder donor cite izen taxpayer and service recipient This works and works well Not perfectly not immediately but the result is better services and lower costs The bad news From the perspective of the nonpro t manager this is hell on wheels We as a sector have not been ready for this We have been underfunded thanks to cheap funders and our own inability to discipline ourselves to put aside funds Few of us have bene ted from capacityebuilding funds necessary to get our backeroom operations ready to compete But like it or not competition is here and increasingly ingrained in the mindset of ourfunders and community In an era of even more limited resources this competitive trend is only going to grow Here are two other spinoffs of competition to consider First when foundation governmental or corporate funding becomes more competie tive some nonpro ts will be unable to compete and will seek more funds from traditional funderaising putting even more organizations in that already overpopulated and highly competitive in its own right arena Second some nonpro t organizations will at out fail They will not be able to convince enough of us in our various roles as citizens governments or foundations that their mission is worthy enough and they will close In late 2008 Paul Light predicted that perhaps as many as 100000 US nonpro ts might fail in the coming eighteen months I think Paul is optimistic Tech Online All the Time Here is the bottom line The future of the charitable sector the future of effective competitive nonpro ts will come from the successful con uence of mission and technology This does not mean we will not continue to need faceetoeface services or human interaction of all kinds When I am in the ICU I do not want the nurse calling it in from home What I am saying is that until nonpro ts embrace not accept but embrace technology as a way of doing mission more effectively and ef ciently as a way of reaching and educating more people as a way of appealing to a new generation of staff and volunteers until then we will not be mission successful as we could be As jim Collins wisely pointed out in Good to Great New York Harper Collins 2001 technology is an accelerator of good ideas not a substitute for one You ve got the good idea It is your mission But will you push technology to help you make that good idea that mission a reality I think you must And here s a hintiyour youngest staff have the most intuitive 28 MissionRa Pd ManavaPm understanding of technology and can help you move this wayiif you let them More Transparency and Accountability This is a good thing if it is handled in an atmosphere of making sure that your organization is accountable for what you do how you do it and how much you spendibut it can easily turn into a witch hunt see my earlier discussion of the basic tenets of funders It can result in a funder who buys a small amount of services from you and demands to know all about everything you do own think and plan But we have to live with the contracts we sign Accountability and the seemingly neveriending amount of paperwork that accompany it will con tinue to increase as long as the press and the public wonder about us Accountability is a fact of life and should be seen as a cost of doing busie ness The oversight may be frustrating and expensive but we need to spend less time whining about it and more time guring out how to use technology to make being accountable easier and less costly Also remember that accountability and competition go hand in hand The funders who have choices of where to send their money want more accountability and often can get it with a few keystrokes If you can t mea sure your real outcomes in the current environment you may not get much repeat funding Better use of technology can help you be accountable more ef ciently and effectively but you have to be comfortable with the idea of being accountable in the rst place not just resigned to it So there are siX areas of change you will need to pay attention to and most likely accommodate in the neXt decade The remainder of this book will try to give you the tools techniques and perspectives to help your organization become more missionicapable and more missioneproductive Recap In this chapter we have reviewed how nonpro ts came to where they are today how your funders really think of you and the siX trends thatI believe you are going to have to accommodate to stay viable over the neXt ten years These trends are the following Governments with fewer resources Generation change in full swing More demand for services particularly in a weak economy A more competitive environment and more failing nonpro ts Tech Online all the time More transparency and accountability QV BASNNE Where We Were Where We Are Where We Are Going 29 With these predictions in mind the neXt question is How do we adapt and accommodate to these conditions Even more dif cult is the answer to the neXt question How do we adapt and accommodate to conditions that may eXist in ve years that no one can even foresee today How do we stay close to our mission stay solvent stay exible and stay sane all at the same time How do we harness technology to help us do more of this I m not sure that all of those things are possible particularly the part about retaining your sanity but Chapter 3 will detail my observations about the key characteristics of the best most exible most focused nonpro ts in the country By trying to emulate their successes and to integrate their strengths with yours your organization can move through the neXt ten years and come out stronger and more missionicapable CHAPTER 3 What Works The Characteristics Ufa Successful Nonpro t Overview This chapter will in effect preview the remainder of the book First we will turn from the environment to the organization and I will lay out for you the ten updated characteristics of organizational success that will help you overcome the problems and environmental changes that we reviewed in Chapter 2 Each of the chapters that follow will detail the ways to attain these characteristics Then I ll de ne what I contend are the key characteristics of a missionebased manager There are four different ways that these stewards show their true colors and we will go over each By the end of this brief chapter you will have a good idea of what is in store for you as you read the remainder of the book and of the standards to which I will be holding you and your organization The Ten Characteristics of a MissionBased Organization All successful organizations share common characteristics Since 1982 l have had the opportunity to train thousands of nonprofit staff and board and to consult for hundreds of nonprofits These consultations often included management reviews strategic planning and new business development In the course of this work I had the opportunity to talk to staff board community members and the people who the organizations served in depth As a result I have had the good fortune to see many many consistently excellent nonpro ts and to talk to their stewards about their strengths an weaknesses plans and opportunities their culture and their dreams It is an examination of those strengths and how they can work for you and your organiZation that make up the rest of this book 52 MissionRn Pd MnnmerPm What is striking in these consistently successful organizations is the sime ilarity of these key organizational characteristics Over and over I see the same core set of beliefs values traditions policies and culture on which the organization functions It does not matter whether the nonpro t is a place of worship a school a museum a hospital a trade association or a rehabilitation facilityithese key characteristics consistently shine through I have attempted to distill these key characteristics into the ten that follow Any such distillation is fraught with a certain amount of peril I may group things in ways that don t t your organization the best or I may not emphasize a particular item enough I have tried to put the key components in a logical and workable form breaking them not only into different segments but separating them in such a way that I hope you can study each apply the information to your organization and then put all the pieces back together to make a cohesive whole ese characteristics have been updated since the second edition of MissioneBased Management and in the intervening years I have had hune dreds of requests to put the list of characteristics in priority order As you will see missioniwhich should always come rstiis rst After that I have done my best to order them but at some peril to the reader Remember this They are all important They work together as a group like the parts of a ne symphony You cannot be a good social entrepreneur without doing great marketing or be organizationally tech savvy without investing in your staff Ignore one or more parts and the whole is greatly diminished Bring them all together and their synergy outstrips the sum of their individual con tributions So don t perseverate on the order Just address each one in turn and try to achieve and maintain your missionebased status Here are my ten characteristics of successful nonpro ts 1 A viable mission The rst rule of nonpro ts is mission mission and more mission A missionibased organiZation needs to follow its mission and to do so it needs a mission that motivates and is understandable supportable upitoidate and needed Without the mission what s t e point Unfortunately at too many nonpro ts there is no point because the mission has become secondary to survival In Chapter 4 you will learn how to write and use an effective mission statement effectively Ethical accountable and transparent We are after all just stewards of the community s resources The best nonpro ts understand this and are increasingly transparent in their work But good accountability and transparency begins at home inside the organization So does the all important emphasis on values and ethical decision making Chapter 5 will cover these topics in detail A businesslike board of directors Your organization needs a group of governing volunteers that know understand and pursue the N W What Works 4 v1 9 7 00 55 organization s mission consistently are connected to the community stick to policy and are the check and balance on the staffias well as on the people who fund the organiZation A board needs the informa7 tion experience character and support to know how to decide key issues quickly and effectively and in today s tough environment they need to know when to say no to a good idea In Chapter 6 I ll show you how to assess recruit and retain just such a board one that will give you more outcome and policy guidance and less dayitoiday manipulation than you thought possible A strong welleeducated Staf Any effective nonpro t needs staff who are advocates for the mission who manage from the bottom up and who are constantly trained and training There is no investment more necessary or more neglected than staff education and training Chapter 7 will show you the best way to treat employ manage motivate and retain your staff You will also learn how to most effectively get staff much more integrally involved in the outcomes of your organization Embracing technology for mission Far too many charitable organiza7 tions still feel that technology is a necessary evil not the path to better mission The best missionebased organizations embrace technology as an accelerator of good mission Technology touches every corner of our lives every hour of every day and it has permanently changed the ways nonpro ts provide services buy services hire manage communicate raise funds and keep abreast of changes in the state of the art In Chap ter 8 I ll show you how to bring your mission and your technology together Again the whole is a lot greater than the sum of the parts Social entrepreneurs Organizations need to be willing to take risks to perform their mission to try and often fail and try again to look at markets and provide services to support their mission rather than create bureaucracies to continue past and often outdated practices Chapter 9 will give you the best ideas on how to motivate your staff board and community to continually take reasonable risks on behalf of the people you serve It will also show you how to assess your core competencies and match them with the wants of your target markets A bias for marketing Organizations that understand that everything they do is marketing and see every act from service provision to how the phone is answered as a marketing opportunity to pursue their mission Our marketing discussion will be in Chapter 10 where you will learn who your markets really are how to give those markets what they want and how to provide a marketing edge for everyone in your organization Financially empowered Organizations need to have diversi ed income income from nontraditional sources an endowment and therefore the ability to have an impact on their mission without waiting for help Sure you say all of that would be nice if it dropped in my lap 54 MissionRa Pd Manavpmpm Well it doesn t happen on its own These organizations make it happen Chapter 11 will show you how to do it in your organization We ll look at the characteristics of nancial empowerment and how to apply them in your organization A w st39on for where they are going This is so simple yet so often ignored A strategic plan both the process and the document is a key to success Without a plan the only way you get anywhere is by accident Isn t what you do too important to be left up to chance Of course it is and Chapter 12 will show you why you need to have a plan what kinds of plans there are and will lay out a process for you to have a usable meaningful plan 10 A tight set of controls These include personnel nance operations media quality control and maintenance policies Good controls free the organization to work on its mission rather than watching its back all the time In Chapter 13 we ll look at twelve different types of policies and show you where most groups make mistakes so you don t have to D In each of the following chapters we ll discuss the important parts of each of the ten characteristics noted above and leave you with questions for further discussion with board and staff What Is a MissionBased Manager If the outcome thatl want your organization to have is to be a missionibased business you and your peers obviously should aspire to become mission based managers Such managers have four major skills that we will examine here Balance innovation motivation and communication are the cruX of such individuals tool chests Let s look at each in a little more detail 1 Missionebased managers balance the needs of the community wit9 the available resources of the organization Balance is such an important skill We need to balance our checkbook our personal and business lives and our priorities with our resources This has never been more true in nonpro ts than it is today There are so many people in need so many community priorities that cry out for attendance They call to our hearts and we as people want to respond But in any organization even yours there are only so many resources Even if your organization won the lottery today there would still be needs to meet when you got done spending all the money Missionebased managers understand that they need to balance pressing needs with available resources and not provide services that they cannot pay for Does this mean that we accept what we have and do What Works N 3 A 55 not seek more resources Of course not But mission mission and more mission is only the rst rule of nonpro ts It is not the only rule the second rule is no money no mission Balance of money and mission board and staff close supervision and staff freedom and work and life is a theme and a challenge that you will see over and over in this book Mi n J i r taeing rear sonahle risks on behalf of the people who the organization senes True leaders know that consistent innovation is the linchpin of consistent success and even of continued survival But innovation is always risky and it requires an open mind to new ideas and an ability to not fall in love with the way you have always done thingsieven if you pere sonally invented that tradition Put simply a socially entrepreneurial organization must be led by social entrepreneurs and that leadership must roleimodel the behaviors that they want from the rest of the orgai nization Organizational risk also always translates to some degree of personal risk If you make too many bad risk decisions you ll probably be out of a job The problem is that if you do not make any riskitaking calls everyone will lose his or her job and the mission won t get done We ll talk a lot more about social entrepreneurism in Chapter 9 Missionehased managers lead the organization by example and in so doing motirate their staff their hoard and their community Successful organizations have people who lead them through the good times and the bad who keep them on track when there are lots of distractions and who are able to motivate the rest of the organization with their energy their vision and their example Successful leaders know that they must lead from the front and walk the talk rst In nonpro ts leaders are held to an even higher example than in forrpro ts We are all on a pedestal in the hot klieg lights regarding our behavior Nonpro t leaders must evidence the values of their organization in their behavior every day or their staff their donors their volunteers and their community will write them and their organization off Look at it this way If a foripro t chief executive of cer CEO is accused of embezzlement or sexual harass ment it is a small story on page 5 of your newspaper Does the forepro t suffer in terms of business Usually not much or not for longipeople often do not feel that management impropriety should affect their use of the organiZation particularly if it is not a local business But if a non pro t CEO were accused of that same behavior what would happen Right Page 1 story fallioff in donations community trust volunteer time and so on Your actions as a missionibased manager have major repercussions You need to lead by your values every day People are watching both inside and outside of the organization mo are p m Missionehased managers can communicate their mission effectively to their staff their hoard the public their inders and the community at 56 MissionRn Pfl Mnnnvpmpm large There is no way to lead without being a good communicator and a missionebased manager has to communicate in many ways every day You have to tell your staff what you want them to do inquire of your markets what they want and interact with your board your funders and your community all in ways that move your organization forward not back The key word here is effectively and that means that the intended message gets to the intended audience If the wrong message gets out it means that the organization has taken a small or huge step backward Communications is crucial and we ll discuss it at length in Chapter 7 Now you have been exposed to the ten characteristics of successful nonpro ts and the four key skills you need to be a competent missionibased manager As you look at information in the following chaptersiinformation that expands on each of these ten core characteristics of nonpro t success and weaves in the personal skillsiask yourself the following How does my organization measure up Do we really do all these things or only pay them lip service How about me Am 1 good at balancing things or at motivation As you continue through the remaining chapters be brutally frank with yourself This is not a time for selfidelusion That will only lead to ignoring real problems and deferring any needed changes Recap In this chapter you have seen the ten characteristics you and your organi7 zation need to embrace adopt and maintain To recap these ten are A viable mission A businesslike board of directors A strong wellieducated staff Embracing technology Social entrepreneurs A bias for marketing Financially empowered Ethical accountable and transparent A vision for where you are going A tight set of controls QWWF QV BASNNI These ten characteristics when achieved as a group can improve your ability to do your mission improve your organization s longiterm viability and assure the people you serve that you will be there to serve them for the long haul They don t show up on their own and they can t be developed overnight Moreover once you attain them all only hard work and discipline will keep them in place What Works 57 Then we turned to the four essential skills of the missionebased manager I assume that in reading this book you are trying to not only improve your organiZation but also your own management style I included four key skills and we should look at them again 1 Missionibased managers balance the needs of the community with the available resources of the organization Missionebased managers are innovative social entrepreneurs taking rea7 sonable risks on behalf of the people who the organization serves Missionibased managers lead the organiZation by example and in so doing motivate their staff their board and their communi Mission based managers can communicate effectively to their staff their board the public their funders and the community at large N W 39 The skills are challenging and are ones that we will work on throughout the book The characteristics of success and the skills of the missionibased manager play off each other beautifully reinforcing one another So you need them all In the remainder of this book I ll show you how to achieve and maintain both sets Questions for Discussion Chapters 1 3 1 How do our funders really view us How do we know 2 Do we act like a missionibased business Specifically how can we get better Does our staff view us as a charity or as a missionebased business What about our board Our funders In Chapter 2 a number of predictions were made about the neXt ten years Which apply to us and how How many of the ten characteristics that were listed for success do we already have in place in our organization Of those that are not fully in place which is the most important for us to develo What about our personal management skills Do we measure up to the list 8 A V CHAPTER 4 The Mission Is the Reason Overview Let s be realistic If you are an employee of a nonpro t you are not in this for the money nor for a lowestress shortehour job If you are a volunteer you are not spending time with your charity of choice so that you can miss time at home or at work or avoid getting eight hours of sleep at night If you are a donor you are drawn by what The same thing that attracts the staff and volunteers The mission what the organization does If that is true why is the mission even an issue in this book Why take up time and space on a topic that we all agree is vital There are more reasons than you might imagine and in this chapter we ll cover each of them and provide some examples and ideas for you to better utilize your mission as you move your organization ahead If mission is your most important resource and it is you need to get the most from this resource in every way every ay In the following pages we ll rst examine the need that you have for a mission statement and how to review and rewrite your mission statement to help you become the organization that you want to be not merely continue to be the organization you were in the past We ll then look at the ways that mission statements are misused underutilized or completely forgotten Finally we will discuss how to use your mission statement as a tool for pole icy management and marketingiin short how to turn your organization into a missionebased one on a dayetoeday basis The Mission Statement Is Your Legal Reason for Existence As noted above the mission statement is not only the reason you work or volunteer for your organization but it also has important legal implica tions for staff and board If you do not perform your mission in the United States the IRS can take away your taxeexempt status under section 501c of the Internal Revenue Code The same holds true in other countries around 59 40 MissionRn Pd Mnnnvpmpm the world If you bring in too much of your funds from unrelated busie ness income de ned as income that is derived from activities that do not importantly contribute to the charitable purpose the mission of the orgai nization you also stand a chance of losing your taxiexempt status as well as bearing tax liability for any pro ts from such unrelated businesses You may not know that many nonpro ts are technically in violation of their mission statement and have unrelated business income that they do not even realize Usually this is due to having been established long enough ago that your mission has morphed For example if in 1960 you were set up to provide a service in County A but now as your community has grown you provide services in Counties A B and C and if your mission statement spec i es only County A you are technically getting unrelated business income from all of the activities that you perform and are reimbursed for in Coune ties B and C The same issue arises for nonpro ts that were originally set up to provide only mental health services but now do substance abuse were formed to help the African American community but now assist people from all ethnic backgrounds or were formed to help senior citizens but now nd it useful to provide day care to the elderly and the very young Note If this is your situation see the Have a BoardStaff Review section that follows All of this is said to underscore the importance of having a mission that you know you can live with and that accurately portrays not only what your organization does now but what you want it to do in the neXt three to ve years Writing or Rewriting Your Mission Statement You all have a mission statement It is in your articles of incorporation and the forms you submitted to the IRS or the corresponding government agency if you are outside of the United States to receive your taxiexempt status It may also be restated in your bylaws Every three years at the same time that you will be writing your strategic plan discussed in Chapter 12 you need to revisit your mission statement You need to take the opportunity to get your staffs and boards input into what your mission should be In most cases it will be eXactly the same as it is now only you will have a renewed sense of its urgency as a result of the discussion In any event there are a number of steps that I suggest you take in reviewing your mission statement Find Your Current Mission Statement If you are like most of your peers you may have more than one mission statement There may be different language in your bylaws articles of incore poration or applications for funding Gather them all up and review them See where there are differences and similarities Take the best of all of them and move to the neXt step The Mission Is the Reason 41 Note Any Substantive Changes Have you started to provide services in a new geographic area outside of any listed in your mission statement Have you added services or a new kind of clientele Make sure to consider amending your statement to include this new geography or demography and make sure that the language you use is up to date Have a BoardStaff Review At a special meeting or at your strategic planning retreat go over your current mission and any substantive changes and then talk through whether your current mission statement is inclusive enough for the kind of organization you are shaping Does it accurately re ect your core values Does it restrict your exibility Don t try to rewrite the mission as a group You will still be there agonizing over syntax and comma placement in 2105 Do talk through the key points or values you want to include things like accessible to all parts of the community highest quality of service 7 and sensitive to different cultural values In Chapter 5 I will suggest that accountability and transparency should be on your list Then redraft your mission statement and take it back to the board for review and adoption HANDS ON Once the mission is rewritten have it formally adopted by the board of directors or voted on by your membership meet ing whatever stipulations are in the bylaws and then send it will the minutes oft9e board action toyoursmte attorney general and 20 IbelnternalRevenue Service This is critical as the IRS will judge you under the Unrelated Business Income Tax provisions of the IRS Code based on the mission statement that they have on le If you do not send the amended mission statement to the IRS they will never know and will judge you on your old outdated mission statement I Now let s turn our attention to the ways that people misuse or underutie lize their mission statement I have already noted that the mission statement is a resource that you need to use and unfortunately it is a resource that is often underutilized in many nonpro ts The Forgotten Mission Statement What good is your mission statement if no one knows about it7 You and your board and staff may review the mission statement every year or two but if you are like most nonpro ts that is the extent of your use of your mission I think you need to be reminded of it regularly We need the mission as 42 MissionRn Pd Mnmwpmpm a beacon to guide us when we get distracted by the dayitoiday ups and downs of life FOR EXAMPLE All three of my children at one time or another a played noncompetitive youth soccer Since Ben the oldest played his younger brother Adam and younger sister Caitlin started at the earliest age allowed four Now at age four watche ing soccer is more amusing than exciting and when Adam started playing I decided to keep busy by analyzing a little of the group dynamics of the games practice and coaching Questions sprang to mind How do you motivate fouriyeari olds to keep their minds on the game or get them to compete You have to urge them to take the ball away from another child when all they ve heard from parents up to that age is Share now Susie At Adam s rst game I wondered what does the coach say before the game Will she say Win one for the Gipper or get technical and say Remember play 17 Trevor go left Andrea go right pass to Sarah and she shoots Not a chance What she did and what all soccer coaches of very young players say is Look at me LOOK AT ME Now WHICH WAY ARE WE GOING And some perhaps most of the children think and point to the goal and say THAT WAY And then the parents line up along the side of the eld and remind the kids which way to kick the ball Why Because kids get easily distracted by picking a ower seeing a friend from school on the other team or waving to Mom or Dad and they often kick the ball toward the wrong end of the eld I The point of the example is that we in our organiZations often also get distracted from the goal from our mission and it is not as easy for us to refocus on the point of what we do as it is for the kids on the soccer eld You can pick them up and show them where the goal is Your goal is the mission statement and it needs to be as visible and readily available as the goal on the soccer eld Remember distractions are a natural part of the busy world we live and work in We have annual meeting time budget time audit time Monday Tuesday Wednesday Well you get the idea It s easy to get off track Thus we need to model ourselves after the parents at the soccer game and constantly be reminding each other that the mission is the point By using the mission statement in management and board decisions by posting it clearly by incorporating it into personnel evaluations you can reinforce and remind people all of the time that your mission is paramount Otherwise The Mission Is the Reason 45 your mission is forgotten among the ashes of the res that you are putting out each day The Mystery Mission Statement Can you recite your mission statement right now Probably not and that s okay for now But do you at least know the key elements Does your mission statement specify a particular group of people geographic area or type of service Or does it include some combination of all three You do need to know that When was it written When was it last reviewed by the board and the staff One thing is important to remember Most mission statements are written to be broad statements of charitable activityiusually drafted by attorneys to be as broad as possible or by advocates of a particular crusade who do not want to offend anyone They often say in effect XYZ of Yoanoun is a nonpro t dedicated to be all things to all people everywhere forever cbaritably That is ne but realize that along with that broad alliinclusive mission can come considerable disagreement in bow to achieve or at least pursue that mission as well as an inherent dif culty in getting anyone s attention I want to work or volunteer for or donate to an organization that does something special something unique So bland is not good On the other hand if we get too speci c we sometimes confuse people about what we really do HANDS ON Try this At your neXt board meeting and neXt senior management meeting ask everyone to get out a piece of paper and write down in one sentence the single most important thing your organization does Then have everyone read his or her answers and write them on the board or on a flipchart Compare the answers How many duplications do you have I If you are like the overwhelming number of nonpro ts you ll have few if any duplications Why Because everyone in the organization comes to it from a different background perspective or priority For eXample if you are a human service provider you have staff who are doing while your managers are managing It sounds obvious but look at how their perspectives will be different The staff will look at the micro how the mission affects their job and their part of the organization and the managers should look at the macro the organization as a whole or at least their larger part of it You may well have board members or volunteers who have been recipients of one but perhaps only one of the services you provide and their perspective on what you do is colored by their individual and often very personal eXperiences MissionRn Pd Mnnmrpmpm This difference of perspective is a key and too often overlooked fact in nonpro ts We are likely to assume that every one of us comes to the orgae niZation because we agree on the mission and good works the organiZation does Not so We come together to support what we perceive the mission to be and it is that mission our perceived one that we will advocate and work toward Obviously this phenomenon results in a likelihood that we do not agree on the mission and that can lead to either major con icts or major strengthening Let s look at some realeworld examples of this phenomenon FOR EXAMPLE An Association for Retarded Citizens ARC in a Great Plains state was a model of a missionioriented nonpro t Formed in the 1950s by parents of retarded children as a voluni tary organization dedicated to ghting for funding for their cause it had over the years evolved with the eld to provide direct services to persons with developmental disabilities and their fame ilies and employers who employed people with disabilities The ARC ran twelve residential sites a vocational workshop an early childhood assessment program and recreational outings as well as support groups and outreach into the community Economically 72 percent of its funding came from state and federal funds mostly in the form of purchaseiofiservice and mostly for less than the actual cost of service provided The ARC made up for these underpayments by running a traditional and pro table sheltered workshop where developmentally dis abled people do assembly packaging and manufacturing for foripro t businesses with assistance from supervisors The ARC depended on the workshop pro ts to subsidize many of its other programs Then in 1985 came a change in the philosophy of work ing with the developmentally disabled an idea called supported employment In supported employment agencies like the ARC work with employers to nd real jobs in real employment set tings and if the person with the disability needs some assistance he or she gets the job along with a job coach who is on site with him or her some or all of the time to ensure that folks stay on task and do the job as it needs to be done For the sheltered workshop this policy was a potential nan7 cial disaster Gone were the least disabled and thus easiest to work with and most productive employees What would be done to keep the workshop pro table Both the workshop director and the ARC CEO knew that without the pro ts from the workshop The Mission Is the Reason 45 other services would have to be cut This would of course have an impact on service array service quality staff morale and even tually community support and donations What should they do Mandated by the state rules to move people out into the working community the ARC was faced with an agencyethreatening dilemma unless the staff and board could adjust and adapt But they did not want to just react they wanted to respond in a way that they could all support The ARC board president called a board staff retreat to discuss the issue and started with a review of the mission statement The Mission of the ARC is to work for persons with developmen tal disabilities and their families to help them achieve their highest potential in school work community life and recre ation Even with this broad mission statement there was stinging disagreement about how to proceed Some participants wanted to close the workshop noting that supported employment works for everyone no matter how disabled Some were hesitant about set ting a policy promoting and providing supported employment that would potentially put clients into a more risky job in the real community Others raised the overall economic impact of potentially reduced pro ts on the rest of the agency s service array The solution Support the mission The key phrase Work for persons with developmental disabilities To the board and staff this meant allowing clients to choose their options and thus keep both options open What this resulted in was keeping the workshop open as a work training transition and work location with the eventual goal of having each person with a disability work in the setting be orsbe most liked To keep pro ts up they brought nondisabled staff to supplement the workforce Thus the program and the nancial viability were preserved and the solution worked well in light of the mission statement Those readers who are professionals or volunteers in the eld of developmental disabilities may disagree with the ABC s choices but the point here is that they let the mission guide them and didn t just react without thinking I n FOR EXAMPLE A nonpro t performance auditorium in the South g was in crisis Like all major performance centers the Hall as we shall call it had gone through tough nancial times along with the arts community in general The Hall not only housed the local symphony ballet and opera companies renting to them at continued MissionRn Pd Mnnmrpmpm continued a steep discount but it also reached out beyond its traditionally white upperimiddleiclass clientele to the minority and lower income communities by holding a wide variety of bookings special performances for children and so fort The nancial mainstay of the Hall however was its series of Broadway touring productions The pro ts from these productions kept the Hall open and allowed it to subsidize the ne arts and community outreach But ticket sales for the core Broadway series were down The Hall needed renovations and upkeep that had been postponed for years The outreach program had brought new nonpro t commue nity groups asking to book the Halliat a discount of course The performing arts nonpro ts symphony ballet and opera were in a nancially precarious state as well and could not afford to pay the full cost of the rental of the site but considered the Hall the only digni ed place to perform since it had the best acoustics and ambiance What should be done The board looked at its mission to gain guidance into what the priorities should be The mission of The Hall Inc shall be to improve the community and cultural experiences of the people of this state to foster improvements and expansion of the arts and to maintain the Hall as a community resource for future generations Now this broad mission provided some guidance but there were other barriers to a quick x First several members of the board were also members of the symphony ballet and opera boards Thus their perspective was that the Hall s board should focus on the phrase foster improvements and eXpansion of the arts which to them meant continuing to subsidize their performe ing arts groups Several board members were highly successful CEOs who focused on the maintain the Hall as a community resource for future generations part of the mission as a mandate to rst and foremost break even nancially and keep the Hall in excellent physical condition The third group on the board were community representatives who wanted more access for their own constituencies The solution There was no perfect one but all of the people around the table understood nance well enough to know that without nancial stability there can be no social good Mission rst but no money no mission They agreed to prioritize their social and cultural obligations and budgeted an amount that was The Mission Is the Reason 47 affordable for them to subsidize each performing group each year Then it was up to staff to sell the Broadway series to meet the budget needs They also set up a veeyear capital endowment campaign to facilitate income from a nonearts source each year Did they satisfy everyone Not really But they did acknowledge all of the perspectives around the table and tried to accommodate as many as possible based on the mission statement I The important points in these stories are many First even with a well written and upitoidate mission statement your organization will continue to have healthy I hope debates on how to implement the mission and on what your values are That is ne and as I say if it is kept on a healthy pos itive basis debates can help the organization mature and keep up with the times Second without some common framework around which to discuss there would have been no starting point for the ABC s or the performance hall s discussions Their mission statements provided that framework Third everyone at your board table and staff meetings comes to the organization with his or her own history perspective and agenda That can be an enriche ing fact or a divisive one depending on how the executive director and board chairperson handle it Use people s diversity of opinion experience and perspective to strengthen your organization do not require everyone to think and act alike Getting More from an Underutilized Resource Staff and board members of a nonpro t have a responsibility to get the most good out of the limited resources that they have Isn t it ironic that in the day today race to secure more of those resources to allow more of the mission to be realized people usually forget to use the mission itself as a resource The mission statement can be a management tool a rallying cry a staff motivator a volunteer recruiter and a fundraiser You already have invested in getting the mission statement in line with your values and longeterm community needs Now use that resource in these other areas Im Management 001 The mission statement should be a regular part of staff and board discussions in questions such as Which of the three options that we have before us is most responsive to our mission or Will this type of funding gain us dollars but distract us from our mission Use the mission statement as a backstop to make better management and policy decisions Have copies of your mission statement literally on the table at all meetings MissionRn Pd Mnnmrpmpm Rallying cry and szu motivator The mission statement can be used as a rallying cry and motivator for staff volunteers and board in tough times HANDS ON Try this When the going gets particularly tough when morale is low or it seems people have given up hope ask your staff or your board to list the good things that have happened in the last three weeks or months as a result of your organization s being in business Get personal talking about the impact of your organization s services on individuals Then turn it around and ask them what would have happened if you hadn t been around as an organiZation Refocus on the mission statement as a higher calling a cause worth working and sacri cing for Note You can t use this exercise every day because it will lose its impact Save it for when you really need it I an Volunteer recruiter Remember the response when President Kennedy called for the formation of the Peace Corps Or the volunteers who ocked to the Gulf Coast to help after the devastation wrought by Huri ricane Katrina Or perhaps the questions you ask when people ask you to serve on a board or special committee Mission what the organiza tion did was the key in all of these Kennedy called for assisting in less developed countries as a way of nonmilitary goodwill in an era of mile itary confrontation After Katrina hundreds of nonpro ts made it clear what people could and should do to help hurricane victims When you are recruited for a board job you ask what services the organization providesiwhat it does Fundraiser Here as in the volunteer recruitment area what you do what good works are done and why you do it are all key questions in a donor s mind The what of what you do is up to you but the why the mission is the linchpin and it should be the rst rationale for funding Donors particularly big ones like to see organizations that are focused on their mission not just taking money for any and all purposes The Mission That Is Everywhere Excellent organizations know their mission It is on the tip of everyone s O ngue and you can ask nearly everyone in the place what the mission is and he or she will repeat it verbatim and give you reasons why be or she is the essential link in the chain to get the mission realized How does this The Mission Is the Reason 49 happen Like the children on the soccer team it is tough to focus people and it is easy to get distracted A unified reason for being does not happen by accident It happens through meaningful repetition The mission needs to be visible everywhere Assuming that you have agreed to your revised mission statement do the following IN Have your mission statement drawn up in an attractive format and then frame it and place a copy of the framed mission in your recepi tion areas staff lounges and where services are provided Do not just copy the mission and have people tape it to the wall Do this right Also do not have the rst time that the staff people see the mission be the framed copy on the wall Make sure that they have seen and discussed it in advance Put the mission statement in every document you print It should be inside the front cover or front and center in at least the following all Your annual report All marketing and public relations material B Your board manual 5 Your staff personnel policies Your staff orientation manual with heavy emphasis on why the mis7 sion is so important In Your strategic plan all Your Web site in lots of places and as a signature on your email Use the mission daily as a tool see above One use I ve seen repeatedly is to have the mission statement installed as the screen saver on all of the organization s computers But it has to be short The mission that is everywhere is more likely to become part of the culture and part of the mindset of the people who work and volunteer for your organization Putting Actions behind Your Words Using the mission statement is a great thing but a perilous risk if not handled correctly Once you hold the mission statement up as the Holy Grail and take time and resources to print it post it and use it at meetings you hold yourself to a higher standard one that invites criticism and interpretation from a variety of places Well 9511 decision certame does not support our mission 7 from whoever loses in a choice made by management or board MissionRn Pd Mnnmrpmpm The cure for this is threefold leadership time and training To be more accurate the realeworld components are leadership time training leadership training training training and leadership db E FOR EXAMPLE Everyone has heard of Ross Perot the computer services billionaire and former presidential candidate Perot made his money starting and growing Electronic Data Systems EDS a computer data services rm that was the rst and for a time the largest processor of data in the world Perot built his organization by doing a number of things including emphasizing customer service teamwork and loyalty to each other and the organization and by having a simple mission and set of values for everyone to work by EDS s mission statement was short and simple Perot had it reduced to a walletesized card which all employees carried so that they could produce it quickly to use in management discussions For EDS employees this worked At the same time General Motors was a giant going nowhere The new GM CEO Roger Smith saw the need for more and more information management to tie together the fari ung outposts of his automotive empire and he contracted with EDS to set up and run the system Smith got to know Perot and he admired the lean canido attitude that EDS employees exuded and demonstrated in their work for GM So Smith proposed that GM buy EDS in the hopes that the EDS culture would prove to be a virus that would spread throughout GM He and the senior GM management team analyzed what to do to hasten this spread of entrepreneurial spirit and they focused on the mission statements that everyone on the EDS team whipped out at the drop of a hat They paid a consule tant to come up with a new mission statement for GM distributed the cards to everyone and waited for the new entrepreneurial GM to emerge fully clothed It didn t Not only did the two cultures clash but the inevitable battle and eventual falling out between Perot and Smith has attained the status of corporate legend Why didn t the EDampGM marriage work There are probably fty major reasons and entire books have been written on this subject Suf ce it to say that you cannot change a culture by handing out walletisized cards with nice words on them that no one has invested in Remember a consultant had written GM s mission statement The Minion I c the Reason 51 Leadership You need to be seen living the mission statement Once you publicize and invest in your mission statement you hold yourself up to a higher standard You have to use the mission daily visibly and consistently You have to embody its ideals If the mission says to be culturally sensitive you have to be the most educated and sensitive person in the organiZation If the mission says for the organization to be an advocate for children or a service provider to the most disadvantaged or an educator of the best and brightest you have to articulate and be a living symbol of the mission People will be skeptical of the need or value of a revamped mission and you have to live the mission Do it do not just say it But saying it and saying it a lot also matters In his wonderful business fable The Four Obsessions of the Extraordinary Executive San Francisco JosseyeBass 2000 Pat Lencioni shows that one of the key duties of man agement and in particular the senior management is to in his words Overecommunicate the core mission I love this phrase because it means you can t tell people about the mission too much Say it say it again and again and again and then of course live it Time After leadership the neXt key is the hardestigiving it time You will need to work for many months and even years before the mission becomes ingrained If you decide to do this and you need to you must lead the charge for a long long time As new staff and board people come on they will know no other organization than one driven by the mission and it will begin to be culturally ingrained Make sure that a clear discussion of mission is ingrained in your staff recruitment and orientation practices That way you start with mission rst which is of course the way it should be Training NeXt there is the need for training training training There is no substitute for training As we will see in later chapters investing in your workforce is key and 40 hours per year per person is the minimum acceptable amount Whether in orientation as noted above or in other training make at least some of every session about the mission why it is there and handseon training about how to use it Remember if someone has never managed or provided direct service by a clearly articulated mission before this is new Do not eXpect anyone to know how to do this automatically Give people a chance to learn practice review and learn more 52 MissionRn Pd Mnnmrpmpm na FOR EXAMPLE In the period from 1986 to 1993 and again from g 1996 to 1998 Michael Jordan of the Chicago Bulls in the National Basketball Association was by a wide margin the best basketball player in the world And yet to stay there bepraca ced every day three bows longer than his teammates But in the work world we say Oh I went to a supervision course once I know how to do that or I took accounting in college I remember that Wrong People say I ve got thirty years of management experience I ve seen it all Remember OJT onetheejob training is not practice it is the game When you screw up it is for real If it is just experience you have it is almost certainly based on outmoded philosophies techniques and technologies Make learning for yourself and for your staff a lifelong pursuit Train train train More on this in later chapters I Recap In this chapter we have covered the key points of the central cruX of your organization the mission We ve reviewed the way to write or rewrite a mission statement to bring it up to date We ve reviewed why a forgotten or mystery mission statement is of little or no use In We ve looked at methods of utilizing your mission as a management motivation and policy tool ml We ve suggested methods for you and your staff and board to live the mission not just parrot it As you nish this chapter look around your organization In how many places can you see and read the mission Is it on the walls On people s bulletin boards Why not Ask the rst ve staff you see what the mission is Listen to their answers Are they the same Why not Look at your marketing material Is your mission on each and every piece Why not So we agree I hope that the mission is a key element in your success You need to review it revise it with help from board and as many staff as you can publicize it use it daily starting with your own activities and train staff and volunteers in how to use the mission as a management and service provision tool That is the starting point and if you do not start here the rest of what is in this book will be of a lot less use to you and your organization Thp Mmz nn I c the Reason 55 Questions for Discussion 1 What general improvements would we like to see in our mission state ment Do we have one or many mission statements Does our mission statement excite us Is it short enough for us to remember or does it suffer from comma fault Is it an effective elevator message How can we better use the mission statement to recruit retain and motivate staff and volunteers How can we better use our mission statement in management discus sions What speci cally can those of us in leadership positions do to evidence our mission daily N W A V CHAPTER 5 Being Ethical Accountable and Transparent Overview Your organization s mission is the why of your nonpro t It is your foune dation and that s why it s rst on our list of characteristics of a successful nonpro t and the rst rule of nonpro ts Mission mission and more mis sion If the mission is why your organization is in business then ethics accountability and transparency are the bow you conduct your mission ased business or at least they should be If you are openly and intentionally ethical you ll have the best staff the best board and a great and trusting reputation in the community If your organization is accountable for its actions and its outcomes inside and out which we ll get to in a minute your reputation will be burnished and people will see that you not only mean what you say but take responsibility for what you do If your organization is transparent again both inside and out people will see that you have nothing to hide while at the same time gaining a greater understanding of not only your mission but your challenges and opportunities You ll gain more ownership and get more ideas from a wide array of people Ethics accountability and transparency done right lead to more inclusion increased involvement and a feeling of community Over the last ve years the need for higher pro les in all three of these areas has increased 39 Technoloo makes easier and less expensive but it has also become an expectation of the community par ticularly of funders and donors Ethical lapses by nonpro ts make the news far too easily An emphasis on measurable meaningful outcomes has spread through the nonpro t world often for the better sometimes for worse But all those things have to do with how the nonpro t deals with and is seen by the outside world In truth ethics accountability and transparency start inside the organization inside the management team inside the board 56 MissionRn Pfl Mnnmrpmpm So that s where we ll start in this chapter We ll begin by looking at why you need to have more emphasis on ethics accountability and transparency and how that starts inside and works outward I ll give you a short starting checklist for each area inside your nonpro t and some handsion ways and cautions for how to proceed Then we ll go through each of our three touchstones in order starting with ethics then moving to accountability and ending with transparency The order is intentional After de ning your mission everything hinges on people trusting that you are the best organization to provide that mission I ll give you examples of what other organizations are doing right as well as stories of ones that have gone wrong We ll look at speci c ways you can improve your operations by paying attention to each of these areas and end with some discussion questions By the end of the chapter we ll have set the framework for all that comes later And what comes later whether it be staff board technology marketing nance planning even your internal controls depends on how you approach the materials covered in this chapter Think about it The way your organization embraces or ignores these three items speaks volumes about your organizational values And values openly discussed and used as benchmarks will de ne your culture the kind of people you hire your relationships with the people you serve the people who pay you your community and each other Your valuesihow you live them act on them promote them and embrace the high bar they often require set the stage for everything else Please do not pass on this chapter skipping it because you know you re already ethical and you believe in transparency and accountability If all that is true and for most readers I m sure it is I still guarantee you ll pick up some handseon ideas And for nearly everyone I predict you ll be surprised by how you can ramp up your emphasis on these three values for the bene t of your mission There is nothing more important to your mission success than what you ll read in this chapter Not9mg Start In and Work Out The ethics that we show the world start inside us or they are false If we talk a great line advertise our goodness and seem like the perfect person to the outside world but then are abrupt or dismissive or untruthful in our own home we are not seen by those closest to us as just abrupt or dismissive we are seen as a fraud So it is in our organizations If we promote our values outside to our community but don t live that way inside the organization not only will we be dismissed by staff our best employees will leave morale will plummet Rpimr thim Arm Inf1MP and Transparent 57 and we won t get the most out of our employees and volunteers since they ll be spending time yammering about how we say one thing and do another Thus our attention to ethics our belief in accountability and our willingness to make our organizations transparent has to start by doing those things inside the organization with each other If we take a values stand those values have to go for everyone E FOR EXAMPLE I encourage my client organizations to foster a cule ture of innovation in their organizations As you ll see when we talk about marketing in Chapter 10 small innovations and small improvements can really add value to the services you provide A few years ago I was visiting a new client organization whose CEO had attended one of my marketing seminars a year prior to retaining me to help with the development of a marketing plan he CEO who we ll call Michael was proud of how ingrained innovation was in his nonpro t We are all about continuous innovation he boasted We have a culture of innovation It is on our values statement waving his hand at the values on the wall as we walked by it s a part of our annual personnel per formance evaluations we talk about it at every staff meeting We have innovation idea contests with great rewards and we urge everyone not to fear the new but give it a try We re a team of innovators l was impressed to a degree but worried that the focus on innovation might be overpowering the organization s commitment to mission perhaps just doing new things was good enough instead of doing the best thing Michael and I spent the morn ing touring the organization talking about other things and we had lunch with his board That afternoon while Michael met with his board president I met with the senior management staff and while we were discussing the key markets of the organiZation I brought up the issue of their innovation culture just to get the staff s take on it Conversation died people looked away a bit and so I pressed them Okay so there is a problem with innovai tion Is it the way you re going about it the emphasis on it the rewards what I asked There was a moment of silence as the senior staff exchanged looks and then the C00 said this We do innovate lots more than before and it is generally good We do talk to our staff about their willingness to try new things and frankly we are the least changeiaverse organization I ve ever seen But well Michael continued 58 MissionRn Pd Mnnmrpmpm continued talks about personal innovation and growth all the time which is ne but well he does not set a very good example himself Understand I love the guy and he is a great boss but he s got a blind spot here And he said looking at me maybe you re the guy to X the problem How so What s the problem I asked The COO responded Michael refuses to learn how to read his own email He makes Maggie his assistant print it out and then reads it on paper dice tates the responses and Maggie sends the actual message And everyone knows it jokes about it and when Michael talks the innovation talk people just do not believe him I ve brought it up with him we all have indicating the management team who all nodded He just doesn t see the damage he s doing to the overall goal by not adapting to this not eXactly new technology I was to say the least astonished This was 2006 after all not 1986 Michael s refusal to walk the walk was hurting his innovation push We have to be willing to do what we say not just have others do it As you can see our push on ethics accountability and transparency has to start inside If we re going to be accountable to the community we have to be accountable to each other on the staff and board If we re going to share information and be transparent on our Web site we need to share plans budget and meeting minutes inside the organization as well If we re going to bring ethical decision making into our discussions about mission we have to do the same in our decisions about staff discipline bene ts and use of vacation time By starting inside we roleemodel to everyone what we believe and then when we go outside we have a rm foundation to stand on So let s begin Below is my checklist for getting started with your vale ues inside the organization When we re done with that we ll discuss the speci cs of ethics accountabilit and J 39 439 394 and in much greater detail Develop or Revise Your Values Statement Mission rst then values Ethics accountability and transparency are really values more than anything else And like all good values they are subjective people have written for millennia about what is truly ethical behavior and you and I could honorably disagree about how much transparency is good for your nonpro t But these three values need to be at the core of your values statement which again is the bow of your organization So you need a list carefully drawn of your organizational hows Rpinnlv thim Arm Int1111p and Transparent 59 First remember that values statements need to be written by a board and staff team They eventually have to be adopted by the board since they are policy but start with a group of board and staff together Here are some hints on developing or revising your values n Do not just sit down and list a bunch of nice easy politically correct terminology and print them up and slap them on the wall It s so easy to ask your boardstaff team what values you should live by and let everyone chip in one or two great ideas and then just list them Think it through Some values are assumed and don t need to be on the list For example I ve never seen a nonpro t value statement that included Thou shalt not kill or No stealing Think through what you want your core values to be what you want to emphasize what part of your culture you need to change If you only have a few core values on your list that s what people will focus on and they can push the culture in a bene cial direction In many cases for eXample being more trans parent is while very important not part of the current culture If you add transparency and then do the rest of the things we ll discuss in this chapter you ll push your organization toward being more trans parent Focus your attention on key values and do not just make a laundry list And while I urge you to include in some form the three core values of ethics accountability and transparency it s up to you If you feel your organiZation needs to focus on others core values great Craft values that require regular discussion to implement I know this may sound counterintuitive but hear me out Values are not digital they are analog Think of two clocks one digital one analog You look at one that says It is 1014AM while the other tells you It is about quarter after ten The latter clock is like your valuesithey get you close but you have to interpret the rest n FOR EXAMPLE What s the most talked about corporate value of g the last decade Google s only value statement the wonderful alleencompassing and ultimately vague Don t be evil You may remember hearing that the rst time and think ing Cool or Weird or We ll see And every time Google announces some new project or application critics hold up the Don t be evil ag and wave it vigorously Inside the organiza7 tion there are according to many staff raging debates on whether those same new Web features or aggregations of information vioi late the core value continued MissionRn Pd Mnnmrpmpm continued And this debate both inside and out is exactly what the Google management wanted By setting a high bar and one cere tainly open to interpretation they kept the discussion going and going and going and the focus stayed on the value I Don t have values orpolicies or rules for that rnatterj tbatyou all can t live wit9 You ll see more about how to gure out the implications of your values in a minute but remember that once you set a rule it has to be for everyone Once you state a value you have to be willing to not only live with it yourself but also as a manager enforce it To not do so is disingenuous unethical Once you have a draft set of values share them wit9 everyone in tbe orgae nization in writing online and then in discussion groups Remember transparency Here s your rst taste of what it s like inside the orgai nization Post the values and ask your staff to consider each value statement and what if anything will have to change in their area of the organization if they are adopted Tell them to make a list and come prepared to fully discuss the implications Then have an outside facilitator because these meetings can be very interesting come and walk your staff through one or more discussion groups about the val ues and their meaning to mission Take any and all suggestions under consideration In Amendtbeualues ha firm and and ultimately adopt them Once adopted go back to the staff show ow their input helped and then start the discussion about implemene tation Increase the discussion of the values along with the mission at staff meetings Ask everyone and encourage your direct reports to do it with their staff whether the decision under discussion agrees with the values Use the values as you do the mission as a discussion tool to keep them front and centeriwhere they should be quot ll 4 Midr HANDS ON Remember Michael the CEO who refused to live by his own innovation credo and the damage he did Always be willing to listen to your staff calling you out if something that you have done violates one or more of your organizational values This is bard and when you ve messed up and all of us do it requires you to roleemodel one of our key values accountability You need to say Yep you re right That was a mistake on my part and I am sorry Thanks for pointing it out and I ll work on that And then do work on that whatever it may be RPI mI thirz Arm ml llhP and T rampanmt 61 Include Values in Recruitment Orientation Personnel Evaluation and Your Staff and Board Decision Processes The values that just sit on the wall aren t on the table during decision mak ing The values that are window dressing aren t on people s minds as they interact with each other The values that are discussed as an afterthought show that you consider them well an afterthought Start at the beginning in recruitment for board staff and volunteers You should already be talking about missioniinclude the values as well and how important they are to you This should come from the top from you as a manager Remember in Chapter 4 I told you what author Pat Lencioni tells usithat one of the key necessary obsessions of a good manager is to overecommunicate the core mission I agree and I think this extends to values You need to be talking about mission and values to potential staff volunteers and board meme bers right away Once they come on board the values and their meaning should be part of orientation Evidencing values should be part of perfore mance evaluations and I suggest an annual staffboard meeting to discuss how well the organization did in syncing its values to its mission Be Transparent With Your Values Which Will Hold You More Accountable Put the Values on your Web site on more than one page for example on your recruitment pages for volunteers and employees on the entry pages describing your services and on your pages for donors Inside the organi zation post the mission statement we talked about that in Chapter 4 and the values prominently in many places around the organization HANDS ON Hold a small ceremony when you post the rst copy of your Values to indicate their importance to commend staff for their input and to remind everyone to discuss the Values regularly and hold each other accountable to them I Hold the mission and values up high and people will both see them and they ll hold you accountable to act by themiwhich is a good thing Once you have your values and have ingrained them in your policies and reviews you need to live them day by day week by week month by month decision by decision and policy by policy This is not an onioff switch that you throw and things just happen You ve got to work at it The good news is that most nonpro ts are already doing something in each of these areas so you are probably not starting from a standing start and that s great 62 MissionRa Pd ManavaPm There are a lot of speci cs to attend to in each of my three core values and we ll address each in order But before we do I have to emphasize one more thing These three values when crafted from within build on each other and form a virtuous circle You use your ethics to make better decisions Being more accountable for those decisions makes all of us no matter how pure our hearts are think more about those decisions and what the most ethical decision is Finally being transparent and letting everyone see our decisions holds us even more accountable and the circle starts over and reinforces itself Will this be hard Sure sometimes But two things are sure First the more you do all three as a set the easier it gets and second the people who bene t most are the people you serve Now to speci cs Ethics in a Nonpro t What are good ethics Thousands of pages and millions of personihours of discussion have been spent arguing out the answer to that simple question I once knew a PhD in philosophy whose dissertation had been on that very question who admitted a decade after getting her degree that she was still unsure of the answer So let s agree that we won t nail down the de nition of the best or even of good ethics for every situation One thing I do know and learned in a wonderful course my senior year in high school is that all ethics are situational I can tell you with absolute assurance thatl won t steal a carton of eggs today but ask me when my children are starving and I may well give you a different answer We d like to think that our ethics are timeless and absolute but for everyone but saints they really aren t and the same holds true in nonprofe its Sometimes and more often than we ever imagined before we moved into management we have to choose the least worst option That is hard and always opens us up to criticism But just because ethics aren t absolute doesn t mean we can t use them to help us create a better missionioriented culture or to make better more ethical decisions There are two management credos that I ve always used both inside and outside my organiZations Certainly when l was a young executive director my rst executive director job came when l was 27 I messed this up a lot I tried to live by these words and I often failed then got up and tried again I still miss the mark some days however I hope my percentage of success is better now Here they are and I ll bet they are not new to you Treat others the way you d like to be treated The right thing to do is also the smart thing to do and vice versa RPI mI thim Arm mfIhp and Transparent 65 These sound simple even trite but when you think about it they are profound in their implications Just look at the treat others credo How do people want to be treated With respectifor their person their feelings their opinion their honesty People want to be informed they want to be asked to help they want to be recognized as individuals and they want to be able to measure in some way their contributions Do any of those sound like things you don t want So if you want to be treated that way you have to treat others that way and that may require changes in your management style You may have to ask for others input more or take the time to learn more about your employees lives beyond work or to be more inclusive in decision making even delegate more Once you say you are going to act on the treat others mantra you have to both do it and accept others holding you accountable for it On the other hand The right thing is the smart thing is a bit tougher to nail down What this really says is that taking short cuts ethically or otherwise does not pay off in the long run It also gives backup to staff and board who hold out against such shortcuts giving them the philosophical support they need to speak up or object in a dif cult situation HANDS ON My suggestion on these two credos is to introduce them to the management team and board as operating guidance They aren t really values but they can help guide decision mak ing and give people benchmarks for accountability Once you list them actualize the treat others credo by starting with a discus sion about how the people you serve want to be treated and inquire if your organization has de cits in any area Then meet with your direct reports and ask them how their staff want to be treated and repeat the examination of things that may need to be changed Understand that once you go through this activity your people should and hopefully will call you out when you do not meet the mark m HANDS ON To actualize the right thing is the smart thing credo after introducing it bring it into the discussion the neXt time the management team is engaged in a debate on a proposed course of action Ask everyone ls everyone comfortable that either option A or B is the right thing to do If not why not And then use your values to see if you can focus and come to a consensus on which option to pursue In some cases of course the discussion will end with you alone having to make the decision but you want the input and perspectives from your team before you have to make any decision particularly the tough ones I 64 MissionRn Pfl Mnnnvpmpm As always your ethics as the leader will show the way and set the tone for the rest of the staff If they see you are doing the right thing they will too If they hear you are bringing your organizational ethics and values into discussions with them they ll do the same with their staff On the other hand if you see your longitime staff taking shortcuts or not acting ethically look to your own actions rst John Maxwell the noted leadership author says repeatedly in his books that if a leader looks at his or her employees and does not like what he or she sees then it s probably due to the leader being a bad example Maxwell notes that people who are unethical or who take short cuts will not be comfortable in a culture that does not tolerate that behavior This is true for all kinds of behavior such as officolor particularly sexually suggesi tive or harassing jokes or language upbraiding an employee in front of peers missing deadlines or chronic lateness Organizations that don t tole erate those behaviors don t have them because people who cannot change their behaviors leave Conversely if the behaviors are presentithey must be being tolerated and perhaps they even start from the top Consider that if you look out and don t like what you see With ethics or more accurately with ethical lapses you really do need a zeroetolerance culture That does not mean that you re someone if he or she slips and makes one behavioral or ethical mistake We all do that and if we were all red the rst time we messed up well we would all have been red pretty quickly But understanding fallibility does not mean that you can ignore a key behavioral or ethical lapse You have to put people on notice right away that you saw the mistake and remind them that such behavior is just not acceptable that you re sure they won t do it again And leave it at thatiunless it repeats executive director job at age 27 I was with one exception the youngest person on a staff of twenty and pretty quickly I got my rst management test A midmanager perhaps ten years older than me started coming back late from lunch about three months into my tenure but worse he came back smelling like a brewery The rst time I smelled his breath I made some lame comment like Long lunch John to see if he would say anything He didn t and I hoped it would pass Of course it didn t and a few days later the same thing occurredilate and loaded Now I had a real knot in my stomach I went home talked to my wife we kicked the problem around and then I went for a long run and tried to gure out what the best plan of action would be Ignore it That was a nonstarter Fire the guy I had no proof Dress him down FOR EXAMPLE As I said previously I was appointed to my rst RPI mI thim Arm minkp and Transparent 65 at the next staff meeting Not a good idea What I did know was that I had to deal with the issue and soon Like the next day No sleep that night The next morning I went and found John and asked him to come see me in my of ce When he came in I closed the door and said to him John I m worried about you Is anything going on in your life that you want to talk about John looked confused and said no everything was ne Really I asked Because I gured that if there was not something going on you would not have started taking long lunches and coming back smelling of alcohol And when I ve talked to you after lunch John frankly you act like you are more than a little drunk John looked startled and began to make excuses It was the allergy medication he was on It was stress It was blah blah blah I let him run the course and when he nally stopped I said Okay John Two things and you can go First I don t care if it is your meds or any other thing you have to be back on time from lunch and be sharp in the afternoon Starting today No more no third chance Second if you do have a problem with drinking I want to help We can get you into a program and will support you in any way we can That s up to you but what s up to me is thatI need all of you here all the time Okay The bad behavior stopped that day which was actually pretty remarkable given that things could have gotten ugly or John could have quit But the most interesting thing was that John became my most hardiworking and loyal employee for the rest of the time I was executive director You as leader have to set the standards Set the bar highiand people will meet your expectations Set the bar lowiand people will meet your expectations Your choice m HANDS ON Building an ethical culture starts with you but it also starts at the point of recruitmentiyou as CEO or senior manager should meet with all potential hires and talk to them about your mission your values and the behavior that is expected This will weed out some potential employees who don t feel comfortable being held to that standard Then when a new employee is hired match him or her up with a mentor who is one of your ethical stars Give the new hire a big dose of expectations right away Ingrain the culture early and often I 66 MissionRn Pfl Mnnnvpmpm Finally talk about ethics regularly If you have a book club which I strongly recommend read a book now and then about ethical management and talk through any applications for your organiZation You don t want to build a culture that has a holierithanithouiattitude nor do you want to empower an ethics gestapo But you do want to acknowledge ethics and the ethical dilemmas we all face as a real part of management and the way we treat each other It is the right thing to dltFand thus the smart thing to do Accountability 1 have lost track of the number of friends family peers and neighbors who have bemoaned our culture s general lack of accountability All too often we see someone perhaps a celebrity or politician who when confronted with anything from a traf c ticket to a felony casts the blame elsewhere on his or her upbringing lack of understanding family bad luck the phase of the moon And again too often society seems to buy or even enable such excuses When former Illinois Governor George Ryan was indicted for racketeering he later was convicted and went to prison one Chicago paper seemed to excuse his behavior by noting that he had started his political career in Joliet historically a haven of organized crime and political corruption As if that explained it We all learn early except apparently George that we need to be accountable for our actions and our choices This is even more true in none pro ts As I said early in the book when we work for nonpro ts our actions and choices are scrutinized much more than those of people in the foripro t world One value that will please our community greatly is being openly accountable for what we do because when we do that we re accountable for the resources the community has entrusted us with And like ethics accountability starts with the leader You have to be willing to say I m sorry M ad Won t happen again and mean it I know that there is a tendency particularly for new managers and execue tives to think you have to exude an aura of perfection that if you appear fallible the people you supervise will lose respect for you Wrong Everyone knows that everyone is fallible And all the people you supervise know when you make a mistake What they re waiting for is what you do nextihow you lead through your errors m HANDS ON Remember this If your staff sees you never admit ting to errors they ll assume that s what you wantiperfection In response they will stop admitting errors too Which would you rather have an employee come to you early admitting to a small mistake or having him or her cover up the error until it turns into a major problem I Reina thirz Arm mfIhP and Transparent 67 Once you ve set the example the next issue is what the organization should be accountable for Certainly accomplishing the goals in its short and longirange plans absolutely staying within its budget without question keeping to the appropriate level of quality of services and always being a prudent steward of the resources you manage While you may know when you re on track a better management style is to measure In fact I agree totally with the classic management credo You can t manage what you don t measure In this discussion let s turn that around and say that you can t be accountable for goals and outcomes if you don t set them and then measure your results Thus a key part of accountability again once you set the leadership stage is to benchmark your organization against itself over time and against other peer organizations I know that most nonpro ts are already looking at outcomes and some of those are terri c some not so much A great resource for you in this area either to get started or improve your measure ment is Benchmarking forNonprofits by Jason Saul St Paul MN Fieldstone Alliance 2004 Setting and measuring outcomes is very important and fraught with a variety of potholes and dangers Let s go over some rules First measure outcomes not activities Think of activities as a spinning wheel held in place Round and round it goes using up energy but not get ting anywhere We held twentyethree staff meetings last year is an activity measure We planned and coordinated staff duties and reduced overtime 14 percent is an outcome measure even though it was the meetings that facilitated the outcome Activity alone is not worth measuring uh FOR EXAMPLE Early on in my executive director job I had many many meetings with state of cials and their subordinates Even if I was just meeting with a program manager and the only people who really needed to be in the room were t e two of us there were always three or four other state staff attending The extra staff would sit there pens and notepads in hand and not con tribute a whit to the meeting No matter which agency section or program I worked with the behavior was the same Need one staff person Bring four Need two Bring seven After six months or so of this I asked one of my running buddies himself a state employee what the deal was Why bring so many people Oh he laughed that s easy to answer It s scratch my back I ll scratch yours I was confused He explained We have to hand in activity reports every month that document how busy we are If we re not busy we may get reassigned given continued 68 MissionRn Pd Mnnnvpmpm continued more duties or even laid off So manager A invites manager B D and G to his meetings manager B reciprocates and on it goes That way we all stay busy I was to say the least unimpressed Or perhaps as a taxpayer l was simply depressed Second measure agains mission Remember in Chapters 1 and 2 we talked about the fact that every action every choice every investment of resources in a nonpro t should result in more mission or improve the capac7 ity of the nonpro t to do mission of higher quality or with more ef ciency If that s true what you want to measure are things that move you toward those objectives More staff education Great but did it result in fewer errors higheriquality standards more ef ciency A new Web site Awesome but did it result in higher referrals or more donations You can only look at and truly understand so many measurements Make sure the ones you use are meaningful to the mission HANDS ON Don t make the decision on what to measure or on what are priority benchmarks by yourself Ask ask ask and then listen Your staff your peer organizations your board even your funders will have ideas about what s important to measure and how to hold your organization accountable in a missionibased way I Third g0 veiy public Once you ve gotten the outcomes and benchmarks set post the goals post the benchmarks and most important post the results where everyone can see them Celebrate the successes and discuss and recommit when you do not make your goal Put the key benchmarks right on your Web site for the world to see Hold yourself your staff your board and your funders all accountable for your outcomes and the success of your mission m HANDS ON Remember to focus the benchmarks you post to have the most effect and be most appropriate for each area of the orgae nization If you have a residential program and a day component post the residential and organizationiwide goals for the resideni tial people to see not the dayiprogram goals You want people to focus on the goals that they can impact And if the residential staff want to know the day program goals they can go online to see all of them I RPI mI thim Arm mfIhp and Transparent 69 Speaking of putting things online that is part of the last component of our virtuous cycle transparency Transparency Transparency is such a buzzword It s used so often that it is easy to ignore Yeah yeah yeah transparency shmansparency Blah blah blah Don t fall into that trap The concept of transparency is crucial but the bene ts of becoming transparent go deeper than the common usage When the vast majority of people use the term transparency they mean organizational transparency from the outside in letting people in the com munity see what is going on inside the organization During his run for the US presidency candidate Obama talked repeatedly about making gov ernment more transparentifor eXample putting Congressional earmarks online for the public to see In nonpro ts outsideiin transparency is not only important it is an expectation of most funders donors and the media Moreover the initiative for this has already been taken away from you Any one can nd out about your organization on one of many nonpro t online watchdog sites such as Guidestarcom Thus you already live with some outsideiin transparency whether you like it or not And that outside overe sight will do what I said earlierihold you accountable for your decisions and that will result in more careful decision makin But an equal some would say greater bene t from transparency results if you become an internally transparent organization Sharing information inside your organization in meetings on your Web site in your decision making will transform not only your culture but improve employee engage ment and ownership develop richer sets of solutions to thorny problems and keep your best people on board both employees and board members We ll discuss this much more in Chapter 7 s discussion on staff and give you lots of handsion ideas for how to use technology to ramp up your transparency in Chapter 8 so let s leave it at this for now The virtuous cycle works inside the organization as well as outside If your decisions are available for everyone to see you ll be held accountable If the organization acts on its ethics and values that accountability will hold you to a higher standard Who wins Ultimately the people you serve Before we end this chapter I want to return for a moment to the outside in part of transparency and discuss the minimum information usually in pdf format that should be easily accessible on your Web site Here s my list IN Your most recent IRS 990 or 990N reports and the 990T if you le it Your two more recent audits along with management letters Im Your current strategic plan or a summary of your goals and objectives 70 MissionRn Pd Mnnmrpmpm An annual report of your outcomes for the last two years put in human terms Don t just say Occupancy up 124 percent instead note that 253 more families got housing last year than the year before A listing of your board members with links to their biographical infor7 mation and experience to answer the question Why are these people good policy makers and duciaries A listing of your management team with links to their biographical information and experience to answer the same question And when people ask for something else put it on your transparency page You should have nothing to hide Take the barriers to knowledge down and let the virtuous circle do its job Recap In this chapter we ve moved from mission to values and focused on three values that give us the bow for your organization The way we approach ethics accountability and transparency is crucial to our mission success and without intentionally dealing with each our organizations will ounder if not founder Remember the mission is the why of your nonpro t These values are the how Don t skip them We started by discussing the fact that dealing with these values has to start inside the organization not outside I gave you a short checklist for your values which was the following Develop or revise your values statement 2 Include values in recruitment orientation personnel evaluation and your staff and board decision processes Be transparent with your values which will hold you more accountable W We also discussed for the rst time the concept of the virtuous circle of ethics accountability and transparency Next we dealt with each value in turn starting with ethics 1 showed you my key ethical guidelines which were the following Treat others the way you want to be treated The right thing to do is the smart thing to do and vice versa We talked about the implications of those statements and how to use them in your organization Then we turned to accountability and we noted that being accounte able is something far too lacking in our culture but that also starts inside the organiZation before it can credibly go outside I urged you to use Rpinnlv rhim Arm mfIhp and Transparent 71 benchmarks as part of your outcome measures and gave you a list of guidelines First measure outcomes not activities Second measure against mission Third go very public Finally we brie y covered the keys of transparency and how it come pletes the virtuous circle I noted that we would deal more with transparency in the chapters on staff and technology butI urged you to be transparent inside and out I closed with my list of things you needed to post on the transparency pages of your Web site Now and only now are you ready to proceed to the working chapters about staff and board marketing and technology and all the rest With your mission and your values set you have the framework and the guidance to improve the other important parts of your nonpro t and to make sure that it pursues mission in the best most effective way Questions for Discussion 1 Do we need to develop or revisit our values statement to include ethics accountability andor transparency What can we do to turn these values into action How can we have better deeper discussions about the ethics of our key decisions How do we remind people that the right thing is the smart thing Do we share information enough inside and outside the organization Where can we improve Do we use internal and eXternal benchmarks to their fullest Are there places we can experiment with this pew A V CHAPTER 6 A Businesslike Board of Directors Overview Whether you are a staff member or a board member you know that the board of directors is a key component of your organization For starters you have to have one it is a legal requirement in state and federal statutes Second the board can provide an excellent resource of judgment and lead ership a connection with the rest of the community and a partnership with staff that can strengthen the organization and its services In other words the board should be a key resource for the organization Unfortunately it is often anything but that Too often boards either totally dominate an organization thus blocking the staff s ability to do their jobs or are so subservient to staff expertise that the staff in effect manipulate the board at will Neither are effece tive uses of resources and both are counterproductive In the worst case both problemboard dominance and staff dominance occur in the same organization How can that be Simple the staff think the board is domie nating while at the same time the board members think the staff is running roughshod over them Gridlock in governance How do you optimize your board as a resource How do you analyze what your organization needs from a board and then go out and recruit one that meets those needs What should the respective roles of the staff and the board be In this chapter I will tell you about those things as well as about how to reduce your board s liability I will show you how to get the most effective board why board people really serve and how you can meet those needs and wants and how to evaluate your board With the things you learn in this chapter you can really turn your board into the effective policyesetting checkeandebalance resource that it needs to be 74 MissionRn Pd Mnnmrpmpm Board Effectiveness The rst thing you need to do in order to make your board a betteriutilized resource is to benchmark your board against some target characteristics of effectiveness An effective board has most if not all of the following characteristics In It understands the organization s mission and acts to implement that mission for the bene t of the organization s constituency consistently and professionally If it is to be effective a board must rst and foremost understand and support the organization s mission see Chapter 4 It must also be consistent in the development of policy to implement that mission if it favors one method of implementation one week and another the next it will be doing more harm than good It acts as a policy setter and cbeceeandrbalance wit9 tbe sta With one exception a starteup nonpro t in which the board often is the staff the board must act only as policy setter and checkeandebalance It must not allow itself nor any of its members to get seduced into trying to run the dayitoiday activities of the organization or to be a backseat driver in relation to the staff s duties The board hired the staff and running the organization s dayetoiday activities is what the staff is paid to accomplish The staff is supposed to be professionals if the right people were hired The board should set the broad policy and let the staff implement it The board has more important things to do things that only a board can do M It works primarily wit9 the executive directorCEO and evaluates that person at least annually Rule 3 of nonpro ts The executive direc tor CEO works for the board and the rest of the staff work for the ED CEO The board cannot be effective if it allows itself to be bogged down in both personal and personnel issues that are most appropriate for staff members to handle on their own Thus board members who acquiesce to letting staff people other than the CEO or executive direc7 tor call them and complain are asking for trouble I know that this is not always easy particularly in small towns where everyone knows every one else but it is the prime rule of nonpro t boardstaff management As with any relationship the one between the board and the execue tive director can only ourish if both parties let the other know how they are doing Many board people tell me that they are not experts in the executive director s discipline ie they are not a minister teacher artist or social worker so they cannot evaluate her or him This con cern while understandable neglects what the board does know and can evaluate The board can evaluate how the executive director intere acts with and supports the board how close the staff comes to staying Directors 7 5 within the budget completing tasks in the longerange plan achieving funderaising or outreach goals reducing staff turnover and so on The board can and should set measurable goals for the executive director and then evaluate his or her ability to meet those goals Moreover the board should evaluate the executive director in formal terms at least annually To board members who are reluctant to evaluate I say this You want to be evaluated in your job If you want to keep your exec give him or her the same courtesy Let your executive director know how he or she is doin It changes over time lling its members9 ip fully by recmiting new meme 19ers to meet the changing needs of the organization Your organization does not look like it did ve years ago in terms of funding programs or staff But it may very well be identical or close to it in board makeup If the board is a resource shouldn t its constitution change with the changing needs of the organization Of course it should Boards should not be perpetual You should build board turnover into your bylaws My suggestion is a threeiyear term with a maximum of two succesi sive terms before a particular board member goes off for at least a year Thus oneithird of your board is up for renewal each year and this gives you a chance to evaluate them and recruit both new people and new skills regularly Also a threeiyear term works well with my recommendations on strategic plans see Chapter 12 which include a planning retreat every three years or at least once in every board member s term of of ce The issue of how you assess what kind of board you need and how you recruit them will be covered later in this chapter 7 It elects quali ed of cers and appoints quali ed committee chairs As in so many of life s endeavors the difference between success and failure can often be leadership Think of some of the great leaders of key orgai niZations in our past Presidents like Washington Lincoln and Franklin Roosevelt and visionaries like Martin Luther King Jr Susan B Anthony Mahatma Gandhi and countless others led their groups at a time when they were most needed Just because you may not be involved with a national or trendesetting organization does not mean you don t need leaders on your board or to head your committees It also does not mean that all your leaders need to be of cers or committee chairs but it certainly helps Effective boards have people in of cer and committee chair roles who know their jobs and their limitations get them done effectively and are willing to commit the time to do so They show up with their homework done lead their groups through the decisions that need to be made and represent the organization without bias with funders donors the media and the public Your organization needs a leadership development track where new members are assessed after a 76 MissionRn Pd Mnnmrpmpm time and potential leaders are put onto an of cer track assigning them rst to committee chairs then of cer slots and nally if appropriate the board presidency Itsupports tbeorganlzatlon lnpubllc Elaine was elected to the board of the XYZ agency four months ago She has been to every meeting since her election and has had in her own words a steep learning curve about the agency its works its staff and its funding problems Elaine is at a social engagement at a friend s house when she is approached by Phil whom she has not seen since her election to the board Phil mentions that he has heard that Elaine is now on XYZ s board Elaine s response Slgb Yes I got taleed lnto belng on tbe board I m not sure tbat I won t regret lt wbat wltb all of ltsflnanclal problems I bad no ldea bow bl XYZ ls bow many sta and senlees lt bas nor bow nanclallyfraglle lt ls I mean tbey are good people and all but tbey 1 I J l l J golng to contlnue at tbelr present pace or tbelr present fundlng But I am learnlng a lot and I guess I ll be able to belp at some polnt once gure out wbat ls really golng on under Idon t u ll Or Smlle Yes I started about four montbs ago and talk about an educatlon I bad no ldea bow blg and dluerslfled lt ls I m really lmpressed by tbe staff Tbey are good people and are dolng mlracles wltb sball we say mlnlmal resources I m learnlng a lot and bope tbat I can really contrlbute onceI get my feet on tbe ground If XYZ s mission was close to your heart which answer would you like to have your Elaine giving If you are or have been a board member do you hear yourself echoed in the rst or the second answer And what if Elaine s friend Phil happens to be on the United Way allocation committee for this year or is an of cer at XYZ s bank or is a potential referral source for new clients What message do you prefer he get Another problem I see a lot is this It is also critical that board people realize that they are on the Board team and must support that teameven if they do not agree with every decision made at every board meeting Once board members start to criticize board decisions or complain about the agency outside of the boardroom the ability of board members to act as an effective team starts to go down the black hole of internal con ict And leadership is key in making sure this does not happen More on that in a bit A M Directors 77 Barriers to Board Effectiveness What are the main barriers that get in the way It s always bene cial to highlight the most common places that boards trip up A board cannot be an effective resource for the organization if in The members of the board do not know basic and upetoedate information about the organization s mission programs andpmposes This sounds so elementary on the face of it that one would think that of course people on boards have that kind of information Don t be so sure Board members come to the table with different ideas and backgrounds and their perceptions of the mission as we discussed in Chapter 4 may be as different as night and day This also extends to the organization s programs and services They may not even be aware of some programs existence Thus orientation on a consistent basis is a key to board effectiveness HANDS ON At every board meeting reserve 15 minutes for ongoi ing board orientation Cover a single program a new state law affecting your organization or new developments in your eld Orientation should be a continuous nevereending process Too often it is done at one only meeting at the beginning of the board member s term provided in a language your jargon that the board member does not yet understand Think back to your own orientation when you joined the staff of your employer How much do you remember Not much and you have worked there 40 hours a week ever since Now add to that working only three to four hours a month as a board member does and you may get the picture about why they do not keep 100 percent up to speed Help them keep current by dedicating 15 minutes per meeting I I It doesn t get accurate and timely information from sta There is no excuse for inaccurate information going out to the board and even less excuse for not sending it to members in advance If board members are to set policy and to be a checkiandibalance for the organiZation they need to see the meeting materials in advance and that does not mean 10 minutes in advance of the meeting As a rule three days is the minimum for materials to be in the bands of board members before a meeting Also make sure that all the information that the board needs is posted on the board section of your Web site so that members can access it if they misplace their paper information a MissionRn Pd Mnnmrpmpm Another part of this barrier is staff not telling board members about key or controversial issues until they read it in the paper get an email from a concerned friend or see it on the evening news This is to understate the issue not smart Whether the news is good or bad if you are a staff manager let the board members hear it from you not through the grapevine or from the press If the news is good the board members feel like insiders If it is bad you get to tell them the whole story rst not after they have read and been prejudiced by whatever spin the media or rumor mill puts on the story Keep your board well informed in person online or by telephone but keep them informed m It frequenth is lacking a quorum How can you take action without a quorum You cannot If the board members are not there three things happen First board people who are not present cannot add their con tributions to the discussion and decision Second if a bare quorum is present decisions that are made will not have the strength of a wider board ownership and may later be subject to being overturned or at least not supported fully Finally board members are liable for actions taken in their absence see the section entitled Board Members Legal Liability 1 tell executive directors all the time what I was told and did not like hearing as an executive myself years ago If you consistently do not have a quorum it is your the executive directors fault no one else s Why you ask Because board members are people like all the rest of us They make choices about how to spend the 24 hours they are given each day All of us have more things to choose from than we have hours to do them in Thus going to a board meeting is a choice one that competes with family time work sports television chores hobbies socializing or sleep to name a few As a staff member you are competing for your board members time and you have to earn their attendance by meeting their needs and wants You need these people at the meetings It is your job to entice them there and to keep them coming HANDS ON You also need a tool to help you entice by enforcee ment All boards should have attendance requirements that are discussed during recruitment and are enforced rigorously For eXample if you have twelve meetings a year each board member must come to nine per year or not be renewed for membership Missing three in a row is cause for probation with one more miss leading to termination If this sounds tough it is designed to be You are a missionioriented business and you can t get your busie ness done without board attendance Be upfront with your board Directors 79 people and let them know you can no longer have them be casual about attendance They need to be on or off the board not both Finally remember and remind your board that board meme bers are liable for actions taken at meetings that they miss That fact alone should entice them to come to meetings This fact will be discussed in more depth later in this chapter I tisnot quot 9 7 lmake L 39m thatyou want talented and accomplished people on your board ones who can contribute to your organization with their skills experience and eXpere tise Given that why would you not give these people anything to do that challenges them Too many boards are perfunctory Call the meet ing to order take attendance review the minutes of the last meeting approve three committee reports and go home As the classic television commercial said all too well if a bit annoyingly Where s the beef If you treat your board members as though they are incapable of doing real work the good board members will leave and you will not have a quorum yet again The board leadership is weak Weak leadership often results in internal strife chaos and lack of direction Also boards sometimes need strong leaders to stand up to strong staffs Additionally good leaders make sure that everyone gets to speak while weak leaders will often let one person dominate This leads to less input and ownership and can fatally undermine the board s feeling of being a team Finally weak leaders do not inspire good people to keep coming to the board meetings or to contribute or take risks on behalf of the organization ts meetings have no agenda and are not well facilitated The lack of an agenda is an open invitation to anarchy and meetings that go on for centuries You simply must have an agenda and stick to it The agenda needs to be sent out in advance with meeting materials and if possible the agenda should be somewhat standardized from meeting to meeting That s the easy part Facilitation is a whole other issue It is a skill one that your committee chairs and board president needs It requires that they encourage people to speak and allow them to contribute but at the same time keep the meeting on track and bring each issue to closure in a timely fashion That is a big order and too big an order for a lot of board presidents whoml have observed ts committee structure is not effective and every policy decision comes before the full board for lengthy debate There is simply not enough time in a single board meeting no matter how long it may drag on to get effective policy and oversight accomplished solely by the board as a w ole To use the board effectively you need a committee structure 80 MissionRn Pfl Mnnnvpmpm that allows for persons on and sometimes not yet on the board to use their particular expertise and focus on a particular issue such as nance personnel fundiraising or planning Then once the board delegates the details of a particular area to the committees the board discussion should be limited and in most cases perfunctory If every issue that is discussed at committee meetings is discussed over again at the board level why have committees Also remember that having nonboard members on your committees is ne and widens your net of involvement Just make sure that your committee chair and a majority of each committee are board members an The sta laces the skills Io suppon be boardior worse makes a sys Iemazic e on to ignore Ibe board or undermine its effectiveness Staff members have a role in making the board work well They need to be supportive but guiding the key functions will be reviewed later But if the paid staff do not help make the board effective it won t be if they undermine the board to try to seize or hold power the checks and balances get negated and there is a terrible risk of the organization s not staying focused on its mission not keeping up with changes in the community and thus being out of touch Additionally if staff members are not supportive good board members will either walk out or attempt to take over the dayetoiday activities of the organization both of which are situations you want to avoid Board Members Responsibilities In attempting to mold a better board we need to de ne the speci c respone sibilities that they have As we have already noted the members of the board of directors are the representatives of the community they protect the community s interest while advancing the organization s mission in the same fashion that a foripro t corporate board represents the stockholders and promotes the corporate goals Even with this philosophical background it is important to list speci cs The board is responsible for seeing that the items listed below are accome plished but they may not actually do each of these things personally If there are paid staff certain tasks such as ling Internal Revenue Service IRS forms are left for staff to do the mechanics but board members are still responsible for ensuring that they are done Other authors have talked extensively about the roles of boards par ticularly Brian O Connell s excellent Board Member s Booe New York Foundation Center 1999 In this teXt O Connell notes the need for clear de nition of roles particularly between boards and staffs Barbara Burgess in The NonprofitManagementHandlmoe Hoboken NJ John Wiley 8 Sons 1997 lists three governing functions of boards A 39 quotL Diretlors 81 1 To preserve the integrity of the trust 2 To set policy 3 To support and promote the organization Although I agree with this list I think we need to eXpand on the roles a bit A board of directors must Fulfill all of the IRS and state nonpro t reporting requirements This includes taxes FICA annual reports the IRS 990 form Unrelated Busii ness Income TaX UBIT estimations and ling the 900T as appropriate and operating as called for under section 501c of the Internal Revenue Code Set policy and establish organizational goals Boards are responsible for broad policy and must do longerange planning to set those policies in place Hire the executive directorCEO No one else can or should do this important job Evaluate the executive directors performance in writing at least annur ally No excuses accept no substitutes m Ensure that fiscal policies are in place and followed Boards should be very concerned about nancial oversight and that means good cash receivables payables and budgeting policies Help develop and adopt budgets The board must have nal say about how the resources of the organization are allocated and this is most clearly embodied in the budget Staff at all levels should help draft the budget but the board has the nal say Once adopted the budget essentially becomes a contract between the board and the staff Review and amend bylaws every two years This ensures that they are upitoidate with current regulations and that they re ect current board thinking on attendance board selection standing committees and of 7 cers and the like I Ensure compliance with the funding streams policies and regulations Nearly every nonpro t has at least one major source of funding gov ernment United Way foundations Every funding source has a different way of monitoring eXpenses and auditing past work When you sign a contract to take someone s money you also agree to comply with their regulations These may include such diverse items as having a drugifree workplace not discriminating in employment or keeping all records related to the contract for ve years Read the ne print before you sign and then make sure that you can meet all of the provisions If you are a board member and you do not ful ll your contractual obligation it is your head on the platter 82 MissionRn Pd MnnmerPm Establ isb personnel policies and monitor their compliance More organi zations get in trouble with people problems than with any other kind Have good personnel policies review them every two years with a professional and build in checks and balances to ensure that they are followed to the letter every time Nominate and elect of cers Most bylaws have the board do this function at the annual meeting an Represent the organization in public wit9 in the constraints of tbe orgae nization s media policy This is important remember Elaine but also something any board member should approach with caution Hint If you are a board member and asked to speak or present about your nonpro t always take a staff member as backup In Help recruit new board members The board needs to replenish itself Good recruitment calls for a boardstaff partnership but board involve ment is key Raise funds but not full time In the rst edition of MissioneBasedMane agement I said that a board doing funderaising oversight was suf cient That ramped up in the second edition to raise funds and for good reason Development is so incredibly competitive that there is no place to hide for board members Not only must they take an active role in fundiraising they themselves must give money to the organization That said this area has a deep and dangerous pothole boards that only fundiraising or whose primary reason for being recruited to the board is to raise funds Look at all the responsibilities listed above If all the board does is concern itself with raising money how can it adequately perform the rest of its duciary duties It cannot So fundiraising is an important board duty but it is not the only or even the primary job of a board Perform volunteer program work If the organization has a volunteer component I strongly urge board members to at least try some hands on volunteer work to get to know the organization better For example I tell the school boards I work with that they can t do their jobs adequately unless at least once a year they ride a school bus read to rst graders and serve lunch in the highischool cafeteria Such handsion exposure should be common for board members and an integral part of the board leadership track Staff Responsibilities to the Board As with any other relationship it takes two Staff members have to sup port the board if the board is to be effective it is not only the board that A 39 quotL Directors 85 must contribute to the overall relationship What follows are the minimal expectations that the board should have of its staff The board should expect accurate timely honest and focused informa tion The board needs to be able to rely totally on the staff to provide it with honest and unbiased information and to provide that informa7 tion well in advance of meetings Staff members are professionals and the board should solicit their advice and ideas Too often I see boards who want just the facts ma am 7 like the Dragnet cops of old and feel that if they ask for any suggestions from staff they will be overrun dominated or manipulated I disagree The board hired the staff as the paid experts Let them contribute to the discussion but make sure that everyone is aware that the board has the nal say on policy The board should he regularly informed of new developments As the paid experts the staff needs to inform the board of new developments in the organization as well as in the eld in which the organization operates The board should expect staff to gather information analyze it and make recommendations to the hoardiin essence to be technical advii sors to the board As noted previously it is key that the staff be the responsible conduits of information for the board The staff also needs to focus the board on what is essential Here staff members walk a very thin line one where they are right on the edge of controlling rather than assisting If the only information that they provide the board is selfiserving or supports only the staff position the staff members have not done their jobs In fact they have violated their trust The board should expect sta to report fiscal information regularly We had a local nonpro t organization that went out of business very suddenly one day perhaps fteen years ago Staff more than 100 came to work one morning to nd the doors locked and a sign say ing OUT OF BUsINEss The organization had run out of money and no one other than the executive director and the nancial manager both staff membersihad known it was in trouble It was a major scandal for our small town and when I ran into some of the board members I asked them what had happened Their admittedly lame excuse was that they had not seen nancials for a year I had no sympathy for the board membersinone at all Not providing regular as in monthly nancials annual budgets and cash ow projections to the board is totally unprofessional for staff Board members If nancials stop being regular start demanding them This is cause for extreme concern and urgency of action Find out what is going on and accept no excuses You need to see the nancials 84 MissionRn Pd Mnnmrpmpm The board should encourage sta to make optimum use of the board as a resource The staff has a responsibility to be familiar with the skills connections and talents of the board and to make use of these skills and talents to the best interest of the organization Board members if a staff person calls you up to ask for your expertise remember He or she should be doing this You can always say no thanks But do not resent the question The board should expect sta to develop a process for and to educate all new board members and to on ent all board members on an ongoe l ng basis As noted earlier board members come to only one or two meetings a month including committee meetings so they need regular orientation in addition to their initial overview of the agency The board should expect sta to proulde suppon for board recruitment and development The process I lay out later in this chapter will demon strate a board staff partnership in this key area The board should expect sta to support hoard committees and provide J r need Just as with the board as a whole someone needs to provide support to the committees to get them the information and to provide technical assistance and advice The board should expect sta to attend all meetings of the board unless excused therefrom I am a strong supporter of board meetings being open to staffiit breaks down the mythical barrier between the board and staff and lets staff know what goes on at these important meetings I also am a strong advocate of staff other than just the executive director making presentations to the board For example the nancial manager can present the nancials the program director can present items about the programs and so on This is not only good development for the staff members involved but it makes the executive director look good as well He or she has hired great people 1 I 1 I u em wm mecca at V V There is a great deal on both the board s and staff s plates in this rela7 tionship but if the staff members do their part and the board does its part the relationship will truly bene t the organization Board Members Legal Liabilities In addition to a long list of responsibilities boards also have legal liabilii ties as a result of their board membership Board members are flducl art es de ned as a person association or corporation that has a duty to act for another in a speci ed area As such they have a duciary responsibility to the organiZations they serve In nancial terms this means that board Direttors 85 members are responsible for the proper utilization management or invest ment of property and other assets placed in their trust They are legally responsible for the management and control of the organiZationiand the resulting actions or accidents This is a pretty heavy responsibility but it does not mean that a board member should worry about liability for every corporate loss or mishap that occurs Most states protect nonpro t board members from liability for errors of judgment as long as they act responsibly in good faith and with the best interests of the corporation and its mission foremost All of this must be balanced with the board s overall role As I have said repeatedly the board should be interested in results not details of operation The board s involvement in programs and operations should be limited to setting overall policy and monitoring results unless there are extenuating circumstances unable to pay its bills In order to stay a oat the director began borrowing heavily from employee withholding FICA taxes The board had no idea this was going on until the IRS contacted the board president and demanded payment of the back taxes By the time the board of directors was aware of this the school had closed and the few remaining assets had been liquidated to pay creditors The IRS of course still wanted its money It took the board to court to pursue the payment of the taxes by the duciai ries arguing that the board members were ultimately responsible for the nancial actions or inactions of the organization The lawe suits dragged on for years and there was always the nagging concern that the board members would be held personally liable for the organization s outstanding debts The answer Yes they would and to the tune of thousands of dollars for each board member I n FOR EXAMPLE A mediumesized nonpro t school found that it was This is not a scenario you want to repeat But it is a true story and one that I hear repetitions of annually To avoid this and other embarrassments you need to be aware there are two common violations of duciary duties or of being prudent 1 Failure to follow fundamental management principles This is the pro cess of making a decision that a prudent person would not make if provided the same information It occurs when a board IN Doesn t develop plans or budgets Doesn t read staff reports to see if there are problems Im Doesn t pay attention to problems raised in reports 86 MissionRn Pfl Mnnnvpmpm Doesn t demand a reasonable standard of reporting and control like the board of the organization that went out of business overnight 1m Ignores repeated warnings from staff volunteers or outside experts Does not attend meetings Operating the organization in a way that benefits one or more board members directly This is known as selfidealing or inurement of bene t and is at out illegal To help avoid this your organization needs to have strong con ictiofiinterest policies and enforce them More on that below N Avoiding Liability Let s focus on some proven ways to avoid liability B First if you are a board member take your responsibility as a board member seriously Come to the meetings read the material in advance and be willing to ask questions Take the time to read and understand the organization s bylaws and mis7 sion statement and act in accordance with these documents If actions con ict with either the bylaws or the mission speak out Stay informed of what is going on within the organization s programs and administration Set policies only after reviewing the facts carefully Never make deci7 sions in a vacuum demand documentation In Read the nancial statements before each meeting Demand a format that can be understood and some training in how to use the reports in your role as a board member Make sure that your organization has a longirange threeetoe veeyear plan and that board and staff contribute to its generation revisions and monitoring Make sure that minimum statutory or technical requirements are met le ing annual reports such as the IRS 990 990N or 990T timely payment of withholding taxes contracting with a certi ed public accountant for an independent audit of the agency s books annually meeting the legal and regulatory requirements of the agency s funding sources and so forth NI Demand minutes from all meetings that list who voted which way on all signi cant items List dissenting members by name Adopt and enforce a con icteofeinterest policy that discourages any business transactions between directors and the corporation unless conducted openly and with stringent safeguards A 39 quotL Direttors 87 Know the state laws regulating voluntary organizations to ensure come pliance The board s attorney should review these laws closely to determine how the state handles the issue of board members liability A report to the board should be made on these issues IIIJ Have directors and of cers insurance if such insurance buys you more than state and federal statutes that protect governing volunteers Ask your insurance agent to show you why the policy exceeds the statutes in protection Following these suggestions should greatly reduce the risk that board members face and make it an acceptable risk for them to continue serving on the board Finally remember that many states have laws that reduce the board members individual liability for actions taken in good faith Make a good faith effort and you will be in much better shape Building a Better Board How can you build a better board First you need to look at the needs you have in terms of expertise on the board Then you should assess when those needs will become critical For example if your strategic plan has a goal to add a new building in three years within a year you need to recruit a board member with construction experience and perhaps someone who can help you through the maze of nancing options on your board Finally you need to develop and implement a recruitment program that lls slots in an orderly and planned manner HANDS ON Let me say here that I believe that you need a huge and varied skill set on a board but that a businesslike board should have two broad categories of members First you need advocates for your missionipeople who passionately believe in what you do These people keep you honest to the rst rule of nonpro ts mission mission and more mission The second kind of people you need are businesspeople and these folks keep you honest to the second rule of nonpro ts no money no mission These two groups provide a dynamic and very healthy tension on the board and help the organization balance the needs of the two primary rules I In assessing the type of board member expertise you need you should pay attention to three things 88 MissionRn Pd Mnnnvpmpm 1 Your organization s current programs what you are now 2 Your strategic plan what you want to be in three to ve years 3 Your funding sources regulations what the payers require The criteria of need can be objective such as ethnicity age or county of residence or subjective such as community leader or politi7 cal connections Exhibit 61 allows you to assess those criteria important to you add your own criteria and assess your current status As you can see from the checklist in Exhibit 61 the types of board members that you will need vary greatly and can change over time I served on a board that at the time I joined had no one with nance architectural or building skills and yet the organization had just acquired a siXtyibed residential facility and was planning on buying or renting twenty small homes within the coming ve years We needed people with those skills and recruited them Eight years later as I went off the board the skills needs had changed again from property acquisition and nancing to fundiraising marketing and property management Your needs will change too Do not make your categories for board service static Review them regularly at the same time you review your strategic plan EXHIBIT 61 Board Assessment Tool Need This Skill CharacteristicExpertise On Board Now 1 Year 2 Years 3 Years Gender Ethnicity various Funder s mandate Age group various Location county city etc Advocate ccounting Finance banking Marketing Personnel Construction Funderaising Small business Directors Board Recruitment Now that you have established the board that you want and the schedule on which you will recruit those skills you will need to organize a consistent recruitment program to constantly be prospecting for highequality board members As noted above the quality of the board member is as important as the slot she or he lls N W 39 There are ve keys to good board recruitment and retention Consistent recruitment This means that you do not just deal with board recruitment the week before the nominations committee meets or the afternoon before the annual meeting Finding quality volunteers to sit on your policyesetting board is a constant job and the process should encourage consistent effort The recruitment e ort isajoint boardsta tase Board members need to be involved in the job of recruiting and assessing potential board can didates So do staff The effort should be split between the two groups but if both are not involved the outcome will not be optimal Provide welledefined and cleanly stated expectations of the board meme 19ers There is no substitute for clearly stating to potential board members the expectations of them That way if they do not feel that they can meet those expectations they can decline an offer to serve and save you the trouble of recruiting another person later Examples of such expectations include You must attend ten of twelve monthly meetings You must serve on one board committee most meet monthly after your rst six months on the board You are expected to read your board mailings before you come to the meeting You must work at our annual XYZ fundraising event and either sell twenty tickets or donate 100 dollars yourself Enforcement of these expectations Having rules and then not enforce ing them is a waste of time effort and political capital As noted in Chapter 5 it also violates our ethical goals say what you mean and mean what you say If you have these expectations and board meme bers can t or won t meet them let them know that they will either be voted off the board or not nominated for renewal When you let people know in advance and in writing about your expectations then there is little area for them to complain That doesn t mean that they won t complain or that ring a board member is ever easy It s not partic7 ularly if your culture has not enforced any expectations on them in the past 90 MissionRa Pd ManavaPm 5 Evaluation of recruitment e ons How many of the available board slots did you ll Did you double up on the important ones How many of your recruits stayed the rst full year How do you know these things You track your efforts As with any good process you learn from your mistakes only if you know about them You can build on your successes but only if you are aware of them Evaluate evaluate evaluate Board Orientation and Education Orientation There are some essential parts of good board orientation First and unlike the way that most organizations orient their boards orientation should be a neveriending discipline It should occur at every board meeting and in the besterun organizations eXtend to brief focused discussions at commit tee meetings as well However the process does have to start somewhere and that somewhere is not the hour before the rst board meeting of a new year Rather good orientation starts at the rst interview for potential board candidates At that time not only does the future board member get an oral brie ng into mission programs funding and philosophy he or she should also get that key document the board manual After someone is elected to the board he or she should get a number of things provided in addition to the board manual a copy of your mission statement and organizational values if you have those developed the current budget the most recent two audits the last three or four monthly nancial statements and all of the organization s promotional material If you also want to pro vide information on key funding sources ne Do not overwhelm a new board member with a 2007page manual These basics will get him or her started Additionally as we ll talk about in more depth when we discuss technology your Web site should include a passwordiprotected area for board members only This area should include information that is deeper and wider than the manual can ever accommodate and it should be kept up to date Second new board members need a personal oral orientation to the organization That usually means a tour of the facilityies hopefully at the time that actual services are being provided The board member may also choose or be required to serve as a volunteer for a short time as a handsion practicum A week or so after the tour the board member should be called to see what questions have popped up HANDS ON One very successful and important adjunct to orieni tation is board mentoring The board president asks a veteran Dz rmtors 9 1 board member to mentor each new board member for three to siX months The mentor meets the new board member for coffee or lunch before the rst board meeting that the new member attends They discuss board duties perhaps the handouts agenda etc Before the rst meeting the mentor and new member meet in the parking lot walk in together and the mentor introduces the new member to all current members Then for the neXt few meetings the mentor and new member sit together so that the new meme ber can quietly ask the dumb questions that while not being dumb at all often do not get asked otherwise Between meete ings the mentor calls to check in and is available by phone and email to chat It is a method to increase the likelihood of meeting the new member s wants and assuring that problems or questions are resolved early This works and it is not an imposition on anyone Third make sure that at his or her rst meeting the new member is formally introduced and welcomed at the beginning of the meeting by the board president The Board Manual The board manual I do not like the term orientation manual because board members should regularly return to this document for reference even after they are veterans provides board members with an organized single reference source for questions about your organization More and more this information is online as well as in paper You should give your board meme bers the choice of which format they prefer The manual should include at least the following The organization s current bylaws and charter I The organization s mission statement in A table of organization with a listing of all key staff people and a bn ef description of what they do for the agency DON Tsend job descriptions unless requested A list of current board members with their addresses place of employ ment and title work and home phone numbers email addresses and what of cer or committee chair positions they hold A list of the board committees with a listing of current members and a brief explanation of what each committees does A owchart of funding where it comes from where it goes pie charts are particularly good for this purpose 92 MissionRn Pfl Mnnnvpmpm A list of programs with a twoesentence description of each program A listing of frequently used acronymsjargon and their meaning In A list of board responsibilities adapted from earlier in this chapter A list of staff responsibilities adapted from earlier in this chapter M A list of of cer responsibilities Committees of the Board As noted earlier you need a structure of committees to make the board work The board does not have the time to review every single issue at length to the level of detail and scrutiny it may merit at every meeting Thus the board needs to delegate the grunt work to the committees Your organization needs to determine what type of committees it needs to serve your board of directors Some committees may outlive their usefulness over time others such as your nance and audit committees will always be needed Standing committees are those committees that are established on a permanent basis and may be described in the bylaws Ad hoc committees are those assigned to carry out speci c functions make recommendations to the entire board and then disband It is important to reiterate whatI said earlier that committee membership does not need to be solely composed of board members Indeed I suggest to all my client organizations that some committee members can also come from the pool of potential board members and are an excellent training ground for board membership and from persons who have a speci c inter est in helping the organization but do not want the longeterm commitment that board membership requires Just remember that the committee chair and the majority of committee members should always be board members An Effective Committee Structure Your committees should do the following an Provide eXpertise to the board by gathering a group of eXperts on a given subject in a committee where they can share ideas and make recommendations based on the issues at hand Reduce or eliminate the board s need to deal with every detail of opere ation Working committees take assignments from the board deal with them effectively and return with solutions to recommend to the board Committees will also come before the board with ideas and recommene dations that their committee members have developed Permit broader participation by all board members as well as nonboard mem ers A quotL Direttors 95 The president in consultation with the executive director should make all committee assignments based on each board member s expertise and special talents as well as personal preference This should be done on an annual basis Each board member should know several weeks before the rst board meeting of the year which committees he or she will serve on for the year Board members should be noti ed in writing on which committee they will serve who the chairman is when and where the committee usually meets and who the other committee members will be The dates times and locations of all committee meetings should be posted on the board part of the Web site and minutes from all prior meetings should be available there as well HANDS ON Some board members will not be happy with their committee assignments One way to solve this is to ask each board member on which committee he or she would prefer to serve before the decision is made At the last board meeting of the year provide each board member with a written checklist of available committee assignments that must be returned to the pres ident by the deadline noted Make it clear that it is not always possible to place them on the committee of their choice but every effort will be made to do so If they do not submit the form by the deadline noted their assignment will be made by the pres ident Then based on this and the organization s needs make assignments As noted in the discussion of board responsibilities every board member should serve on at least one committee However don t ask new members to serve right away Let them ease into their duties for ve or six months and then give them an assignment Try to keep committee membership small and focused Five to nine people seems to work well for most groups An odd number of members provides a tiebreaker if you need it Finally I strongly recommend having all committee appointments be one year in length That way the president and the committee chair can constantly be improving the committees and adjusting to the changes on the board on the staff and in the industry This does not mean that a particular board member might not serve on one particular committee for six years it just ensures the maximum exibility for the president What Committees Need to Operate Committees like boards need certain things to operate effectively and ef e ciently As I have noted repeatedly an effective committee structure is crucial 94 MissionRn Pd Mnmwpmpm to an effective board so staff need to ensure that the following elements are present A clear understanding of their role and what their limitations are NI Quality supportive staf ng m A committee chairperson who is a A leader E Knowledgeable i Experienced in group leadership I Able to encourage participation by all committee members a Capable of facilitating a meeting and keeping members on track with out inhibiting valuable new discussion 5 Able to bring the group to a timely conclusion andor a decision Committee members who E Complete their assignments on time I Do their homework between meetings a Are reasonable and thoughtful 8 Understand the importance and impact of their decisions One nal reiteration of an earlier admonition about committees If you nd that committee reports to the board are simply the basis for rehashe ing everything at length you are not using your committee structure well I understand that some critical issues will deserve a great deal of board atten7 tion and time but if you see that you are simply holding the committee meeting over again at the board meeting work to cut short the debate and have the board accept or reject committee recommendations not reinvent them One technique that works well for board members who feel the need to know everything about everything is to invite them in public at the board meeting to attend the committee meetings and have input there Recap In this chapter we have set the stage for building a better board of direce tors for your organization You have learned about what makes an effective board and the barriers to that effectiveness We have reviewed the respone sibilities of the board to the organization and listed the eXpectations that the board should have of the staff We also went over the legal liabilities of the board and suggested ways to reduce and avoid liability A quick review here of the crucial criteria and responsibilities from this chapter is in order First the characteristics of a businesslike board A quotL Direttors 95 It understands the organization s mission and acts to implement that mission for the bene t of the organization s constituency consistently and professionally It acts as a policy setter and checkiandibalance with the staff It works primarily with the executive director and evaluates the execui tive director at least annually It changes over time lling its membership fully by recruiting new members to meet the changing needs of the organization It elects quali ed of cers and appoints quali ed committee chairs It supports the organiZation in public The responsibilities of the board were listed as follows Ful ll all of the IRS and state nonpro t reporting requirements Set policy and establish organizational goa s Hire an executive director Evaluate the executive director s performance in writing at least annually Assure that scal policies are in place and followe Help develop and adopt budgets Review and amend bylaws every two Ensure compliance with funding stream s policies and regulations Establish personnel policies and monitor their compliance Nominate and elect of cers Represent the organization in public Help recruit new board members Raise funds but not full time Perform volunteer program work Finally the staff responsibilities to the board were listed I111 The board should expect accurate timely honest and focused infore mation The board should be regularly informed of new developments The board should expect staff to gather information analyze it and make recommendations to the boardiin essence to be technical advii sors to the board The board should expect staff to report scal information regularly I111 The board should encourage staff to make the optimum use of the board as a resource The board should expect staff to develop a process for and to educate all new board members and to orient all board members on an ongoing basis 96 MissionRn Pd Mnnmrpmpm The board should expect staff to provide support for board recruitment and development In The board should eXpect staff to support board committees and provide them with necessary information and expertise they need ml The board should eXpect staff to attend all meetings of the board unless excused therefrom Your board is a crucial resource one that needs to be used to its fullest if you are to provide the best mission in your community You need a strong board You also need a strong staff which is the other side of the coin in most nonpro ts That is the subject of Chapter 7 Questions for Discussion Nt A W p V Do we have a businesslike board now How can we get there Is the list of board responsibilities valid for our agency How should we improve and amend our list What about staff responsibilities to the board Do we do all these things now Does our board agree Where can we improve How can we ramp up our orientation process to be constant and con sistent Is there value in having ongoing board recruitment Why How can we move toward that goal CHAPTER 7 Leading Your People Overview An essential component in successful nonpro ts is building and retaining a strong staff one that embraces the mission knows the eld of endeavor that the organization has embarked on and manages all of its resources as effectively and ef ciently as possible to produce highequality mission every single day Remember the resources of your organization also include the traditional ones some combination of people money buildings and equipment But let s also not forget the missionevalue of your governing and nongoverning volunteers and the business techniques we discussed earlier Of all these though the most visible resource for most nonpro ts at least after the mission and certainly the most expensive resource are the employees which is the subject of this chapter You need to maximize the effectiveness of your staff and to do that you need to be an effective missionebased manager Throughout this chapter I will walk you through the information you need in order to become a more effective leader of your staff valuing and empowering them We ll look at a management style that is literally upside down as well as some competing management styles and their advantages and disadvantages We ll look long and hard at ways to communicate better I ll show you some new thoughts on delegation how to double your out comes in evaluations and how to set up a staff reward program that really rewards rather than punishes By the end of the chapter you will have a clearer understanding of how to better manage that crucial organizational assetiyour staff First some facts to set the framework from which I will advise you Your staff is one of the markets that you need to attend to As I noted in Chapter 2 you are increasingly in competition for good staff Second you can t and probably never will pay like the private sector whether for a secretary a driver a line staff person or an administrator Thus you have to give folks 98 Who Work With you something more than just a check to keep them coming to Work for you certain extent this something is your mission statement and We discussedthis at length in Chapter 4 But beyond that it is your culture and the Way you as staff treat each other and hang in there together as a team that will keep people Wanting to be employed With you A Wise executive director once told me There are two reasons and only tWo that our staff OW up for work every day the mission and the Way We treat each other So We need to talk more about mission and treat each other better Letts look at hoW We can do both The anerted Pyramid of Management Look at Exhibit 7 1 the traditional management pyramid This organizational structure Which is familiar to almost everyone Was not believe it or not developed at the same time as the pyramids in Egypt or Central America In fact itWas developed after World War II by the Rand Corporation for the use of global U S corporations to help them manage their rms And itWorked for nearly thirtyyears Rather itWorked until there Was serious competition l l k ll l EXHIBIT 71 Traditional Management Pymmid Leading Your People 99 You see after the war the United States really had a twentyeyear win dow in which it had the only serious manufacturing medical research and higherieducation capabilities in the world Much of the industrial world lay in ruins and spent that time rebuilding and recovering from the destruci tion of the war The United States had free rein until the Europeans and japanese and then the Koreans and other Asian countries recovered Then from the mid71970s through the mid71980s those countries ate our lunch Remember when the japanese bought Rockefeller Center and we thought it was a harbinger of things to come It was not and one of the many reasons why was the abandonment of the traditional management structure Companies became atter with fewer levels between the line staff and the senior executives and they also ipped themselves around and realized that the people who were really the most important in any organization were the people who do the actual manue facturing or provide the actual service the line staff Worldiclass rms like Cisco Systems Marriott Federal Express Lands End and Google all have turned their organizations around by valuing their line staff more and their executives less This kind of structure empowers staff pushes decisions to the line of service and makes use of all of the resources of the organization In a competitive globalized marketplace it is the model that succeeds The same holds true for nonpro ts Most nonpro ts simply copied the forepro t world and still use the old traditional model Until the nonpro t world was subjected to serious competition it worked just ne No longer Successful nonpro ts realize that they too must value their staff educate and empower them and bring everyone into the effort to provide total customer satisfaction If they don t they will not be around much longer In this organizational model again look at Exhibit 71 the executive director is at the top of the heap with associate or assistant directors and assorted middle management between the executive and the line staff who are portrayed at the bottom of the pile Now let s turn that all on its head Take a look at Exhibit 72 Note that the box that the executive director occupies is at the bottom and the line staff at the top with the people who you serve at the very top This symbolism and that is all it is if you don t live this style of management all the time is important because many organizations need to rethink what is the most important thing that they do who is most important and where their internal priorities are Let s look at the major tenets of my version of the inverted pyramid and then examine some examples IN The only reason there are sza is because of be mission There arepeor ple to serve The only reason there are managers is because the staff doing the service need support The executive director is not the most g39e l l EXHIBIT 72 The Preferred Management Model 1mportant person 1n the nonpro t He or she may be the mostpoWerful butnot the most 1mportant If all staff members reallze that management exists to nd and manage resources to alloW llne staff to do the1r jobs d cant do As an enabler your role 1s to support your staff 1n accompllshlng the goals of the organlzatlon Thls support means do1ng What 1t takes to get the job done It 1ncludes ghtlng for resources for your people xlng thlngs that arengtt r1ght gett1ng d1straci tlons large and small out of the Way and partlclpatlng 1n budget a planning activities no matter What your level in the organlzauon Thls fundamental prlnclple alloWs you to see your job terms Your job as a superylsor 1s to take some of the load off of the people you superylse and letthem do the1r o s The supewwmsupemed mlmrommp 15 Mom y The relauonshlps you develop Wlth your staff llke any other relauonshlps are Way That means that both the superylsor and the superylsed have a responslblllty to make th1ngs Work Addltlonally 1f the Closer you go Leading Your People 101 toward the people you serve the more important people doing the service are then the supervisoriinstead of spending time restricting and controllingishould be facilitating getting resources to his or her employees As we all know relationships will not work if you always talk and never listen if you only give ideas and are never receptive to those of your staff or if you make all the decisions and do not delegate This idea works in great sync with our concepts of ethics accountability and transparency More on this idea later Treat others the way you would want to be treated Again we started with this as a major part of our ethical framework in Chapter 5 and it is so important it needs to be revisited here Honesty fairness and consistency are the key characteristics of a successful mana er Hone esty means not promising to do something you cannot deliver I ll get back to you on that tomorrow fairness means treating all of your staff equally what goes for Assad has to go for Amie and consistency means asking for rules to be followed and then enforcing them when you say you will Say what you mean and mean what you say Be a leader but be willing to follow This means that you are a leader who takes risks on behalf of your staff It also means you let your staff take the lead when they are right or when they have a better solution to a problem This happens more than you or I want to admit It also means being very human and part of the team so that you pitch in and do the most menial task when it is necessary to help support your staff If there is a rush item to get out like a mailing or preparing handouts for a board meeting and everyone is hustling around pitch in run copies lug boxes drive the van We all know that you are very busy but these small efforts go a long way with staff people they remember them and it makes you more accessible to them If you are going to help your sta you need to leeep in touch Knowing what is going on with your line staff has never been more important The further you are from line work the more important it is Make the time to work with line workers My rule is one day per quarter at the very least and more if the size and locations that you operate allow it This task which too many managers think is a waste of time is in truth an essential component of the job The most popular term for this was coined by Tom Peters in In Search of Excellence New York Warner Books 1982 He called it Management by wandering around Peters talked about keeping in touch by being on site on the factory oor or at the place that service is being provided In his wonderful 2007 book The Three Signs of a Miserable job San Francisco JosseyiBass 2007 Pat Lencioni notes that people want to be known Employees want their supervisors and their coworkers to take the time to know them as people not just as employees Leadership guru John Maxwell 102 MissionRn Pfl MnnmerPm echoes this in his book Developing the Leader witair You Nashville TN Thomas Nelson 2005 when he notes that People don t care how much you know until they know that you care You need to get out of your of ce stop hiding behind your open door policy and get to know your people In addition to just being there I also have seen over and over the positive effects of also having management do some line work at regular intervals HANDS ON Do a monthly stint as a volunteer a quarterly day as a line worker or simply have breakfast or lunch with line staff once a week You ve got to keep in touch with your peo ple and that means starting by understanding what they do For eXample if you run a hospital work as a security guard or as a volunteer who greets new patients for a day If you run a human service organization open a case be a mealsioniwheels driver or sit in on an encounter or support group Lf you run a school teach an hour a week or a day a month as a guest teacher The essential philosophy This is not taking time away from your job This is an essential part of your job You will learn more about your organization how it really runs and what staff really need to get the mission accomplished than you would ever believe Many of the senior staff at McDonald s work one week a year behind the counter at a restaurant to keep in touch It doesn t matter that most of them worked at a McDonald s as teenagers They need to work on site now to know what works and what doesn t now When you and your sza are praised pass it around When you are criticized take the fall You are responsible for the results of both you and your staff But when someone praises you individually or as a group pass the praise on directly Well thank you Mayor for those kind words but I am just the CEO The real work and thus the real praise should go to our outreach staff 7 Pass the praise around Also go out of your way to compliment deserving individual and group efforts Positive reinforcement if sincere and deserved is always appreciated This can be constant and informal or may include employee recognition which we ll discuss later in this chapter The reverse is true when you are criticizedias an individual or as your part of the organization If you are the chief staff person you take the fall Never ever ever blame someone else There are three reasons Leading Your People 105 for this First even if whatever went wrong is really not your fault you are in charge The captain on the bridge of a ship is responsible for the actions of his or her people Second nothing you do will bring more loyalty or build more morale than stepping in front of the blame bullet for your staff people Well board president I know we missed the deadline I m doing all I can to minimize the damage and I ve already apologized to the affected people It won t happen again Finally it is always easy to blame your staff for something that doesn t go right But remember it may really be your fault as a result of your not clearly communicating instructions or picking the wrong person to complete a task We ll look at delegation and communications later in the chapter The inverted pyramid works slowly but surely However to make it work it has to be lived every day in every way Once you set yourself up as believing this philosophy it is easy to fall off the pedestal If you just ip your organizational chart on its head and do not follow it up with real and consistent actions to support the concept you will lose ground with your staff With those tenets in mind let s look at several applications of the prin cipal of the inverted pyramid and how it works in our local public school district for thirtyithree years until her retirement in 2007 and for many of those years she worked in a building that was rst a 5th7 and 6thegrade center and later a middle school As background all teachers everywhere are required to come in for planning days and meetings a few days before the children return in the late summer or early fall and these are not days that most teachers look forward to The schools are still hot the meetings are dull the kids are not yet there and there is too much to get done in too short a time The year this story took place Chris went in for her planning days with even more trepidation The 5th and 6th7grade center she was assigned to was new she knew only some of the staff and didn t know the principal at all although she had heard through the grapevine that the principal was incredible After her rst day of meetings Chris came home totally pumped up and excited She almost could not tell me the story fast enough It was incredible Our principal Phyllis was amazing continued FOR EXAMPLE My wife Chris was a special education teacher 104 MissionRn Pd Mnmwpmpm continued She came into our rst allifaculty meeting and said I am the prin cipal here but I rn not the most important person in the school The kids are And sinceyou deal more with the students than I do you re more important to their education than I am So what do I do I am the person who ensures that you get the resources you need and the necessary environment to allow you to teach to your maximum potential You as teachers are what this school is all about teaching children My job is to get you the resources you need as well as removing the distractions you don t need If you need supplies see me and I ll get them If you need a disruptive child removed from the room I ll do it If you can t get parental support I ll help you My job is not to sit on you it is to help you teach Chris went on You could have heard a pin drop No one had ever been talked to by a principal like that before I actually heard our union rep say as we walked out Who needs money if we re treated like that 7 Chris taught at that school for the neXt twenty years the remainder of her teaching career and you could not have gotten her to leave for any money Phyllis moved on to another school after the rst ve years leaving her successor and her succese sor s successor to carry on the tradition of management that she started The school is among the most recognized in the nation and has become a magnet school where twice as many students are on the waiting list as are in the school Its students are blessed with great teachers who are well treated and who want to be there every day to teach The school is a great place to learn Not only do kids like it there but their test scores are up there are innovative teaching techniques being tried and it s fun to teach there Teachers work more hours in and out of school than any school I know of and there is also a waiting list to get on the faculty I This eXample shows what can be done in a short time with a commit ment of one person Admittedly Phyllis had a clean slate a new faculty to start with but she also had to overcome tradition past morale problems and inertia She did it by letting the teachers know in word and deed that she valued them as professionals and as individuals What more do any of us really want And Phyllis made the changes stickithey outlasted her tenure as principal Leading Your People 105 E FOR EXAMPLE As a result of mywork I travel a great deal I usually stay in hotels that are the choice of the conference planners at the conventions where I speak or at hotels close to clients with whom I am consulting In both cases someone else decides where I stay When I am lucky enough to check into a Marriott at any level of Marriott from a resort to the Fair eld Inn I know my needs will be met I know that everything will work that I will be treated like a valued customer and that whateverI need will be provided This is particularly important when I am conducting training as I need to ensure that the LCD projector microphone and room temperature all are working well and in many places this is an iffy proposition atbest and that other lastiminute details are attended to WhatI don t want are hassles bad attitudes or to be told can t or won t In the thirty years that I have been traveling for business I have probably stayed at two hundred Marriotts and I have never ever met anyone bellhop restaurant server housekeeping staff audio visual tech who works in any of those hotels and not been greeted with a Good morning sir How are you today And it was said like they meant it I can recount dozens of times staff went out of their way to make me feel special or to willingly and immediately X a small problem that I had Like the nightI arrived at a Marriott in Washington DC at 200 AM after interminable travel delays only to nd that my reservation was for a different Marriott across town What did the clerk do Dismiss me and tell me to go elsewhere No rst he called the other hotel to assure that my room was still available and then sensing my exhaustion and frustration offered me a room at his hotelithe hotel thatI was standing ingeven though they had no rooms at my reserved rate I gratefully accepted the latter offer and ve minutes later was escorted into a threeiroom suite complete with fruit basket On another occasion I was off to a meeting and walked by a pleasant matronly housekeeping supervisor who greeted me with a c eery Good morning then told me to wait while she very tactfully straightened my tie and added Go get em What a great way to start my day Both of these people made my stay memorable by doing a little eXtra thing that they were both encouraged and empowered to do The desk clerk had been given the authority to upgrade my reservation or actually to give me one without a reservation and the housekeeping staff person was simply motivated and pleasant continued 106 MissionRn Pfl MnnmerPm Continued Both of these were the result of good management practices and the upsideidown pyrami Marriott as a corporation believes in the phrase of their CEO Take care of your employees and they will take care of you They constantly train and motivate their line staff drilling into them the concept that they and not the management will make the hotel succeed or fail and to have the line people surface ideas on ways to make the guests more comfortable They delegate respone sibility and authority The company invests in its people and it pays off Other eXamples abound in the proprietary world When was the last time you met a curt or unfriendly UPS or Federal Express delivery person Or talked to a brusque salesperson from Lands End You don t Why Because these organizations value their people they tell them so all the time and they show them by their actions All of the staff at the Disney properties are provided costumesinot uniformsiand even the trash collectors at their parks go through a solid week of training in how to interact with customers before they get their trash collection training Think of each of these and other organizations such as airlines restaui rants and the like Who do you deal with nearly all the time in these organizations The lowest pald people m the company At the airline it s the ticket agent or the baggage clerk or the ight attendant At a hotel it s the concierge bellhop or desk clerk At a restaurant it s the greeter or server lt s these people who really shape your experience with the come pany And in successful companies it is these people who are the most valued Who are these people in your organization Who do your clients donors volunteers and referral sources deal with most If you are the exece utive director unless you are a oneeperson shop it s probably not you Treat the people who actually do the mission with respect and you ll get a lot more out of them Styles of Supervision There are four broad categories of management styles listed below In truth as managers we all t into at least one and probably more than one at different times As you read these think about how each does or does not t into our invertedipyramid model 1 Attlla tbeHmt We ve all worked for Attila or a direct descendant This person is tbeboss No question about it He or she maintains a quotdirecting Leading Your People N W 39 107 behavior lays down the law and expects it to be followed to the letter He or she looks at the staff as stepping stones up the management ladder Attila is quick to criticize and judge and has never heard of the words thank you Attila is obeyed but usually not respected Attila also gets results at least in the short term but when Attila is not present a great deal of staff time is spent griping about Attila One of the gang These managers usually come up from the ranks but never adjust to the new role They want to remain one of the gang so they try to minimize or eliminate the distinctions between them and their staff They never understand that once they cross the bridge to become a supervisor they are never again peers They can still be friends with those who they supervise but they can never be pals This person has dif culty in completing performance appraisals and usually cannot discipline at all Morale can be good if you work for one of the gang but over time productivity tends to slip as this person may be liked but is rarely respected Often he or she favors his or her former peers over other staff causing resentment and discord All business These managers are thoroughly professional but distant They do not fraternize or socialize with their direct reports and they place great emphasis on plans goals objectives budgets and perfore mance They never take the time to truly get to know their people and this is key to good communications and effective delegation I cannot envision this manager stuf ng envelopes or lling in at the reception desk in a pinch CoachConductor Both a coach and an orchestra conductor get the job done but and this is crucial Ibrougb the actions of others The coach and the conductor both know that they themselves don zplay that others do and that their success is contingent upon the success of their team They cajole praise and discipline when it is necessary These managers exemplify team spirit with enthusiasm but they maintain a longiterm view of the organization A coachconductor helps his or her staff to grow and attain their maximum potential Obviously I would prefer if all of us were coachesconductors But it would be naive to assume that everyone can adopt that style Besides in the real world we all need to be Attila once in a while hopefully for only short periods at long intervals The most important thing is to adapt your style to let people know you value them If you are demanding ne but be demanding of the right things things that focus attention on mission and line staff and quality of outcome not things that inflate your ego or make people cower before you And make sure that if you are demanding of others you are even more demanding of yourself 108 MissionRn Pd Mnnnvpmpm Your style as a manager as well as your priorities in terms of staff and mission are inherent parts of bringing about the organizational direction that will allow you to succeed Communications To succeed with your staff you will need to be able to communicate with them to nd out what they need to get their job done to delegate tasks to plan budgets or to gure out what to buy for lunchiall these things require good communications It often seems that communication is a veesyllable word meaning trouble as in What we have here is a failure to communi cate I can hardly think of one of the nonpro ts thatI have consulted with over the past twentyi ve yearsieven the wellirun onesiwho didn t come plain about inadequate or poor or awful internal communications This seems to be an area where everyone would like to see improvement or are unsatis ed with the way things are now Why There are a number of reasons First many people assume that they need to know everything that goes on in the organization They do not but that s irrelevant They feel that they should be better informed and thus will be discontented until they feel that they are being at least adei quately informed Often these people will simultaneously complain about too many meetings too many emails and not enough time to do their real jobs The second reason is that many nonpro ts are changing quickly and growing rapidly As a result the staff particularly those who have been employed for a number of years often feel that they used to know every thing and everyone around here and now feel isolated This problem is most acute if the organization has multiple buildings or sites Obviously the issue of communications is essential not only to good operational management but also to good morale Good communications is as much perception as reality and it is based on the following tenets hum If the staff don t trust the management to give them full accurate and timely information the rest of these techniques are a waste of time The staff will still complain about the lack of communication from top management employee morale The executive director had been on the job no FOREXAMPLE A client agency of mine was having problems with a two years and had instituted a number of staff and organizational Leading Your People 109 changes that I felt were terri c but that had met with very tra ditional resistance to change from many of the staff This agency provided distinctly different services at two separate sites and thus staff did not all get to see each other a great deal The agency was planning to construct a new building to house some of its services At the time the events described here occurred the agency had developed architectural plans had acquired a site and had a date for the initiation of construction and a target for completion It also knew the budget and which major components of the agency would move to the site upon completion The agency was to build the building as a shell rst and then later would divide the shell into components to house various programs As soon as the site had been purchased all staff who had not been in on the early planning were informed of the project and told everything listed above Approximately two weeks later I was scheduled to come in to run some focus groups of staff to discuss the results of an employee survey that our rm had administered for the agency In the survey communications had come up over and over again as a real de cit in the management area During my discussions with staff one staff person I ll call her Linda and I had the following conversation the notation PCB means yours truly Linda Senior management never tells us anything till after the fact PCB Give me an eXample Linda Well take this new building we just heard about We just haven t been told anything about the project and it s important to us PCB Of course it is What did the management staff tell you speci cally Linda Well I know that the building is being built at the comer of Adams Street and 15th and that it will house the intake client assessment and rehabilitation divisions PCB Did they tell you anything else Linda No nothing See what I mean PCB No information on schedule budgets or anything else Linda I do know that they are laying the foundation next week and that we are scheduled to occupy neXt April I think my division will move in rst continued llO MissionRn Pd Mnnmrpmpm continued PCB Sounds like you know everything there is to know about this project I actually just met with your executive direc7 tor and the architect and that s pretty much all they know Linda Afterapause Well they always tell us so late You get the picture I m sure Linda did not trust the man agement staff for whatever reason And no matter what the management people told her no matter if she was included in senior management meetings she would not be happy If how ever she had trusted the senior management she would have had a different outlook on the same information All Commtmjcation Is TwoWay The most important part of communications is not what you say but what your staff hears It is not what you send but what your staff receives It is not what you write but what your staff reads All of us have the mystery lter in our houses you know the one that comes between you and your spouse or you and your kids It is the lter that comes between your mouth and their ears and results in the conversation No I didn t say THAT Whatl said WAS etc etc etc There is little protection against miscommunication but we can do more to check on what people heard so that we correct the initial miscommunication HANDS ON To vividly demonstrate the concept of miscommunii cation to your management staff try this exercise with your staff At a staff meeting read off the following list exactly wit90m warning Read it slowly and deliberately BED REST SLUMBER SNOOZE PILLOW SHEET NAP MAT TRESS SNORE DREAM Now ask the staff to write down as many as they can rememe ber Give them a minute or two Ask how many people got six words ask them to raise their hands Some will have gotten six Ask if anyone got eight Compliment them Ask who wrote down the word bed the rst word you read About half will have Compliment them Ask who wrote down dream the last word you read About the same number will have Now and this is the key ask whoever wrote down the word sleep to raise Leading Your People 11 l their handsiand keep their hands up If your group is like the dozens I ve done this with over half will have written down sleep and you never read it Have everyone look around to see how many hands were raised Make the point with your staff that the reason that they wrote down sleep was that they associated it with the rest of the words you read but that they felt so strongly that they heard it that they wrote it down Now if you were to have gone back to them in a week and asked for notes on what you said they would have written proof documentation that you said sleep because they wrote it down We need to ensure that our instructions and communications are understood Let s examine the issue of communications from the viewpoint of results When do your staff fail to complete a task correctly When They don t know what they are supposed to do None of us is very good on this one Think about it You tell your staff something and then ask Do you understand or even worse You understand don t you Now who is going to say to his or her boss in effect No I don t understand I m stupid We do not give people much of a chance to say no or to ask for help They don t know bow to do the task Same issues as above They think they are doing it right but haven t received any feedback If you are not around to talk to or observe staff while they are working on the project you cannot guide them away from mistakes Thus little problems become big ones If people are not given some supervision or being observed particularly the rst time they do a job they may very well with good intentions do it completely wrong and in a way that could have been prevented if you had been around enough to catch the little mistake before it got to be a big one in They don t know why they should complete the task The why is so important Telling people why they need to do something puts it in context it gives the assignment a rationale a purpose and a priority In terms of accurate communications think of the difference in the mes sage sent by someone saying Please put together a spreadsheet of our cash ow projections or Please put together a spreadsheet of our cash ow projections because I need to present them to the nance come mittee on Thursday night The rst assignment gives the bare bones The second gives conteXt and would probably lead to a clearer more l 12 MissionRn Pd MnnmerPm complete and neat cash ow being presented Tell people why some thing needs to be done Do not assume that they don t care about the why Let them make that choice They hear something different than what you say and you are not in control of what your sta hears Remember our list without the word sleep Need I say more In order to get over the worst of these when you give instructions to someone particularly on something new follow this order Explain how to do it Demonstrate how to do it if possible Request an explanation of how to do it Invite the employee to demonstrate it for you if possible BRENNIquot Now you can t just treat staff like a small child and say What did I just say in a condescending voice But what you can do is ask Please tell me what we just agreed you d do so that I can make sure I didn t tell you wrong In an invertedipyramid management scheme and if you agree that you are responsible for getting the communications across ask for feedback with the assumption that you have not communicated whatever needs to be communicated accurately or thoroughly At the end of meetings ask everyone at the table to reiterate what it is that they agreed to do at the meeting and by when Don t tell them what they agreed to you want to hear it in their words Delegation There is enough good material on delegation to ll three shelves at your local library and we all know that good managers are ones who delegate effece tively so I won t try to convince you that you should be delegating more Rather I ll try to pass on some ideas on how to delegate better Delegation is particularly tough on rstitime supervisors who still want to do rather than manage After all if you hadn t been good at the doing you probably wouldn t have gotten promoted But since you now are a supervisor you have a different job and not enough time to both do and supervise You need to delegate the jobs that your staff can do now or learn fairly quickly To be successful you need to attend to the following rules Delegate authority with responsibility This is critical Your employees must feel that they have the authority to decide as well as to do If you require them to get back to you on every little detail you might as well Leading Your People 11 5 do it yourself and your staff person will be very frustrated to boot The further toward the line staff that decision authority can be pushed the better Challenge your sta supponiuely Do not just give them a job and a deadline and then kick them out the door of your of ce Learn how to offer support and advice without having them lean on you for every thing Also push them a bit forcing them to try new tasks if you feel they can learn them Back off in the level of supervision as quickly as you can but let them know that you are there as a safety net Im Know your sta We ve talked about this already a great deal and it s really important to being able to do good delegation and communie cations You just have to take the time to know your people so that you know their skills their strengths and weaknesses their likes and dislikes their potential and their pitfalls You just have to have this information if you are going to use them to their maximum potential Remember we talked about Peters and his maxim Management by wane dering around Be out there look and listen more than you talk This will allow you to know your people Recognize that mistakes will and should he made It is how we learn Honest mistakes honestly made are okay Once Don t let people make the same mistake twice But be assuring and helpful noting that you also have made your share of goofeups If people don t make mistakes and don t learn they won t ever grow Adopt the maxim Do some thing as your credo and you will have gone a long way toward better delegating I Admit that other people can do some things better than you can It really is true You ll be amazed at how well other people can do what you have always done often without your help It will be different but ofteniif you are really honestibetter than the way you have done it in the past Remember be a leader but willing to follow HANDS ON Try this with your staff Make a copy of the gure below IX Hand it out at a staff meeting and tell people exactly the following quotTalee this add one line and turn this into a six J continued 114 MissionRn Pd Mnnmrpmpm continued Give the staff people a minute or two to get the right answer and perhaps one in ten will The answer by the way is SIX I used to use this exercise to teach people to learn how to solve problems in different ways But in 1988 my thenisixiyeari old son Benjamin was talking to me as I was preparing for a presentation He was asking the ageiold question What do you do at work Daddy and I was trying my best to eXplain the job of management consultant and trainer in terms that he could understand I told him that I teach grownups Like in school he asked Yes like that I teach them things about where they work Do you play games he wanted to know Yes some times and as I said that I saw and here s a blast from the past a transparency that had the IX on it Aha Benjamin I said showing him the IX just as on the preceding page Take the pen cil and with one line turn this into a siX With no hesitation at all he grabbed the pencil added an S before the IX and said Like this I was oored I mean I knew he was smart my child and all that parental pride but only about 10 per cent of adults get this at all much less immediately What was going on What was going on of course was that Benjamin as a rst grader had not learned about Roman numerals When he looked at an IX he saw an icks not a nine which is what adults see In short we as adults have too mac9 information too mac9 education too mac9 knowledge to solve this problem Later that week I was Visiting Benjamin s classroom andI asked the teacher if I could repeat the actiVity with the class Of thirty kids in the room all thirty got it immediately The point here is don t assume that because you have a college diploma or a master s or a doctorate or twenty years on the job that you can solve every problem better than someone without those degrees or experience Sometimes you ll be too smart to solve the problem m POSTSCRIPT TO THE STORY As I was preparing the rst edition of this book in 1992 Benjamin then 10 asked me how the book was coming and if there were any stories about him in the book I told him yes and summarized the story for him When I ne ished he asked to see the problem for me to let him do it again Leading Your People 11 5 He couldn t come up with the answer I laughed and asked him what he saw on the page and he said Dad how can you turn a nine into a siX with one line I showed him and informed him that he now knew too much to solve the problem He had learned about Roman numerals At this point Benjamin s then seveniyeariold brother Adam walked in Benjamin who like all big brothers thought he knew it all handed Adam the IX and asked him to turn it into a siX You guessed it Adam with no hesitation replayed his brother s actions from four years before He grabbed a pencil and wrote an S in front of the IX I still treasure the memory of the look on Ben s face as he realized he did not automatically know more than his little brother just because he was three years older Communicate clearly Back to communications again Remember Explain how to do it Demonstrate how to do it if possible Im Request an explanation of how to do it Invite the employee to demonstrate it for you if possible Good delegation is the path to supportive management You help peo ple grow by good delegation They wither without new challenges Evaluation I make the assumption in writing this section that you already have an evaluation policy and an evaluation tool in place If you do not have such a policy you need one starting today At a minimum you and your management team should provide a writ ten and oral evaluation of every staff member volunteer and board member every year Why Because without evaluations without confronting the bad and acknowledging the good people don t grow It is also the only doc umentation that you have of a person s capability or lack thereof his or her contributions to the organization and the like It is the easiest man agement task to procrastinate on but it is an essential component of good management That having been said there are some keys to the way we encourage a staff evaluation process to be established and conducted These may be different than you have seen before but they are well tested and they work 116 MissionRa Pfl ManavaPm All Evaluations Should Be TwoWay As discussed in the opening pages of this chapter the relationship between a supervisor and the supervisee is just thatia relationship It will not work if both parties do not participate and try to make it work For example if the worker does not get clear instructions from the supervisor or does not get them in a way that he or she can best understand and follow them then the worker will fail to do the job up to the super visor s expectations In a normal evaluation setting that problem would be the employee s fault with no encouragement to the worker to point out the supervisor s communications problem Therefore your employee evaluations should have parts where the employee is evaluated goals are reviewed and so forth as well as parts where the supervisor is evaluated in terms of his or her interaction with the employee There is no question that for many supervisors this is a terribly threat ening change Supervisors are used to doing the evaluation not being evaluated For staff this can be very nerveewracking as well Evaluate my boss No way But it does work can work and should work in an organiza tion that sees management as support and staff as critical We ll cover bow you do it in the methodology below Evaluations Should Be Oral and Written You write out evaluations so that you have to think about them so that people can read and think about them and so that you have documentation of what was said You do them orally as well so that each person has to face the other with both the good and bad parts of the evaluation It opens yet another channel in the communications array There Should Be No Surprises at Evaluations If you and your staff are communicating well and regularly if you are dealing with the good and bad immediately rather than waiting for an annual review then there should be no bombshells between supervisor and worker If there are big surprises then the rest of the communications system is breaking down and you should use the evaluation process as an earlyewarning sign of that breakdown Set and Evaluate Goals for Both People Three or four goals for the neXt evaluation period are important If accome plished they provide a feeling of satisfaction and accomplishment If not they provide a challenge for improvement Again the goals should be for the supervisor and the worker Leading Your People 117 Evaluations Should Never Be Just Numerical I feel that the biggest mistake that we all have made in the past ten years in the area of evaluations is the trend to totally numerical rankings or ratings for evaluations I understand the need for quanti cation in many evaluae tioncompensation systems you need a number to calculate a bonus or a raise But numbers without context are meaningless They provide no guidance for the employee and a record of no value in the future rate an employee in ten categories such as Enthusiasm Attene dance Work Quality Interaction with Clients Interaction with Staff and the like on a 1 to 10 scale with 10 being Excepe tional and 1 being Totally Unacceptable Thus a supervisor can go down the list and rank John or Mary a 7 for Interaction with Staff and a 5 for Interaction with Clients and be done with the whole rating in a minute Now the supervisor gives the evalue ation to John or Mary and tries to compare the rating with last year s John went from a 7 to an 8 in Work Quality But why The supervisor cannot really remember Worse if next year there is a new supervisor he or she will have absolutely no background as to why John was rated an 8 as opposed to a 7 or a 2 for that matter I n FOR EXAMPLE Agency A has a form that asks for a supervisor to I strongly prefer written evaluations with questions that require thought and answers in complete sentences If you must use a quanti ed scale ne but require written justi cation for each numerical rating Include the Mission and Values as Evaluation Criteria Everyone should have as part of his or her evaluation criteria an item with wording to the effect of In what ways did the person being evaluated pursue the mission or embody our mission and values this year This once again reinforces the mission statement as a focus for the work ethic at your organization Develop Criteria That Are Important to the Organization and to the Individual Job Being Evaluated Don t rely on standard evaluation forms Work with your people to establish criteria that re ect your culture mission and values as well as those that are focused on the job being evaluated For eXample I feel that people who supervise should have a component of their evaluation that deals with 118 MissionRa Pd Mnnnvpmpm how the people who they supervise have evaluated them This supports the theory of management as a support function Another example would be to limit an evaluation criterion for Interaction with Customers to only those who have such interaction In The Three Signs of a Miserablejob Pat Lencioni notes that people want to know how their job relates to the organizational whole and to be able to measure their own progress Help them do that Your best people want to be held accountable Separate Evaluation from Compensation in Terms of Timing Discussions of money muddy the waters between a supervisor and an employee Have the supervisor deal with the money portion of this well before the evaluation of work effort and have it out of the way Changing the Way You Evaluate You may evaluate annually or twice a year Some organizations even do reviews quarterly Never evaluate less than annually and if you want to impress your people do it twice a year No matter how often you do it here are some suggestions of how to implement a twoeway evaluation system Plan and Consult Before instituting such a major change as going to twoeway evaluations some planning and consultation are necessaryHDr you will wind up with very very upset people Start by establishing a staff committee of all levels of staff to review both the evaluation tool and the evaluation process Dise cuss the importance of twoeway evaluations what they are and are not and set the criteria for evaluation as well as the process If you tie the evaluation process into your compensation package talk about how that will hape pen and how worker evaluation of supervisors will not be held against the worker in the compensation area there are protections against that outlined below Write up your new evaluation policy and the reason it is being instituted and transmit that to staff in writing and in meetings I strongly encourage you to stage a roleeplaying exercise at this point so that people can see how the process is supposed to work Have two staff act out the entire process ry the process for a year monitoring it closely and then evaluate and amend it Understand that it will take time for some staff to adequately trust their supervisors to be willing to take the risk of offering criticism It will also take time for some supervisors to be able to accept constructive criticism Leading Your People 119 from their workers Give it time but monitor the implementation carefully Have intermittent meetings with supervisors and workers to discuss the program and how it is going comparing that to the original intent A Suggested Evaluation Process 1 The HR staff should provide both the supervisor and the worker with their copies of the evaluation form ten days prior to the evaluation s being due Each person then lls out his or her part of the form in writing The supervisor also at this point lls out any salary or bonus recommendation in line with the organization s compensation policy and hands it in to the appropriate person That way the nancial part of the evaluation is done and delivered before the supervisor gets evaluated by the worker reducing the chance of retribution by the supervisor if the evaluation from the worker is not perfect The supervisor and worker meet in private exchange forms and go over the evaluation as well as the goals that they had set at the last evaluation They discuss the reason for each criteria rating and in general how they are doing as a team Both supervisor and worker now set their goals for the neXt evaluation period This is best done individually and then discussed at a second meeting 4 After meeting to discuss the goals the supervisor may as appropriate inform the worker of compensation changes or bonuses It is critical that the supervisor and worker informally review the progress toward the goals two or three times during the neXt evalu7 ation period I recommend that they both put the times for such an informal review on their calendars to remind them N W V Staff Recognition An ofteneforgotten component of invertedepyramid management has to do with staff recognitionicelebrating and rewarding the kinds of behaviors that you want to see the most There are virtually unlimited ways to do this but most organiZations that try this have problems that could have been avoided The most common is to adopt another organization s program without checking with their own staff rst Three critical rules for staff recognition programs are 1 The rewards should not bepum sbmem Don t assume that what you think is a nice reward is received the same way by those whom you are trying to honor Reward and punishment is a very subjective thing 120 MissionRn Pd Mnnmrpmpm FOR EXAMPLE Ten years or so ago I was running a twoiday retreat for a state human services department at which the Director and the fteen highest level staff were participating One of the department s training staff who specialized in working with hotels had made all the hotel and meal arrangements and she was one site for the two days of the retreat ready and able to assist us if needed The staff person whoml will call Linda was a very capai ble and pleasant person and had mentioned to me that among many other things in twenty years with the department she had never actually met a director She also had reserved another traine ing room right down the hall from our meeting room in which she would set up camp to help us if we needed her and in which she would eat Following the afternoon session the participants broke for dinner in the hotel restaurant while I remained behind in the meet ing room to summarize our afternoon activities so that we could proceed without delay when we reconvened Linda had made dine ner reservations for all the participants plus me and now I realized that since I would not be there there would be an empty seat at the table I saw the Director walking by in the hall and ran out to stop her suggesting that since Linda had done such a great job on the arrangements that it might be a real treat for her to be invited to dinner with all the department senior staff The Director agreed and said that she would set it up I returned to my work feeling that I had really done a nice thing for Linda and that she would be very pleased by the opportunity to visit with the Director and other senior staff Ten minutes later Linda stuck her head in the door and said Well I won t be down the hall for dinner if you need me I have been told to eat dinner with the mucky mucks She walked out of the room with a long face looking completely depressed I immediately realized that my reward to Linda was actually a punishment While I might want to meet the people at the dinner table the thought of spending an hour with the big bosses terrii ed Linda It was the worst thing I could have done to her I later apologized to her and we still joke about the incident when we talk 2 The system mus be seen by sza as fair and impartial There is no point to this if the staff people feel that the system is rigged and that only the boss s favorites will be chosen You simply must have a system that will both actually be and more important be seen as impartial and fair Leading Your People 121 FOR EXAMPLE In another statewide agency a good friend of mine took over as director following an Attila the Hun My friend whom we ll call Greg as one of his early actions asked line staff to develop a rewards program that was fair meaningful and easy to administer The results There is a rewards review committee made up of ten line staff the total staff of the department is over 2000 This review committee has volunteered and also has made itself permanently ineligible from receiving the rewards Each month this committee reviews nominations for Employee of the Month which can be submitted by peers or supervisors Employees who are selected get a number of things their picture in the foyer of all agency of ces that month a plaque given to them by Greg and other perks 7 that they get to choose The system has worked wonders in the two years that it has been in place but it has all the parts essential for success peer review impartiality and rewards that really reward I 3 The system must be understandable and support the mlsslon You can t have a reward system that requires a degree in astrophysics to under stand You also need a reward system that rewards behavior that supports the mission That s why soldiers get medals for valor and police of cers and re ghters get awards for saving citizens lives it s the kind of action that we want to encourage in those professions In order to do all these things well have a group of employees from all levels of the organization study the idea of rewards and get back to you on a program They may even tell you that staff would prefer not to have rewards preferring to remain anonymous or to have the funds that a reward program would use go into the programs instead Do not decide from your senior management seat what is meaningful for line staff You may well waste time money and morale Recap In this chapter we have reviewed the parts of top quality management for your nonpro t in Living the invertedpyramld Valuing your staff and remembering that by increasing the importance of your staff who are closest to the line you will improve morale and productivity You need to live this attitude not just put it on your table of organization You need to be your staff s best advocate 122 MissionRn Pd MnnmerPm Using the coachconductor 52316 of management Remember that neie ther the coach nor the conductor plays You have to get your outcomes completed through the actions of others You have to know those peo ple and their capabilities well to have them come together and achieve a common desired outcome 1 Understanding that all communications are twoiway and that what someone hears is more important than what you say If you believe as I do in the inverted pyramid you need to act as a facilitator and as a supporter That means in communications you need to communicate in the way that your people hear best not in the way that you feel most important Delegating effectively and how that is a strengthinot a weakness You need to remember that you cannot do it all and in fact that others can often do it better than you Evaluating in the best manner Iwaway You and your staff should both evaluate the relationship and your contributions to it These evaluations will improve your management skills as much as they will help your staff people Rewarding sza for their desirable behavior All of us like to be rewarded Just remember to make rewards real rewards and not pune ishments Ask what people would like and try to give them that not something that you would like to have Mr j Willard Marriott had it right Take care of your employees and they will take care of you You need your staff to be motivated and committed You know you can never pay them enough so keeping the good ones takes a different kind of compensation what they do and how you treat them Hopefully this chapter has provided some insights and some tools for you to apply to that end Questions for Discussion What parts of this chapter apply to us Let s be speci c Do we value our line staff How If we had an inverted pyramid what would we have to change What are our styles of supervision What do they say about our values Should we have twoiway evaluations Why or why not What about communications Should we train our staff in this important area QWBKSNNI CHAPTER 8 Embracing Technology for Mission Overview Oh the wired world All of us online all the time Constant cell phone chatter in public places endless numbers of cable stations to click through com glued to the end of every noun verb and proper name e in front of way too much of the English language Need something Information a frienddatespouse a sales venue music or a reservation for dinner Go online Need a service from a nonpro t Want to donate or volunteer Go online And of course that is just the beginning Luddites aside we can never go back to the unwired unconnected nontech past You your staff your clients your donors your funders your referral sourcesiin short all the people who matter to your organizationiare either online or on their way there with fewer and fewer exceptions Think your clientele are too poor or dispossessed to need tech A friend of mine who runs a homeless shelter told me fteen years ago about asking a new client the standard marketing inquiry that all nonpro ts should ask How did you nd out about us The answer from this bedraggled unshaven man who would ful ll most people s mental image of a homeless person Oh I checked you out on your Web site I liked what I saw so I came over 7 Where could a homeless man be able to check out this organiZation online way back then At the library Now he could do it at lots of places the public library the BoysGirls Club a local church at a job center even at the homeless shelter itself The tech divide that used to focus on income now focuses more on people and the difference between those who are comfortable online and those who are not All online all the time is truer and truer every day Technology has gone from being a luxury to being a ubiquitous nece essary tool and even more important an expectation The costebene t of tech that we waited for for so long is now well established Quality speed the variety of applications and their ease of use have all improved and the price of each has gone down down down until we have reached the point 125 124 MissionRn Pd MnnmerPm where you can get free or lowicost cell phones software computers and a host of other products and services that ve years ago were the mark of only the wealthy Tech is paying off for all of us ech has had an impact of course in the nonpro t sector as well But more than any other part of our economy we have lagged in seeing technology s full bene t As this is written much of the sector is still behind the tech curve and many organizations are still suffering from the failure to recognize the revolution for what it is and more important what it can do for our mission Part of this lack of techisavvy is generational Most of our senior management are members of the Baby Boom and Silent generations and thus do not get tech the way later generations intuitively do Some of it has to do with scarce resources but that is a waning factor as costs have plummeted Like it or not the world has changed In his now classic and still won derful book The Lexus and the Olive Tree New York Farrar Straus and Giroux 2000 Thomas L Friedman notes that in the very near future there will be only two kinds of organizations Those that embrace technology and those that do not The rst have a long life expectancy the second next to none I agree and that is why this chapter is titled as it is As I said earlier the future of philanthropy is the successful merging of mission and technole ogy This does not mean that we will give up ineperson service Rather it means that if you want to be around to do mission ten years from now if you want to connect with people born after 1975 if you want to provide mission as effectively and ef ciently as possible tech is your friend Tech is never a solution on its own Remember the Jim Collins maxim from Good to Great that I referred to earlier Technology is an accelerator of a good idea not a substitute for one I want tech to be an accelerator of a great missioniyours In this chapter I will show you many examples of how technology is helping nonpro ts like yours do more service sooner and better We will look at the realities of competing for donors staff volunteers and people to serve online We will examine how to adapt your organization to a tech friendly model without breaking your budget I will give you a technology checklist to examine now and a review and renewal process to make sure you stay appropriately up to date in using technology to the maximum mission outcome I know many readers particularly those my age hate this Tech is still not second nature to many in our sector and perhaps you or some members of your staff are tech averse I understand and you need to know that you are not alone At Stanford University which is located on the north end of Silicon Valley the student body still breaks itself down into two groups in its slang Techies are engineers math and hardiscience majors fuzzies are social science English art and history majors Now think about it In thmrz39mr Tprhnnlom for Mission 125 the nonpro t world which would predominate Of course the fuzzies And there is nothing wrong with being a fuzzy It s just that all of us fuzzies have to adapt adjust and get on with our lives in an increasingly techie world We cannot do the ostrich on this one The people who we serve depend on us to adapt so that we can continue to pursue our mission The tech world is so integral so ubiquitous that it is no longer properly called the tech world It is just be world as it is and in nonpro ts we have to deal with the world as it is Remember what is the job of a nonpro t steward It is to use all the resources available to do more mission Let s gure out the best ways to use the technology to do more mission better sooner and more ef ciently The AllOnline All theTirne World We Live In The second edition of MissioneBased Management dealt with technology for the rst time Of course much of what I said then is out of date and has been updated but guess what Some of what you are about to read will be outdated as well by the time you see it That aside there are some valid and timeless basic concepts that you can work from as you consider the best way to enable your mission with technology Embracing technology will be a small step for some nonpro ts and a giant leap for others You will have early adapters and late resisters Your board may tell you that you should not spend the money on tech now and then siX months later bug you about why your Web site is not awesome So before we get into the how let s look at the why and perhaps get more of your staff and board on the same page about technology Here are a few observations to consider The Default Location for Information about Your Organization Is Now Online All the Time Get used to it While still not the case for everyone going online rst to nd out about your organization is the default for more and more people every day and absolutely dominates the preference for anyone born after 1975 Your Web site is getting more inquiries than your phone system More people will check out your volunteer opportunities or try to online than will email you If you do not have the ability to take donations by credit card or PayPal on your Web site you have lost money Period This is really important and no longer up for debate We reached the tipping point in this area in about 2004 as servers got bigger bandwidth got higher and wireless networks took hold And here is the other killer fact While checking you out online is the rst place people look more and more if they cannot 126 MissionRa Pfl ManavaPm nd the information they want on your Web site it is also the last place they look They will not call They will not email They will just move on to another nonpro t s Web site that is more appealing You are in sports terminology one and done To Keep Up With All the Changes and Opportunities in Technology You Need to Depend on Younger Staff and Board Members Moore s Law posited by one of the founders of Intel in 1964 states that the computing capacity of microchips will double every eighteen months at no increase in cost Again the tipping point for usable cheap online allethee time tech hit us in about 2004 and has been going at an even more rapid pace since But the choices brought on by this change can be both dizzying and deafening which can cause us to just stop listening after a while This is particularly true for those of us who do not think tech rst or automatically jump online to try a new app or download the newest version of every operating system Thus while it may not be our instinct to try new things our organization still needs to be on top of all this so what to do Simple Seek out engage recruit employ and then listen to the young HANDS ON The youngest generation born after 1980 gets this in ways those of us born before 1980 cannot To develop a tech prone policy you rst need someone on your board of directors who gets technology from a policy standpointiwho undere stands how to harness tech to your mission The younger this person is the better because that means that he or she has had more of their lives surrounded by tech This is also true for your staffiyour younger employees will if asked provide you with lots of ideas on how to use the best of technology to do more and better mission raise more funds and communicate more ef ciently Again the benchmark birth year here is 1980 I m HANDS ON But But what But not everyone is tech savvy and tech comfortable Thus your tech committee a committee every nonpro t needs that keeps up with the techimission bridge and writes and monitors the tech plan should be made up of geees and nongeeies people who love technology and people who are still techeresistant This is another important balancing act for your nonpro t You don t want to alienate but you do need to keep up with changes in technology thmrz mr Tprhmlom for Mission 127 In addition to your tech team you need a chief information of cer CIO or IT manager of some kind Even if you cannot afford to have someone full time in this role you need to have someone in your organization someone who understandsiand likesitechnology and who also understands what you do how you do it and why This person s job will be to match up the mission with the technology to enhance and support it In the words of a computerisavvy friend of mine You need to get a higher geek quotient I agree One great resource for this person is TbeAccz demal Teevie St Paul MN Fieldstone Alliance 2005 by Sue Bennett It is written for the partitime nonpro t CIO and is a terri c book I The CostBene t Ratio Has Tipped Permanently to the Bene t Side But Only for Flexible Organizations Again Moore s Law and ruthless competition are making what was yestere day s exotic technological breakthroughs today s ubiquitous tools In 1995 a home page was something foreign and somewhat geeky and no one really knew what a URL uniform resource locator was Remember when cell phones were unusual and less common than pagers I vividly rememe ber sitting on airplanes with my rst true laptop in the late 1980s or even with a new notebook in the early 1990s and having people come over look and be amazed at the technology Now on many ights the few people without laptops can t sleep because of the glow of all the laptop and PDA screens You can get online during your ight and nobody thinks a thing of it What was so cool even ve or eight years ago is so normal now Email voice mail teXting spreadsheets funderaising software even customized payroll software and outcome measure software all have become parts of our everyday lives They are affordable and should be viewed as essential tools not luxuries In some cases think teXting for those born after 1986 they are default communications tools and the only way to reach a particular age market In a competitive environment you have to compete Part of that competition is being as responsive and cost effective as your competitors and tech can help you but you have to truly understand the everechanging tools that tech provides Again listen to the young Of course you cannot just buy the hardware or software and have it solve all your problems You also have to move toward the technology be a bit exible and accommodate to the new situation 128 MissionRn Pd Mnnnvpmpm m FOR EXAMPLE I regularly look at Web sites for clients and ifl am doing a marketing or management review I will push all the bells and whistles on the site I ll try to donate 5 online ask about a job and inquire about a volunteer opening And if there is no information on the site about those things or if I have a problem I ll go to the Contact us page click on the Email us link and ask my question Sometimes I hear back in a day or two sometimes a week or two sometimes never Hmmm I Once you adopt the technology you have to use it and make sure that your people have enough training and comfort with it to be getting the bene t of it The technology will not come all the way to you You have to be exible enough to meet it partway Tech Can Get in the Way of Providing Good Mission As you can tell I am strongly pro tech for mission and an advocate for your organization to use the tools that technology provides us to the maximum mission effect However I would be naive and would be giving you bad advice if I did not remind you that tech is just a tool and not a panacea ltwill not x a poorly managed organization that does not care about its markets does not value line staff does not recruit and retain good volunteers or does not pay attention to its nances To think so is the same as assuming that just buying a van will allow you to deliver meals on wheels or that having a receptionist guarantees prompt customer service Tech is a toolia wonderful exible helpful fascinating tool But the tool is not the issue How well you use the tool is the issue Further technology can get in the way of good mission usually without our even realizing it We can get so enamored of having the newest coolest thing or of getting tech just to keep up with everyone else that we forget that our investment in technology just like any other missionebased investment is supposed to result in more mission not less n FOR EXAMPLE When I do my training sessions on marketing g and customer satisfaction I regularly do this little exercise with the participants that demonstrates a very common example of good technology run amok I ask the group the following ques tion How many of you really dislike calling an organization and getting one of those automated systems that say somethin ike Hello welcome to XYZ organization blah blah blah continued thrth I Tprhnnlom for Mission 129 press one to press two to Put your hands up if these sys7 tems really tick you off And of course nearly all and sometimes every single hand goes up Then I ask Why do you dislike calling into these systems I get answers ranging from impersonal to confusing to takes too long to work your way through the sys tem to alll want to do is talk to a person And they do not like having to gure out how to type the last name of the person you want into their phone There is uniform widespread consistent dislike that borders on hatred for these systems And then I ask the clincher So and be totally frank now how many of your organizations use these systems You got it nearly all the hands go back up And I ask how many of you were at least partially responsible for the decision to purchase and install the system Again most if not all of the hands go slowly up accompanied by sad or embarrassed looks Finally I ask the question Why Why did you in ict this on your customers when you yourself despise it What convinced you to spend money to tick off your clients and funders The answers usually focus on the salesperson convincing the staff that they would save money by not having to have a receptionist So I ask How many of you laid off your receptionist or cut your FTE by a person Hardly anyone ever puts his or her hand up So you irritate most people on their rst contact with you and still do not save any money Silence And I do not even deal with the fact that these systems are terribly dif cult even impossible to use for people who have hearing problems or who themselves are technophobic I 3 HANDS ON Voice mail is great but you should always have your phone answered during regular of ce hours by a real person And have your people check their voice mail regularly I Uses of Technology for the MissionBased Organization So how do we harness this huge societal change to help our mission What is the best way to get the most out of technology Well it is not by going at it piecemealia bit here a bit there You would not provide services that way You would look at the entire service array the whole outcome as well as the pieces I know you added tech piece by piece everyone did You probably got accounting software rst then email then some pagers for your staff then your early Web site and development software then more and more online accountability updated Web sites etc 150 MissionRn Pd Mnnnvpmpm But now as we have said ten times tech is everywhere and you have to get your act together emphasis on rogeryer You need a plan More on that in a minute Let s look at a few uses of technology to do more mission that go beyond just the basics of nance a Web site and email Education You want your organization to be known as the expert the source the place to go for information on the issue that is the center of your mission whether that is literacy autism animal abuse or performance art So on your Web site develop whatl call a reading room a place where people can nd papers in pdf form sites books and the like to educate them more about your issue and to see your organizational opinion on the issue as well This is a simple addion but one that needs to be kept current No seteite andeforgeteit for information Volunteers 1 have already told you that all nonpro ts will be more dependent on quotunpaid professionals over the neXt few years than they are now and that you need to upgrade your volunteer recruit ment training and management Look at your Web site right now If I were a potential volunteer and I came to your site to see about volunteering could I nd any or all of this information What opportunities are available when where for how long with what skill set etc online sign up training needs dress code whether opportunities are available for groups Is there discussion about how important volunteers are and a place that current volunteers can add comments about their experiences What about a video of volunteers in action New employees You need good employees more than good employees need youiyou heard that in Chapter 7 But to nd them and espe cially those born after 1980 everything about your organiZationi its mission its values the management team the board the culture the bene ts online applications comments by current employeesi everything needs to be online and easy to nd m HANDS ON Make sure that on your Careers page you have an e7 mail signeup for notices for future jobs That way even if there are no openings at the current time a potential employee can leave his or her contact information with you Once your employee is hired he or she can learn faster about the organization and keep up with changes by using a staffionly part of your Web site that is deep and wide with information policies meeting minutes staff information and so forth thrarmv Tprhnnlom for Mission 151 Transparency In Chapter 5 we talked about this at length so just remember that your Web site offers the ability to easily have your most recent 1R87990 your current audit budget and strategic plan all out there for people to see For a complete list of transparency items that you need online see Chapter 5 page 670 Dweleem From software to track and communicate with donors to applications that help with event planning development has really embraced technology for the better As I said earlier if your Web site cannot take donations by credit card and or PayPal you have lost donations Period Remember this Technology has brought down the cost of fundraising and this is key to many donors And while the ask particularly the big ask will at least for the foreseeable future remain a faceitoiface or at least voiceitoivoice event using the best tech can get you that meeting set up that ask keep in touch with the donor and keep him or her focused on your mission That is just a sample I know some readers are yelling at the book saying You forgot about and it s so cool and l ow you are right I left many things out and many more that I cannot even imagine will probably be cuttingeedge or even passe by the time you read this So let s agree Tech has many uses for mission and many opportunities for ef ciency and effectiveness It also has many parts that often seem to go off in different directions I am a list person as you probably can tell Let s start by making a list for technology and move from there A Technology Checklist Now that we have hopefully set the stage for you to look at your organization s ability to use technology in productive costieffective and missioneincreasing ways let s use a checklist to help you nd your way Have a Team We have touched on this before but you need a group of people to monitor your tech Yes technology is as important as anything else that merits a com mittee development marketing quality assurance nance And speaking of those committees representatives of each should be on your tech team because they have technology needs and wants So your team should be rep resentative of committees of ages of geeks and nongeeksiperhaps even have a board member who is tech savvy sit in once in a while What does the team do Read on 152 MissionRa Pfl Mnnnvpmpm Have a Plan There are so many parts to the impact of technology and so many opportu7 nities that technology brings to your mission and as a result so many places you can spend your time and money that you need a tech plan There are lots and lots of samples of nonpro t technology plans online Go do a search and see the kind of things that your peer organizations are looking at However in developing the plan remember to go through the rest of this list rst Consider the Outcomes You Want What is the point of your technology More mission I hope but that is pretty general Before you plan to spend a lot of time and money go through each area of your organization and look at what you want from technology Are there easier ways for people to donate Better methods of measuring out comes Better use of staff time Improved communications with the board Better community image At your rst tech team meeting this list should take up most of the time And when it is re ned and honed it should be your backstop as you develop tech goals and objectives Consult the Young Now that you know what you want ask the intuitive eXperts the people who have grown up with and used technology every day of their lives your staff and board born after 1980 They get it in ways those born earlier cannot and their understanding of what is out there and its potential is amazing Ask them nh FOR EXAMPLE For a Boomer I like technology a lot I bought my a rst computer for my nonpro t in 1982 had the earliest Web site of any of my peers read the tech press tried new applications like podcasts blogs and video early on and have run my own Web site for years I think about technology a lot not only for nonpro ts but also for my business About four years ago I was planning to visit my techie son Ben in Denver and I told him I wanted to talk for 10 minutes with him and several friends about how to get more bang for the buck from integrating my Web site blog and newsletter Ben had helped me four years earlier by designing a complete upgrade to my Web site and was familiar with my business needs butI outlined a number of questions to thmrmn Tprhmlom for Mission 155 him in advance and he said he would ask his business partner Dan who I have known since he was eight to take a look as well I gured I would learn a little here and there but that I had most of the big stuff nailed down already Make a long story short In those 10 minutes which stretched to 50 I got fteen or twenty aim ideasisimple free improve ments in the way I used the Web that have colored my thinking ever since Even though I am pretty tech savvy for an old guy to quote Ben I learned a lot in a very short time And Ben and Dan had talked about my site blog email and newsletter for about 15 whole minutes before the three of us started talking They instantly saw what I could do to improve things People in this age group do not need to think deeply or ponder about this stuffiit is intuitive I 13 HANDS ON A simple and easy use of this resource is to ask any high school or collegeeaged young people you know to go to your Web site Tell them to look at the site from the point of view of a potential user a potential donor and a potential volune teer How easy was it to nd the information they needed How nice did the site look and feel What would they change add delete or improve And when they are done with that get their email addresses and phone numbers send them or text them a thankeyou note and ask them to keep thinking about ways your organiZation can connect better with people through technology Try this it works I Use All Your Resources There are tons of good resources out there that are free First let s talk about two organizations that have become the goeto resources online for nonpro ts Techsoup wwwtechsouporg and Nonpro t Technology Nete work wwwntenorg If you have not been to these sites you need to and soon They provide great free resources training howetos and so forth Be sure to subscribe to their newsletters as well Great great stuff Second I have to give a bit of space to a better software option open source For those who have not been exposed open source is software that often exceeds the forepay software that it mimics The best known example of this is the operating system Linux developed by thousands of volunteers worldwide and updated several times an hour by those volunteers It is so good that most major computer companies like HP and IBM offer Linux as an operating system alternative to Microsoft Windows or Vista 154 MissionRa Pd Mnnnvpmpm I have used open source software for years for some basic reasons It is nearly always better than the original program it mimics with more great fea tures it is more stable more secure it is less bug prone and when bugs are found they are xed in hours and since it is not from Microsoft it is much less prone to hacker attack Equally important to most nonpro ts It is free I have used Firefox for my browser NvU for my HTML coding Thunder bird for my email and OpenOf ce for my word processing spreadsheet database and presentation software all for years These words are being typed on OpenOf ceorg Writer If there is an application you use there is almost certainly an open source alternative Go to SourceForgenet to see what is available Proceed cautiously read the user reviews and talk to your tech team But open source is a great option And did I mention that it is free Focus for the Best Return Once you know your outcomes and have gured out what your resources are focus your efforts for the best return on your investment For exam ple if you have no development software but your development staff is tech savvy and you are expanding your fundraising efforts that might be a place to spend some money If your Web site is ve years behind the curve start there but you may just want to add some things not redesign from scratch I have noted that the costebene t line for tech in society has been passed years ago but that does not mean you should not focus your limited time and money to get the most bang for your tech buck And remember my admonition about open source software The offethee shelf cost is 0 which is always a nice start if you are calculating cost bene t Buy What You Need Not What Everyone Wants When I go into a hardware store a Best Buy or a campinghiking store I want one of everything The same thing happens to my wife in a shoe store or my daughter with purses Wants are ne and as we discussed in our marketing chapter they rule People have needs people seek wants But in tech with limited budgets you have to buy what you need which is not necessarily what your geeks want Some things you do need You need lots of bandwidth to the Net lots of storage an internal wireless network and good security That said get your plan develop your budget from your plan and get wbatyou need to do your mission heifer thmrmn Tprhmlom for Mission 155 Backup and Be Secure Good security is part of any good technology plan You need to be secure from the people who want to do bad things on your system and most basic packages like Norton or McAfee and a little dose of common sense do not open attachments on emails from people you do not know will go a long way to keeping your computers and servers secure I also recommend reg ular use of an open source program called Spybotesearch and Destroy that checks for malware and different bugs that attach themselves to browsers It is great free and easy to use The most likely disaster for your technology though is the old fashioned kind re ood tornado electrical storm You have to backupi and get that backup off site Many organizations have their systems programmed to do regular hourly daily weekly backups Great Good The more automated the better because we all forget But make sure that backup is either automatically or by hand taken off site There are lots of good constant backup services like Mozy or Carbonite which are always on and always backing up your most important les Check these services and their competitors out and see about automated ways to get your data off site That s a great list for your tech team and your management team to use as you think about your technology One thing you did not see too much of in that list was your Web site and that is because it deserves a lot more time and discussion neXt Your Web Site There are a number of great resources for Web site design places that will give you lots of advice on ways to improve your site what you want to use your Web site for and options applications and features that you want to include Not the least of these is TechSouporg It has excellent tools for improving nonpro t Web sites There is no point in my being too speci c about your site since whateverl say will be outdated by the time you read it I do however want to give you a framework for your site to make sure you have a template as you work to improve the single most important tool technology offers your organization and its mission You want your Web site to a Clearly convey your passion for your mission Obviously you want your mission statement on your site but stopping there is doing more harm than good Discuss what the mission means show the outcomes and tell the stories Have testimonials by people who have bene ted from 156 MissionRn Pd Mnnnvpmpm your services and if they cannot speak for themselves have staff do it On your Careers page let staff talk about the rewards they get from providing mission and on your volunteer pages make sure there are comments from volunteers about the rich personal rewards of voluni teering at your organization HANDS ON Use video The rst reaction from Boomer managers when I say this is always Video s expensive No it is not YouTube has brought down the standard of video to well cheap Again ask your younger staff Most of them probably did video assignments in high school or college and are familiar with the inexpensive and easy software that will allow them to put up a number of short personal videos on your site A picture is absoi lutely worth a thousand words but videos tell your story in ways that photographs just cannot Use video You want your site to have your mission embedded in some form on nearly every page Be accessible intuitive and easy to use You need to make sure that the site itself is easy to navigate and frankly most sites are not You have three clicks to get from the opening page to what you want to nd More than three and people leave So think through the mapping of your site and do not just add stuff willy nilly Plan it out Add dropdown menus for large categories like About Us or Services so that people will be able to see what they are getting into on before they click HANDS ON Test test test Get some staff and volunteers to look at drafts of the site as it is being developed Ask them about language particularly on navigation bars Does the term About Us make better sense than Who We Are as a navigation cate7 gory Put together a list of simple tasks that are important to people using your site and then ask your test group to do them with you silently looking over their shoulder For example where they would look for a way to get a service nd out how to volune teer locate your IRS 990 form etc See what they do and if it takes more than three clicks or if they get lost go back and try again A Web site that is unfriendly uninformative confusing or out of date is like a map that is smudged in some places but not in othersifrustrating And remember your Web site is your rst point of contact for more and more people Make it a good experience thmrmn Tprhmlom for Mission 157 5 Be informative The greatest bene t that a Web site provides is that of being a deep and wide information pool at very low cost You want much more information on your Web site than anywhere else and you want to remember that the site will be the rst and often only place people will go for information I have already mentioned having a read ing room a part of the site set aside for the best papers books and informative sites on the issues that are most important to your mis7 sion You want to be the goeto place for information particularly for people who are interested in the same issue as you Thus if your orgai nization works in the eld of Alzheimer s your reading room could have a set of pdf papers on different issues about the disease its treat ment how to cope as a family member new developments etc Part of being a lifelong learning organization is having your patrons educated as well m HANDS ON As I have said in earlier chapters you want special passwordiprotected sections on your Web site for staff and board Use these to post as much information as you can again organized intuitively Ask your staff and board what they would want but for starters on the board site put things like contact information for all board members dates times and locations of all board and committee meetings minutes from all board and committee meetings a deeper discussion of every service you provide a list of key staff with pictures and bios your bylaws con ict of interest policies budgets and audits for the past three years For staff put those same minutes of the board meetings as well as minutes of senior staff meetings new developments in services from your reading room copies of all policies all staff forms notices of new positions discussions of staff bene ts etc Again remember to ask board and staff what they want on the site and repeat asking at least annually For donors you want all the ways that they can help and do not forget to include your transparency items IRS 990 forms your audits budgets plans senior staff and board bios For the people you serve you want to include short thumbnails of each service with a For more information click here link for a more inidepth description You also want good current contact information for anyone wanting to talk to a staff person For volunteers you want information on why volune teering is rewarding with your organization and of course the when where why and how of upcoming volunteer opportunities I see more and more organizations that have separate volunteer areas of their sites 158 MissionRn Pfl Mnnthum as they ramp up their use and professionalism of volunteers in their organization Be a great recruiter If you show off your mission and values if you embed them in some way in every area of your site you will recruit people Who are you recruiting You are recruiting everyone in your organizationiboard staff volunteers large funders and small donors Remember that your Web site is often your rst and sometimes only impression point If a ZSeyeareold hears from a friend that volunteering is awesome at your nonpro t the rst place she will go for more infore mation is your Web site Always The same is true with a 307yeariold potential employee a SSAyeariold family member and more and more people from 17 to 70 They will use the Web site rst And to recruit you have to connect and to connect you have to use stories People want to hear about what you do the people animals environments that you save or improve Tell the stories and invite them to come along with you on your mission journey a HANDS ON Here again we get back to the power of video But you have to use it effectively not just pepper your site with unape pealing clips Think it through but remember that video can tell a story better than almost anything You can also use podcasts on your site for oral histories and stories from people you serve but video is best El Help wit9 transparency If people start at your Web site for more infore mation it is pretty obvious that you want to use it to help with the transparency efforts we discussed in Chapter 5 You need a part of your site again easily found where you put your transparency documents At a minimum these should be your current and prior 1R87990 forms your con ict of interest policy and your most recent audit 1 also encouri age my clients to include a summary of their strategic plan as well as detailed biographical information on the management team and the board of directors Make sure you also discuss outcomes in ways that affect the reader Do not just put teXt such as Occupancy up 135 percent as an outcome Turn the number into a person or persons Last year we housed 145 more homeless individuals 38 of whom were children than the year before Let your work shine through the openness of your transparency efforts Be a portal for input In Chapter 10 on marketing you will hear me say over and over and over Ask ask ask and then listen When we thmrimr Tprhmlom for Mission 159 talked about staff management in Chapter 7 l urged you to get out of your of ce and meet with staffito give them more opportunities to ask you questions The more ways people can ask suggest complain point out opportunities and have input the better and your Web site offers that Make sure that for the people you serve and volunteers there are places to comment on their experiences with you and let your board and staff know how to nd those areas and urge them to check them regularly Link input areas in the signature line of your emails Have an idea or a comment Let us know and link to that area of the site Get as much input as possible Then be ready Some of the input may well be ugly but if you do not offer a place for it the unhappy people are more and more likely to go online anyway and gripe A CEO friend of mine told me a year or two back that he sets his Google Alerts to show him every morning any posting on the Web that responds to the search string his come pany name sucks 7 And when he nds the posting usually on a blog he tracks down the issue and either gets back to the person person ally or has a highiranking staff person do it He seeks out input and listens Tell your staff what I have told mine forever Do we want to provide the best services ever Yes we do To do that we need to know what is broken to x it Remember Praise feeds the ego and we all need to be told Good job on occasion So praise feeds the ego but criticism feeds improvement Ask ask ask and then listen I cannot overemphasize how important your Web site is to your mission provision and it will only become more important every day Pay attention to it keep it current and use the checklist above to make sure you are hitting the key components of a successful missionebased site Keeping Current A Review and Renewal Process Now you are up to speed You have done your homework bought what you need installed the hardware and software and trained your staff and volunteers in its missionibased uses They are using it and it works Great So can you relax Perhaps coast for a bit Nope and you already know what is comingiyou have to be at this all the time That is why you need a tech team that is why you need a tech plan So to an eXtent you can delegate a bit but you still need to keep your manager s eye on this issue Try the following four actions 140 MissionRa Pd ManavaPm Increase Your Geek Quotient We touched on this earlier You need to have an IT person either full or part time and you need that person yesterday Beyond just that you also need to send your staff to tech training Overall you need more and more people with more and more technological savvy and that comes naturally as you hire more and more staff who were born after 1980 Obviously tech is too important to have just one person who can reboot the computers or install software or who knows how to deal with a jammed faX or an error message on the printer You have a lot of tech and it needs to work When it does not things tend to stop The more people know the more they will pay attention to technological advances and understand their implications for your organization Make sure your techies talk to your fuzzies about what each group does A lot Check Prices Uses and Outcomes Regularly Set up a schedule to check on communications costs for your phones and Internet access at least annually Have someone check for upgrades patches and new versions of all your software every ninety days You do not need to buy every new version but you do need to know that it is available I update my accounting software about every three years but I have the patch and improvement tool in the software set to automatie cally download whatever is released right away that helps operations or security Talk to Your Peers We have touched on this a number of times Do not reinvent the wheel Use the great ideas that your peer organiZations have had and adapt them to your own needs Read the Nonpro t Press Every single one of the major nonpro t periodicals now has regular features on tech issues and speci c articles as well You need to get and read at least one of these periodicals anyway Now just make sure you read the tech columns as well These periodicals are also online where you can often nd links to useful sites Remember to subscribe to the newsletter at TechSouporg It is the best thing out there in terms of practical useful advice Embracing Tenhnolom for Mission 141 Recap In this really important chapter we have talked about ways to make sure that you are using technology to the maximum mission bene t We rst went over the realities of the wired world and I gave you the following observations to consider 1 The default location for information about your organization is now online all the time 2 To keep up with all the changes and opportunities in technology you need to depend on younger staff and board mem ers 3 The costibene t ratio has tipped permanently to the bene t side but only for exible organizations 4 Tech can get in the way of providing good mission Next we went through applications of technology for nonpro t organi zations and I gave you a large number of examples Third we examined a checklist of technology which was as follows 1 Have a team 2 Have a plan 3 Consider the outcomes you want 4 Consult the young 5 Use all your resources 6 Focus for the best return 7 Buy what you need not what everyone wants 8 Back up and be secure Then we spent some time talking about your Web site because it is so important to your mission future Finally I gave you a sequence of actions that will help you keep current with the technology that can enhance your mission and cut your costs of operation These actions are Increase your geek quotient Check prices uses and outcomes regularly Talk to your peers Read the nonpro t press Awwe One last time The wired nonpro t can survive and prosper The non wired organization is doomed An investment in technology can if focused on mission outcomes greatly bene t the people your organization serves Do not let the tech wave pass you and your organization by 142 MissionRn Pd Mnnnvpmpm Questions for Discussion Who should be on our tech team What parts of our system need upgrading How regularly should we schedule reviews of our Web site our internal systems i Are there technological applications that can improve our mission What are they Are there funds to pay for them from the people who purchase our services What about our Web site What do we need to do to excel in all the areas that were listed What is the most technologically advanced nonpro t in our town How can we learn more about how they got this way N W p v1 CHAPTER 9 Creating a Social Entrepreneur Overview All of us know the common wisdom that smallebusiness entrepreneurs are the handseon people who generate jobs develop new products and services and are the engine of the economy In truth so are many nonpro ts today I must add All nonpro ts were entrepreneurs in their starteup phase But how about now How about your organization Have you been around long enough that you are no longer exible no longer willing to embrace and shape change no longer willing to take chances with your organization s resources The term social entrepreneur has many many de nitions I certainly hear the term thrown around a lot more now than when I wrote my book Social Entrepreneurship Hoboken NJ John Wiley 8 Sons Inc 2000 some years back To some a social entrepreneur is an investor who only invests in companies that do social good or do not do social harm To others it is a business that works in partnership with charities Even others de ne it as a nonpro t that starts a forepro t business Since you are here reading this chapter let me give you my de nition A social entrepreneur is someone who takes reasonable risk on behalf of the people their organization serves Think about it Forepro t entrepreneurs take a risk on behalf of themselves and their stockholders Social entrepreneurs take a risk on behalf of the stakeholders Hence reasonable risk taking is good mission Focus on that adjective reasonahle To get to reasonable risk you need to add to your skill set knowledge of how to do feasibility studies and business plans Yet another business skill that has good use in your nonpro t I want to you become or get back to being a social entrepreneurian organiZation that is constantly on the lookout for how to do more and how to do it better and is willing to regularly take that reasonable risk on behalf of its clientele This means that you will fail occasionally But more often you will succeed in both satisfying and missioneoriented ways that serve your community much better 145 144 MissionRa Pd Manavpmpm In this chapter we ll go over ways to help your organization get comforte able with the idea of social entrepreneurism I ll show you how to decide how much return on investment is enough and the ten biggest mistakes people make in developing their business plan nancials We ll go over how to and how not to seek debt which can be one of the sources of capital that you may need to eXpand and prosper We ll look at ways that your organization can become a culture of new ideas constantly seeking new thoughts from staff and board evaluating them and trying the best out We ll review ways to get comfortable with prudent risk I don t want you to become reckless Bungee jumping with a rope that is 20 feet longer than the drop is not a good idea Prudent risk is what it s all about I hope that by the time you are nished with this chapter you will be excited about the possibilities open to you if you become a social entrepreneur The Characteristics of the Social Entrepreneur To me the core of social entrepreneurism is good stewardship Good stew ards don t just rest on their laurels they try new things serve people in new ways are lifelong learners and try to have their organizations be fonts of excellence Social entrepreneurs have these characteristics They are willing to take reasonable risk on behalf of the people that their organization serves m They are constantly looking for new ways to serve their constituencies and add value to eXisting services ml They understand that all resource allocations are really stewardship investments They weigh the social and nancial return of each of these investments Hint From now on look at your eXpenses as investments in mission What should the return on that investment be m They understand the difference between needs and wants an They always keep mission rst but know that without money there is no mission output These are crucial traits for you to mull over as you consider your organii zational adaptation to the social entrepreneurism model How do you your staff and your board view risk As something to avoid or as something that is part of steady improvement of services to the community What about sere vices Are you doing the same old thing you were ve years ago or can you speci cally list what the organization did to improve services last week the week before that and the week before that Steady consistent improvement Cym rnnI 39n ml mm hum m 145 in services and the constant adding to the value of those services from the point of view of the people you serve and the people who pay for them is an absolute necessity if you are to become and remain a social entrepreneur Understanding and Accepting Risk If you and l and eight other people were to be given 20000 today we would do ten different things with it Some would buy certi cates of deposit some would pay down the mortgage some would buy a car some would pay off other debt and some would go on a vacation or try to win big at a casino Why the variety Because we all have a different willingness to take risks with money We grew up in different eras some of us are children of the Depression some selfeindulgent baby Boomers others took on crushing debt to have a bigger house or better car believing that the piper would never come to call surprisel we are in different places in our lives some of us have kids to put through college or big medical costs staring us in the face and we have different nancial situations to some 10 is a lot of money to some 2500 is pocket change But all of us take risks It is a risk to get in your car and drive to the store It s a risk to get married to have a child to take a job to buy a house to buy a stock or to y on a commercial airliner Some risks are so small that we just accept them as part of life and stop even calling them risks Some are so big that we do not take them We no longer have the stomach for some of the risks that we took when we were younger Some things we never would have ventured as a child we now do without thinkin Risk is relative and our willingness to take it depends on a combination of many things In nonpro t organizations our willingness to take riskior be recklessidepends on the makeup of the people in charge of the organi7 zation as well as on the organization s history and its nancial condition If for eXample there has been a history of recklessness resulting in big failures even with another executive director CEO the board of your organization may be less willing to take on a risk than ifyou have a stellar historical record of success Also the board s willingness to take a nancial gamble will be in uenced by how much money is at stake and how nancially secure you are If you are already nancially empowered it is more likely that your board will be willing to use that empowerment for the good of the com munity In a widespread economic downturn think late 2008 early 2009 there is often a cascade of hesitationipeople not wanting to take a risk to invest build buy or lend People fear the future and their willingness to take risk plummets Your willingness as an organization to take risk also depends on your view of yourself as an organization The rst step is to nd out what the 146 MissionRn Pfl Mnmwpmpm EXHIBIT 91 Internal Risk Assessment Tool T his form will help your organization assess its willingness and readiness to take risks Below are four statements Read all four and then decide which one best descr res your view of the most appropriate role for your organization Please note that even though your organization is a nonpro t your staff and board can interpret the role of the organization differently m of government Our organization gets most or all of its funds from some branch of government As a result we should provide only the programs that the government asks us to and is willing to pay for GoverImJent contractor One or more branches of government contract with our organization to provide services Government policy heavily in uences us but we are able to do some things outside of this source of funding Local charity Our organization should provide the services that our community says that they want We know what they want by what they fund us for either individually through United Way corporate giving or in fees for services Nonpro t business Our job is to provide services to support our mission To accomplish this we may accept funds from the government local or smte funders corporations individuals insurers or others I think that the description that best ts our organization s role is check only one D Arm of government D Government contractor D local charity D Nonpro t business people in your organization think about risk and nd it out early in the process HANDS ON Try this wellrtested method of nding out your risk quotient Copy Exhibit 91 and hand it out to your board senior staff and social entrepreneur team Let them ll it out tally the result and then discuss the answers What you will nd may be very interesting and will get the issue on the table I Obviously the farther down this list of choices you go the higher your organizational willingness to take risks Do not assume that there is a right answer to the survey There is only your board and staff s answer And you need to know it now before you talk through business ideas Cym rnnI 39n ml mm hum m 147 with any seriousness The worst thing that can happen is for you not to realize that the staff is a group of social entrepreneurs while the board really sees the organization as an arm of government or vice versa Ask now and you will not only nd out where people stand you will genere ate discussions that will bene t you throughout the business development process Risk is here risk is now and prudent risk is part of your job as a service provider in your community Business Ventures Nationally thousands of nonpro ts are turning to outside businesses to sup plement and broaden their income streams In my twentye ve years as a consultant I have helped hundreds of nonpro ts throughout the country examine their capabilities in this area and have assisted them in developing their business plans As an executive director I started four new businesses when our traditional funding was cut drastically The development of good business plans by a nonpro t is a complex enough issue to merit an entire book by itself which is whyl wrote Social Entreprenemism But here I want to review the steps of business plan development focus on the preparation of nancials and review the big mistakes people make in preparing their nancials Hopefully this advice will help you avoid the big pitfalls in business development and will excite you suf ciently to begin to think entrepreneurially but with appropriate discipline keeping that risk reasonable First a reality check No business is going to make you independently wealthy as an organization nor is it going to make you independent of your current major source of funding Nearly all of my clients come to me and state that one of their main reasons for wanting a new business is to become nancially independent of the state feds county foundation United Wayl Sorry this is not going to happen The services that your major funders will pay for may not be provided by anyone else and in all likelihood they will continue to be a major part of your income stream far into the future You can by expanding your income sources become less dependent on the major funders But independent Not likely Second remember that business income is okay and will not result in a threat to your 501c3 status unless it grows to truly dwarf your charitai ble functions Also most of you will start new ventures that are related to your mission anyway Why Because it s what you know and if you are a professional in education or in the arts or in substance abuse treatment you are not going to start a WaleMart or an engineering rm People take what they know and nd new markets for it You will too and in most cases 148 MissionRa Pd ManavaPm about 90 percent of my clients the business that you start will result in more mission being provided which is good Finally the idea of a business is to maximize pro ts and for you this is only slightly diluted I ll address the issue in a few pages Suf ce it to say here that any pro ts you make will have a social use either to fund your mission reserves or to subsidize a moneyelosing program You are not just starting this to make a ton of money There is a social a mission purpose The Steps of the Business Planning Process Let s start the examination of the nonpro t business planning process by looking at the steps listed below Note that this is a different process than the forepro t world uses There most people start with number 4 idea generation and that s ne for them As a nonpro t manager you need to do this list from start to nish even if in another life you started with number 4 If you do not do these in order you are really going to get yourself in trouble Take them one at a time and you will do ne 1 Establish Reestablish Your Mission We ve already talked at length about your mission statement and the need for it to be up to date and re ective of the organization that you want to become rather than the organization that you were in the past twenty years If you have not already reviewed your mission with your board and staff now is a good time Make sure that your mission statement does not conflict with the idea of your business venture and that you all agree that a new service ts into the parameters of the mission statement 2 Establish the Risk Level of Your Organization Using Exhibit 91 go over your organization s willingness to take on risk with your board and senior staff How much income do you need from this venture How much social outcome Talk this through with great detail and frankness If you don t you may wind up leading the charge up the hill and turn around to nd that there is no one behind you They thought it was too risky 3 Establish the Mission Uses of Pro t and of the Venture Of all the steps that people miss this is the most important You simply have to specify what you want to do with the money you will earn and show a direct mission outcome from the new venture If you do people will Cym rnnI 39n ml mm hum m 149 be able to rally around the eXtra work and risk involved in the business development process If you do not they won t be able to focus on the outcome they will just question why they have all the eXtra work just to make money uh FOR EXAMPLE A number of years ago I was asked by a large g provider of services to the developmentally disabled in the South west to come and facilitate a session with board and staff on the development of a new business The executive director was totally committed to starting a new venture but it quickly became obvi7 ous that the board and staff were anything but excited about the prospect Questions such as Why should we try to be in business We re not IBM abounded After about 45 minutes of this I asked the group to imagine what they would do with unrestricted funds of 10000 After a brief pause the ideas started ying around the room To make a long evening s discussion short the focus came to rest on the idea of establishing a scholarship for three people with disabilities to send them to summer camp each year something that the state would not fund I then asked the group Where are we going to get the money for that They immediately chastised me with comments like We can t get it and you said just to imagine what we would do I said Okay but what if a business one that employed people with disabilities in the community was able to net 10000 in two or three years and then its ongoing pro ts were used to support the scholarship Would you support the idea of a new business then Yes was the answer with great enthusiasm The group had gone from staunch resistance to avid support simply because they could now wrap their heads around a tangible mission outcome Postscript The organization started a swimming pool cleaning service three months later with developmentally disabled persons on the crews Three years later it had broken even pro ted almost 15000 and pro ted 12000 per year for the neXt ve years Each year when they awarded the scholarships they reminded everyone that this was money spun off from their business I Establish the uses of your pro tispeci cally For eXample name the program that will be subsidized by the pro t and list the amount you need per year and by when to accomplish your social goal Then when you nish your business plan you can look back and see if your business meets your goals for social outcome 150 MissionRa Pd Mnnnvpmpnt 4 Idea Generation Only when you have done numbers 1 through 3 should you seriously con sider what it is that you and your organization can do to earn eXtra income and provide new services In developing ideas use your staff and volune teers They almost certainly have thought about what the needs are in the community and how you could meet them They just may however never have had the forum in which to voice them HANDS ON Get your staff together for a brainstorming session with a facilitator Explain the need for a business and the social outcome that the business will meet Then ask for ideas rememe ber in brainstorming every idea is a good one In a minute or two the ideas will start to ow If there are problems in getting the group started use the questions that follow What is your organization s primary mission as a nonpro t organization What are your organization s core competencies What are the markets the groups of people you want to target What do these markets really want How do those wants match up with your competencies you we When you have your list develop some criteria against which to weigh each idea For eXample you might want to prioritize businesses that can be started up in fewer than siX months with no more than 10000 invested and have a direct social impact The combination of criteria will be up to you but by establishing what is important now you can fairly weigh all your potential business ideas and not get the people whose ideas do not get followed up on mad at you Feasibth Study There are two steps to establishing feasibility and they represent two dif ferent kinds of feasibility studies preliminary and nal In the preliminary stage you take three to ve pages and review the business its markets in general and what kind of services are being provided in this market In the nal feasibility study you go into much greater detail about the market you want to serve a de nition of the service you want to provide why the market wants this service how you will provide it the barriers to success and how you will overcome them and preliminary nancials r HrnrrI 39n iaFrnhv hum m 151 The emphasis in the feasibility study phase is Can we do this Do we have or can we get the resources to accomplish this and Does it meet our social outcome goals If you do your homework and complete the feasibility study well the majority of the work in your business plan will be done Do not however automatically proceed to the neXt stage without con sidering the key question Is this business feasible In some cases it will not be and then your choice is to rework the idea or wait for conditions to improve For eXample if you are considering a recycling business you might have to wait until the market for recycled goods rebounds to a certain level Or if you are in a highly leveraged business eg buying renovating and reselling lowiincome housing you perhaps could not afford to start the business if mortgage interest rates were high Remember my maXim of reasonable risk The idea of a feasibility study is twofold to focus you on what the business is and to see if it is feasible Some businesses will not be and that is okay Whatever you do however do not throw out the idea or the work that you have done Most ideas that make it to this point are good ideas but many are just waiting for a market to move under them Think about recycling It is a great idea a terri c businessiwhen the price of the recycled goods is high enough When that price is down recycling loses its appeal in FOR EXAMPLE By now almost everyone has heard the story of g the development of Postiitsithe reistickable notes from SMiand how the developer had to battle against the odds to get his case heard and how the product is the single most successful product 5M has ever launched What you may not know is the part of the story about the glue that is used on Posteits It is a glue that failed all the tests that the chemists put it through Prior to Post its SM s criterion for adhesives was that they stick to something and hold things together This glue failed that test but was not discarded and thus was available when the new product idea was presented The chemists simply kept the formula in case an unanticipated condition developed which it certame did I It may for you too Don t throw away your work Marketing Plan The marketing plan portion of a business plan is crucial Here all the ques7 tions that need to be asked are the same ones we will discuss in detail in 152 MissionRn Pd Mnnnvpmpm Chapter 10 Who are the markets What do they want How do we know How do we let them know we are here You want your business to be mar ket driven not service driven and that means that you will probably have to change the method of service delivery a number of times from your original concept through the business planning process as you ask the markets what they want Business Plan Now that you have done all the preliminary work and found that your business is feasible why go on and write an entire plan It s a lot more work and you probably want to get going You like the idea you ve come up with and want the mission bene ts it will hopefully spin off Well sorry Remember that the entire business development process is designed to take something inherently risky and reduce but never eliminate the risk to a reasonable level for your organization To do that you have to write the plan Here are three speci c reasons 1 Writing a business plan forces you to take an objective critical unemoe tional look at your business project in its entirety 2 The nished product is an operating tool that if properly used will help you manage your business and work toward its success 3 The completed business plan is your means of communicating your ideas to others and provides the basis for your nancing proposal Over half of all new businesses fail within the rst two years of opera tion and over 90 percent fail within the rst ten years A major reason for these failures is the lack of planning If you have a wellewritten business plan that takes into account all the variables involved in starting a new busie ness and is based on reality you can move your venture on the road to success Implementation Once the plan is written reviewed and adopted the nal stepiand cere tainly not the easiestiis to go and set up and run the business Obviously only through the implementation of the plan can you hope to achieve the social outcomes you desire as well as the new income streams that are so important to your nancial empowerment Remember the most successful entrepreneurs fail the rst few times before they hit it big I do not want you to be like them I want you to develop a sound business plan based on good research and valid marketing r HrrtrrI 39n iathv hum m 155 and succeed and in a big Way the rst time out With a solid business plan you should be taking only prudent risks not the leap off the cljf that so many small businesspeople refer to A business plan consists of several parts The most important compo nents are A coter letter identi ing the business plan as tbepropeny of your orgae nization This cover letter includes your name address and contact information and the month and the year that the plan is written or revised One paragraph states in simple terms WhO the business plan belongs to and the limitations on its distribution 1 page A table of contents 1 page II A summaty of the plan with a briefparagrapb about yourorganization A fouriline description of the product or service a foureline description of the market a brief paragraph on production and one on distribution if needed and a short paragraph on the nancing requirements 2 to 4 pages A description of your organization and its business with tbefollowing subheadings 4 to 6 pages a The organization The product or service til The target consumer ml The consumer s need for the product or service In The sales strategy A description of the market for your product or senice including information on the competition and cost price comparisons between competitors and your organization 4 to 8 pages A marketing plan that includes information on til The markets In Customers Competitors E The macroenvironment Technology ml Government Culture How each of these areas affects the marketing and selling of your product or service Evaluation of potential pitfalls IN The nancial plan With sources and applications of cash and capital and 154 MissionRn Pd Mnnnvpmpm a An equipment list i A balance sheet I Breakieven analysis a Cash ow estimates by month for the rst year by the quarter for the second and third years projected income and eXpenses for the rst three years and notes of explanation for each of the estimates 8 to 10 pages mi Other reports and statements that can be included in this section but are not appropriate for all plans are I Historical nancial reports for your organization such as balance sheets for the past three years and income statements for the past three years 5 A current audit report a An annual report if one is available ml An appendix with a Management resumes Your organizational marketing materials and Web site URL 8 Other pertinent material about your organization and its work 5 Letters of endorsement 5 Copies of signed contracts for business if you have them How Much Return on Investment Do You Need Before we get to the nancials in your plan let s take a short break and look at a key issue that will be shown or disproven when you develop the numbers for your plan How much return should we get on our investment our risk The answer It depends u FOREXAMPLE A nonpro t organization in Colorado was develop7 a ing a business plan for a janitorial service that would employ some of its clientsipeople with developmental disabilities In complete ing the plan the staff and board found that they could go two ways First they could clean upscale of ces with crews made up of both workers with disabilities and those without If they proceeded this way they would make about 25 percent return on their investment due to high prices and high pro ts Or they could clean factory and warehouse space using crews with a much higher proportion of people with disabilities If they did this how ever they would make less money The quandary Should they earn more dollars and employ fewer people with disabilities or employ more and make less I r HrrtrrI 39n iathv hum m 155 n FOR EXAMPLE A performing arts nonpro t in Connecticut decided a to offer children s theater classes to optimize staff and volunteer talents and to take advantage of the theater building in late after noon when it was empty The center knew from its nancial projections that it could make some money but its dilemma was whether to charge a high fee say 1207for the lessons turning a larger pro t or charge lessi407thus making the class afford able to more youngsters but receiving very low returns on the investment What should these organizations do How much return on investment R01 is enough for an organization that is going into a new venture Are there any benchmarks or ratios that should be followed Is there such a thing as making too much money How can you ensure that the staff and board of your organiZation are getting the most from your limited resources These questions are among the most commonly asked by nonpro t staff and board members as they examine the feasibility of new ventures and rightly so Analyzing R01 is not as simple for a nonpro t as it is for a forepro t organization A forepro t invests in a business or a piece of equipment or a new employee and it is concerned with traditional nancial ROI How long will it take for me to recover my investment and how much pro t will I make A nonpro t making the same investment should also be concerned about financial return but has to add to that an analysis of mission return There will always be services that you need to provide since no one else is doing them or no one is willing to pay for them but that are very missione rich even if they are moneyepoor That s okay but if that is all you do you ll be out of business We ll look more at this in depth in Chapter 11 on nancial empowerment Here I want you to keep in mind what I ve said a few times already When your nonpro t makes any expenditure it s really an investment in mission If you believe that then you should look for a return on that investment some combination of nancial return and mission return For the purposes of this chapter let s assume you are looking at veni tures or services that do in fact make money and spin that pro t off to the remainder of the organization Hint If you re like most nonpro ts you already do that at least I hope you do with one key service It s called your development or funderaising department If funderaising which does no mission does not make a pro t it is a bad investment If it does make a pro t it can contribute funds to doing more mission That s the return you are looking for 156 MissionRn Pd Mnnnvpmpnt Since nonpro ts don t just look at nancial return the two organizations in the examples above had to consider not only their earnings but also the social impact of its new venture jobs for people with disabilities or arts for kids Having more of one meant having less of the other although that is not true in all cases This twin return need makes the analysis more complicated though still fairly straightforward Let s look at the way the performing arts organization described in the second example analyzed its two returns Before starting the theater classes the organization staff and board dise cussed the purpose of the venture They set goals for the classes and made sure that these goals supported the mission either nancially or in service units Suppose for example that the main goal was to expand appreciation for the theater throughout the community starting with its youngest meme bers while at the same time not losing money To accomplish this goal it would be of the greatest importance to keep tuition low so that the most possible children could attend If however the main goal was to contribute 15000 a year in related pro ts to a fund for renovating the theater in three years the pro ts become paramount and tuition may need to be higher although not so high that no one comes to the classes In this case cash return is a higher priority than social return It is important to note that putting a higher priority on cash than social return is not only acceptable in certain cases it is essential even for the most compassionate nonpro t staff or board member As we ve noted repeatedly don t associate pro ts with bad things making money in one area can help subsidize another area of service that will never pay for itself Again think about your fundiraising staff You want them to make a pro t each and every year Next the staff and board developed feasibility studies and a business plan These documents gave them a good handle on the total investment including cash staff time board time and volunteer time They were thus able to make a true comparison of the cost and bene t of various outcomes As in any investment decision and that is exactly what this is there are options Our theater group for example could start the class with a high price and pro t start with a lower price and pro t leave the money in the bank or try a different tack altogether Let s examine how they might view each option Assume a cash cost of 25000 to start the class and a total staff and an investment of volunteer time equivalent to 5000 Look at the table on the following page to see the results of three options Obviously the last optionileaving the money in the bankiis the least risky but it also offers no return in service units and in visibility The decie sion between the rst two options high or low tuition is tougher and will depend on the goals the board and staff set earlier Do they want cash or r HrrtrrI 39n iaFrnhv hum m 157 Option One High Tuition Smrtiup costiCASH 25000 Smrtiup costiTIME 5000 TOTAL COST 30000 Pro t per year 2 500 Studean per year 100 service units Cash return on investment in year one 250030000 or 83 Invested cost per service unit 30000100 or 300 each Option Two Lower Tuition Smrtiup costiCASH 25000 Smrtiup costiTIME 5000 TOTAL COST 30000 Pro t per year 500 Studean per year 225 service units Cash return on investment in year one 50030000 or 16 Investment cost per service unit 30000225 or 13333 each Option Three Leave Funds in Bank at 7 Smrtiup costiCASH 25000 mrtiup costiTIME 0 TOTAL COST 25000 Net income 1750 25000 at 7 Studean per year 0 service units service And if their goal is to have 15000 a year in pro t for the capital fund are the outcomes of any of the options good enough Probably not One aw in this analysis is that we can t consistently quantify the risk associated with the business Is the risk of failure and of losing some or all of your investment high or low You will need to make some estimates of risk include these estimates in your analysis and weigh them in your decisionimaking process The other intangible to consider is the bene t to your organization from exposure For example if your museum is offering classes a low fee will usually bring more people into the museum and therefore provide more exposure for the museum Greater exposure translates into more potential contributions visibility public awareness and overall goodwill Good management is basically resource allocationimaking the best use of what you have and committing resources where they will do the most good By setting and sticking to your goals carefully accounting for all your costs and reviewing your options fairly you and your board can make the best decision possible with the information available regarding your new business No manager can ask for more than that 158 MissionRa Pd ManavaPm Preparing Your Business Financials Now that we ve examined your two returns let s look at how to generate the numbers for your business plan Too many of my clients focus on the markets on the service or on the product and forget the key parts of the nancials Remember no money no mission so we want to get this part right There are three steps to go through in developing your nancial infore mation They are listed below Assemble Your Financial Data In the early stages of product or service selection and feasibility analysis you should have gathered most of the information you need to prepare your business plan Your work now is to re ne and organize that information check the accuracy of your estimates and replace as many estimates as you can with rm gures For eXample for the purpose of your feasibility study you may have estimated that your rent payment would be 600 per month In your actual business plan you may state that you are leasing property at 1124 East Church Street for 675 per month Following is a description and listing of the information you need SALES TARGETS In order to make reasonable nancial projections you need to predict as accurately as possible what your volume of business will be There are two major constraints here the market and the assets like money skill and time that can be put into the enterprise One way to approach these constraints is to estimate based on your market research what the potential market for your product or service is if you have restraints on money skills or time The neXt factor is your internal constraints This infore mation allows you to estimate with some con dence what your potential sales will be You should project sales for at least a threeeyear period Be careful not to project growth that cannot be sustained by the mar ket For eXample if you are selling janitorial services in a community of 10000 people with only twentye ve business establishments there are only a limited number of the businesses that may be willing to buy your services This is true even if you provide topequality service and beat the price of all the competition You simply cannot sell any more Conversely in a big city there is an unlimited market for janitorial service at the quality and price you offer But if your potential workforce is limited to about ten employees it makes it dif cult for you to reach your entire potential market Finally remember that there is a relationship between price and sales In general lower prices mean more sales but only to a point There is a point at which no matter how low you price your service no one will buy r HrnrrI 39n iathv hum m 159 it For example if you clean swimming pools you can have only as many customers as there are pools Even if you give services away you will have no additional customers So in your sales projections remember to consider the impact of price and of the competition PRICING INFORMATION Pricing is the art of nding the price that your mar ket will pay that will cover your production costs and provide a reasonable return on your investment By using the information you gathered in your marketing research you can determine the going price or price range for products or services that are similar to yours Next set a target for the amount of pro t you wish to make during the rst three years of opera tion This information is used to set the price after you analyze the various costs involved in your operation As I have said repeatedly nearly all nonpro ts are trained to undefprz ce their services and thus they do Do not assume that you will compete solely on price Perhaps you can do what your competition does better faster or with less turnaround time Consider both the xed costs and the varie able costs in your pricing mix as well as your pro t and your competition Remember you will have the tendency to underprice ght it START UP COSTS Capital Items These are the oneetime purchase items that you need to oper7 ate your business This category includes the purchase of land buildings equipment and furniture These are the assets that continue to bene t your business operation Items like inventory and supplies that are used up in the course of conducting business are expenses With the exception of land you depreciate your longiterm assets Depreciation is simply an accounting method of distributing capital costs to the expense of the business opera tion Some nonpro ts do not bother with depreciation because they do not pay taxes and cannot take advantage of depreciation as a business expense deduction However depreciation gives you a more accurate picture of the cost of running your business Largeiticket items should routinely be deprei ciated even if the business is a nonpro t otherwise you never recover your full costs For your larger expenses review one or two nancing options even if you plan at this point to pay cash Borrowing or leasing might be more advantageous and you need this information to test the nancing options Other Initial Costs In addition to capital items you have other costs related to getting your business started that are not re ected in your operating expenses Items such as legal fees costs incurred to set up an accounting system licenses and introductory advertising are included in this section 160 MissionRa Pfl Mnmwpmpm OPERATING EXPENSES Fixed Costs These are the expenses that you pay regardless of whether you sell any product or service They are sometimes called indirect costs or overhead These expenses include items like rent heat and electricity and salaries Most of your xed or indirect costs change at different levels of sales or production For example if you operate a mailiorder nursery you produce a certain limited number of plants to sell from one greenhouse If you wish to sell more you need two greenhouses This action increases your capital costs and xed costs If you anticipate growth during the rst three years of operation you need to estimate your xed costs at various sales levels and identify the levels where your xed and capital costs increase Variable Costs These are expenses that vary directly with the number of items or services you sell Variable costs are also called direct costs These costs vary depending on the type of business If you manufacture a product then all of the material costs are considered variable costs If your product is made by workers who are paid only for contracted work then their wages are part of the variable costs If however your workers are salaried you must pay them regardless of whether there is work to do This makes salary expense a xed cost Analyze the Financial Data You Gather After you organize the critical nancial data you are in a position to analyze the information to help you make decisions about nancing and pricing your product or service There are speci c types of analysis you need to perform Each of these is described in the sections that follow STARTUP COSTS AND WOMNG CAPIZAM NEEDS Starteup costs are those costs you have to get the business up and running Licensing land building equipment raw materials and training are all startiup costs Your working capital is the money you need to operate your business during its starteup phase and then when the business is operational this money becomes what you run the business on between the time you deliver a service or manufacture a product and the time you get paid Your working capital needs are not xed For instance if you make 1000 widgets a month and you get paid in thirty days for those widgets you need to have enough working capital to pay for the direct costs of the widgets plus your operating costs overhead for the same period But what if your customer suddenly decides to pay you in fortye ve days Now your working capital needs go up by 50 percent As noted before more businesses go out of business making money than losing money because they forget that fast growth Cym rnnI 39n ml mm hum m 161 starves businesses of working capitalwf cash For more on working capital and some handsion estimation forms see Chapter 11 BREAKEVEN ANALYSIS Breakeven analysis provides you with a sales objective that is expressed in either the number of dollars or units of production at which your business is neither making a pro t nor losing money The breakeven point is the point where sales income is equal to xed costs plus variable costs for a certain period of time Breakeven analysis is a technique used to analyze your cost information The technique helps you to decide how much you have to charge at Various levels of sales or how much you have to sell at various prices in order to get a return equal to your expenses Breakeven is calculated by the following formula Fixed costs Unit selling price 7 Variable costs per unit You may nd that to charge a competitive price you have to produce an unrealistic number of sales to achieve a pro t In this case you need to reexamine your cost assumptions to see if expenses can be reduced How important is breakeven See my list of the ten biggest mistakes people make on their nancials later in this chapter Breakeven is there and it s there because it is important PRO FORMA PROFITANDLOSS STATEMENT This statement is a projection of your income and expenses Like the breakeven analysis it provides a further check on the soundness of your venture Mostbusiness plans project income and expense statements for at least three years I recommend that you project income and expenses for a threeiyear period the rst year by month and the next two quarterly However the farther you move from present day the less meaningful your numbers become To develop your pro tiandeloss statement simply use the gures from your operating expenses form for xed expenses Subtract your expenses from your income to show your pretax pro t add taxes if you anticipate incorporating your business as a foripro t enterprise and subtract any pro t sharing or bonuses The nal gure is your retained earnings or fund balance PRO FORMA CASH FLOWANALYSIS Your cash flow is probably the most impore tant analysis for internal management of your new business just as it is for your nonpro t It is the document that banks are most interested in because it indicates your ability to pay back your debt The cash ow analysis shows how much cash is needed when it is needed and where it comes from After you develop the cash flow analysis use it as a check on how your business is doing If you spend more or take in less cash than you anticipate you 162 MissionRa Pfl Mnnnvpmpm may run into trouble Variation from your cash ow projection helps you see early on if you are likely to run into cash problems This analysis gives you a chance to take action and correct the ow of cash before you run into a serious shortage Do your cash ow by month for the rst year and quare terly for the neXt two This will give you the most realistic View of your cash situation and then you can design a credit policy to get you over temporary shortfalls but only if they are temporary Prepare the Financial Data to Incorporate It into Your Formal Business Plan The nancial section of yourbusiness plan should include the following ve displays PRO FORMA SOURCES AND APPLICATIONS OF FUNDS This statement identi es where you intend to secure the funds you need to begin your business and how you intend to spend the money In order to prepare this document you must rst look at your starteup costs and cash ow analysis to determine how much money you need to start the operation and how much working capital you need to carry the business until it generates its own revenue Next identify where you anticipate getting your money your fund sources in one column In the second column list the ways you intend to spend or apply the resources that are available THE FINANCIAL CONDITION OF THE OWNER Be sure you include descriptive statements about the nancial condition of the organization initiating the new business in this section of your business plan if you are going out side your organization for loans This includes any information you believe reassures the bank that the nancial position of the parent nonpro t orgae nization is sound It also includes your nancial statements for at least three years audited if possible and a copy of your annual report if available PRO FORMA BALANCE SHEET AND PROFIT AND LOSS STATEMENTS This statement is prepared to show the anticipated nancial condition of your business to bankers and others who wish to help you nance your venture Many times this statement is completed for threeeyear periods I suggest that the rst year be monthebyemonth and the second two years presented quarterebye quarter just like your PampL The rst balance sheet shows where the business is on the rst day of business and the second a month later You already prepared your pro forma pro t and loss statement for your own analysis of the potential pro tability of your business in the future BREAKEVEN ANALYSIS Include a short section that indicates the number of units you must sell at the asking price in order to break even If you can nd Cym rnnI 39n ml mm hum m 165 any information about the business you are entering that indicates typical sales for your demography or any other information that shows costs and anticipated sales based on sound information be sure to include it PRO FORMA CASH FLOW Include a pro forma cash ow projection for at least three years The rst year is a monthibyimonth projection The following years can be done on a quarterly basis Remember this is the most important document for your banker Compile the information with care because it provides you with an invaluable measure of how your business is doing Working with these nancials will give you a much better idea of how your business will operate let you have a clearer idea of the risks you will run and make the policy decisions for the senior management and board much more prudent The Ten Biggest Mistakes People Make on Their Financial Projections Now that we have looked at how to prepare your business plan nancials let s see what not to do In working with hundreds of nonpro ts developing plans to start or acquire businesses I have seen a lot of great plans and a bunch of soiso ones It seems to me that nonpro ts are quicker to get the marketing concept to understand the idea of meeting market wants than they are to do really good indeed useful nancial statements I have a week s worth of theories as to why this is but perhaps the most salient is that all of us in the nonpro t sector have been trained by our funding streams since we were right out of school how to do nancials that don t cover all of our costs how to rationalize expenditures that may or may not be related to the program how to double up maximize match make something out of nothing This accounting alchemy is dif cult to overcome in developing a business plan and it leads to serious business planning problems that I see repeated over and over again In order to help you perhaps avoid some of those common and often fatal to the business mistakes I have developed my topeten list below Note that the list is in reverse orderithe most common business mistake is number 1 at the end 10 Many People Do Not Read Financial Projections after Theyire Prepared Now why would you spend the time putting together nancials and not read them Well lots of people do and mostly because they are unreadable they are too long too weighted down with appendices too arcane to actually read through Solution Have an objective outsider 164 D 00 l MissionRn Pd Mnnmrpmpm read edit and improve your plan before you send it to the board The same solution will help you with the next two items Financial Projections Do Not Support the Stated Goals of the Business As I ave said repeatedly the point of your nonpro t s going into business is to a do more mission by having the business be part of the mission Cb earn money from an unrelated business to then use to buy more mission by supporting another program or c a combination of the two The trouble with nancials for a new business is that too often decision makers get so excited about the business that they forget about the pointithe overall mission If for example the new business s nancial projections show a pro t of 15000 per year for the second through the fourth year that may be great But if the point of the entire exercise is to get a 30000 per year boost to support a key program the numbers are not meeting the goals We have already talked about this a bit but it bears repeating Numbers in tbe Profiteandrloss Statement Cash Flow Analysis and Bali ance SbeetDo Not jibe his is yet again a surprisingly common problem People put together different nancials at different times the sources and applica7 tions one week the pro tiandiloss PampL statement the next the cash ow after that They then revise each one a number of times but do not remember to crossicheck the numbers and wind up with a lot of mistakes For example if in revising and neituning your numbers you merely change the interest rate on a loan from 80 to 775 percent that changes the interest rate shown in the PampLs the debt service shown in the cash ow any calculation that you may do of the cost of cap ital and the display of liabilities in the opening balance sheet If you change one or two and not the others your numbers no longer jibe and someone reviewing your planiparticularly a banker who may be considering lending you moneyimay rethink your business acumen Understand that in my experience the numbers are not usually off just by a quarter of a percent 1 see things like the Sources and Applications noting the purchase of 250000 of factory equipment and no depreciation in the PampL or a loan for 300000 in the balance sheet and the appropriate interest line in the PampL but no debt service payments shown in the cash ow Little things like that Little things that can sneak up and bite you The solution Just as with numbers 10 and 9 have an objective outsider look at your numbers and make sure that they work with each other People Do Not Do a Cash Flow Analysis or Create just One Cash Flow Analysis Each Year PampLs are nice balance sheets are cool 7 breakeven is important but you live and die by cash ow When I do training on this subject I GreatMn y mi mm hm w G 165 make all the participants write this down CASH OXYGEN Then we talk about how long one can live without oxygen and how this translates to your organization You ve got to know your cash situation and see cash shortfalls coming The solution is to have cash ow projections for six months out Yet agencies thatI work with repeat edly don t do them or do them only on an annual basis Particularly in a business startiup doing a yearly cash ow analysis instead of a monthly or biweekly one is a recipe for disaster In truth it would be better to not have one because a yearly projection too often provides dangere ously outeofetouch information An annual cash ow predicts the cash at the beginning and end of the year only with nothing about the status in the middle It would be comparable to assuming that temperatures are cold yeariround if you measured the temperature only on January 1 and December 51 Do cash ow projectionsiand do them on a monthly or biweekly bas39 1s People Do Not Allow 5m Adequate Number ofDaysfor Accounts Receive able Unless you are a retail business always assume that people are going to pay you as late as is possible Then add seven days for the mail or for the bank to release your electronic transfer Then add fe teen more for bureaucratic messiups and an extra twentyione days if you get your funds from the federal government Lf you assume you will get paid too soon you will not set aside enough working capital to get you through Receivables are part of your cash ow estimation process HANDS ON Think of this scenario You ask a customer How fast do you pay and he honestly tells you Thirty days So on April 8 you provide a service and bill him expecting to get paid thirty days lateriMay 8 But by May 18 no payment has arrived and you call the customer Where s our payment you ask He responds Like I told you we pay in thirty days That hasn t passed yet What didn t you do You didn t ask Thirty days from when From when we do the work or from when you get the bill or from when you post your payables or from the end of the month or or or In this case the customer posted its payables at the end of the month April 50 not April 8 Thus thirty days became ftyitwand your nonpro t had to oat that difference 166 MissionRn Pd MnnmerPm 5 People Do Not Understand the Concept of Breaketen Analyst s Breakeven is ueiy important to good business planning for nonprofe its and yet few managers and board members really understand how to compute it and more important what the numbers really mean First breakeven is computed by the following formula Fixed costs Price 7 Variable cost This calculates the units of service or number of widgets you need to sell to break even in a particular timefmme For instance if you were selling widgets for 10 that had a variable cost of 4 and you needed to pay off a xed cost of 3000 per month you would need to sell 500 widgets 300010 7 4 per month not to lose money that month The value of this projection is to allow you to see how much sales volume is needed to stop losing money and then to calculate w many months it will take for you to get up to that sales volume Unfortunately many people take breakeven to mean the volume of sales that will let you start to make money for the ltfe of the business and it is anything but that Thus they make incorrect and overly optimistic assumptions about the business and assume that the money will start to roll in long before it really will People Do Not Understand Mum931 s law Here s a news ash Stuff breaks people get sick machines get stuck storms occur airline ights get canceled and customers change their minds or get red or lose their income stream Mr Murphy and his Law show up all the time To paraphrase the crude but accurate bumper sticker Stuff Happens If you do not allow for things not to go as planned you will be very unhappy In terms of your nancials that means not cutting your working capital so close and your cash so thin that any one of a hundred things could put you under I recently saw a business plan that had projections of 250000 income per year and a net pro t of 34 each year And on the basis of these projections these folks were prepared to borrow 200000 over ten years I did my best to talk them out of it Foripro t businesses have a technical term for their Murphy Money It s called Contingency Funds You need such a fund as well People Do Not StunNew Businesses wit9 Enough Gus9 Reserves This mistake is a combination of nearly all the items that have pre ceded it People don t do or understand breakeven so they do not reserve enough cash They don t do a cash ow analysis so they do not know how much cash they really need They don t allow for a lengthy enough receivable time so they do not reserve enough cash They forget A W Cym rnnI 39n ml mm hum m 167 about Mr Murphy and don t give themselves a cash cushion Sounds like I m repeating myself If you doubt me remember this More businesses go out of business making money than losing it That s right How They get starved for cash and close down People Price TbeirProduct or Service Too Low This is a bigeleague mistake and easy to understand given nonprofe its training in getting paid for work at less than costs In a new business you must a charge enough to pay all your eXpenses or Cb have very deep pockets 1 have heard people tell me in their business plans on more than one occasion that they will compete based on price before they know what their costs are You would think they were an airline the way they talk about cutting costsiand we all know how nancially healthy our airlines are If you think you can compete on price greatibut read on before you think you can People Do Not Take into Account All Costs When Preparing Financial Projections This is so common it must be a communicable disease I have lost track of the number of nonpro t executives who do not add their time into the overhead of the new business even though they will be spende ing 25 percent of their time on it for the rst siX months Or there are those who leave out rent as an eXpense since our building is paid for Let me put it this way If your competition is charging for it you should be Or let me put it another way If you are not accounting for all your costs you are probably losing money on each sale and you will not make it up in volume Be brutal in this area Compare your business PampLs to your own organizational books Are all the same line items there If not why Are the additional things that are different accounted for Is there a realistic number for depreciation administration rent utilities support services accounting and bad debts If you are manufacturing is there a contingency for wasted raw materials Put everything in or you do not have a realistic view of what is really going on N So there they are The ten big mistakes that you can avoid if you try They are easier to make than you might imagine Creating a Climate of New Ideas One of the most important things that you need to do if you want to develop or enhance your social entrepreneurism is to develop a climate of endless new ideas one in which suggestions are encouraged ideas are fairly weighed and the best ones implemented 168 MissionRn Pd Mnnmrpmpm In line with our theory of the inverted pyramid of management this means everyone s ideasiboard staff management and line You need these ideas to stay fresh to see new methods of providing service and to keep in line with the changes in your many markets wants To create this climate of ideas you must constantly be asking Do at least these things N W A V Talk to all sta ipanicularly managersiabom the need to usepeople s ideas Let all staff know that ideas are welcome valued and will be evaluated fairly and objectively Let them know that no idea is too small and that all suggestionsieven those that are not usediare appreciated As John Chambers the CEO of Cisco says quotEvery idea is a good idea until we nd the best idea I love that And as a manager you re paying for all of your staff s brains Use them Ask for ideas Create a number of ways for people to o er ideas Have something better than just a suggestion box Ask for ideas at staff meetings Have an idea wiki on the staff portion of your Web site to encourage input and ideas Make a new idea or process a reward item on people s evaluations and a time during the evaluation for discussion of new ideas The freer people feel and the more opportunities they have to offer their thoughts the better Develop an objective review 13787 People need to know that their ideas will be reviewed impartially For small suggestions the managers can probably do this for larger ideas you perhaps can adopt the criteria you developed in your business development process to weigh varying suggestions Close the loopger back to people Let anyone who puts forth a suggesi tion know what happened to his or her ideaiit was implemented it will be implemented or it cannot be implemented and why And always thank people for their ideas Consider a rewardrecognition system Regardless of whether you do this on a systematic basis if someone makes a suggestion or does a great deal of work on a particular idea at least recognize him or her publicly and consider rewarding him or her nancially If you feel the need to systematize this just make sure the reward is a reward not a punishment For more on reward systems see Chapter 7 You need your staff to use all their synapses and neurons on your orgae nization s behalf all the time Creating a climate in which new ideas are valued recognized and encouraged will not only make you able to be more entrepreneurial it will also keep you exible Cym rnnI 39n ml mm hum m 169 Recap Life is full of risk and all of us learn to accommodate a certain level of risk every day It is no different for missionibased managers The skills that you have learned in this book will help make it easier for you to take risk on behalf of your clientele Building a better board a stronger staff becoming market oriented having strong controls and becoming nancially empowered all build your ability to evaluate and take risks Some of these skills increase your strengths some reduce unnecessary risks and others build an important nancial cushioniall of which leads us to the skills you have been learning in this chapter how to be more entrepreneurial for the bene t of your community I hope that in this chapter I have given you food for thought on how to become better risk takers and more entrepreneurial We have reviewed how to assess and take risk and how to accept its presence in your organization We have looked at new sources of income and have reviewed the steps necessary to start an outside business venture The neXt decade is a risky one for you and for your organiZation You need to meet those risks with an ability to think and act like an entrepreneur Questions for Discussion Do we meet the characteristics of a social entrepreneur How Are there business ideas that would make both mission and money sense for us How do we look at expenditures now As investments in mission How can we be better at this and communicate it to our staff What risks are we taking now How can we incorporate the idea of good risk into our culture more N Squot A For much more on this subject see my book Social Entrepreneurship John Wiley 8 Sons Inc 2000 CHAPTER 10 Developing a Bias for Marketing Overview This chapter is central to your success If you don t know who you are serving if you don t know what they want if you don t know how to ask them how to improve if you don t know how to let people know that you are aroundihow can you stay in business You cannot You need to adopt a culture of marketing and this chapter will show you how In the following pages we ll talk through the bene ts of marketing and then go through each of the seven key steps in the marketing process which are Identifying your target markets Assessing what the market wants Developing and redeveloping the product or service Pricing Promotion Distribution Evaluation F QV EAE39NNI After that we ll look at the best ways to ask your markets what they want and then show you the ways to evaluate your marketing efforts By the end of the chapter you ll have a new understanding of who your markets really are what they really want and how to satisfy their wants There is no question in my mind that of all the business skills you can put to work for your mission marketing is the most applicable in the most areas If done properly consistently and with an eye to innovation and improvement you can use marketing to recruit and retain better employees make your board happier generate more good community buzz raise more funds and have more satis ed mission recipients as well as funders who not only return to fund you in future years but who refer other funders to you 171 172 MissionRn Pd Mnnnvpmpm Sound good I thought so Remember though that marketing is not the equivalent of fundraising it is not just promotion it is not just sales It s marketing broader in scope and in impact than any small part of the whole Let s get started Why Market Marketing is essential integral to your success and yet in many ways foreign to nonpro ts Let s start this critical component with a short quiz You are a nonpro t so you don t have to worry about marketing right Wrong The people who you serve are your primary markets right Onlypm y Successful nonpro ts know that their continued success even their con tinued eXistence depends on living breathing eating and sleeping this slogan EVERYTHING THAT EVERYONE HERE DOES EVERY DAY IS MARKETING Every employee and volunteer At home at work at the grocery store 24 7 565 This means that the way the phone is answered the way the staff dress the way the trash is picked up and the lawn is cut the quale ity of your Web site the knowledge of the board to say nothing of how services are provided All these activities go into the marketing mix You have to assume that every interaction with a client patron donor funder neighbor friend stranger relative or politicianieven those who you are totally unaware offhave an impact on some part of your organization a decision to come to you for services a decision to refer someone else to you a decision to donate or a decision to fund As I said above this maxim is not just applicable to management or to service provision staff but to every employee and volunteer who is associe ated with your organization Remember the story I told in Chapter 6 about the new board member who attended the cocktail party She had two ways of presenting her new experience one positive one less so It is impor7 tant that everyone understand that his or her role in the entire enterprise is essential and part of your team marketing effort h FOR EXAMPLE During the late 1990 buildup to the rst Gulf War a Americans saw interviews with dozens of young military persone nel on television Often the young men and women were asked What are you doing here Regardless of their jobicook truck Tim I Mm a 12m foyMaykgtmg 175 driver munitions handler mechanicithey answered Kicking Saddam s butt out of Kuwait No matter how menial their task in the huge war machine these service men and women had been taught that their small component was critical to the larger task at hand I remember hearing a dockworker who spent his 105 degree days of oading cargo at one of the ports saying Hey no one eats moves or ghts without supplies and no supplies get to nobody sic without me That means I m winning the war And he meant it You want to work on that type of ownership with your staff and the understanding that what they do does affect the whole even if on the surface there is not a direct impact on your services or your funding Everyone matters I You ll also get resistance from some staff who say something like this But I m just a receptionist social worker janitor teacher accountant IT specialist I m not a marketer I don t sell anything and don t want to When you hear this just smile and say that you agree that they won t be selling But even so tell the staff that everything they do matters to the future of the organization In the discussion on staff management I talked about the fact that the lowest paid people in your organization are the most important They are the ones who have the most direct contact with your clientele and the public and the most impact on your marketing potential directly or indirectly These people need to be involved in your marketing in the planning and execution of your marketing plan They need to understand their critical role in the marketing of and therefore the future of your organization and its mission Marketing Basics Marketing is so often considered a dirty word in nonpro ts It is unseemly and after all you are not in sales right7 Wrong You need to attend to your markets and there are more of those than you think nd out what they want and give it to them within the limits of your resources Let s start by looking at the basic marketing owchart shown in Exhibit 101 As you can see the entire process starts not with developing a product or service and then trying to sell it but instead with choosing your target markets Now what do we do in our organizations Usually we say We re here to provide arts medical educational etc services and we know how to provide them So we ll let you know when we are open and y all come This is known as productedrz ven marketing We believe in our product or service and that it will sell itself If we build it they will come Or not Let s go through these parts of the marketing diagram one box at a time 174 MissionRn Pd Mnmwpmpm Define and What does Shape and reShaPe redefine your your market your product market want or serVIce Promote the product or service Distribute the product or service EXHIBIT 101 Marketing Flowchart Identifying Your Target Markets Fact The nonpro t industry is the only industry in the world that regularly gets together in groups to berate and complain about its best customers Think about it Your best customer is the group or groups that send you the most money For most readers that is some branch of local state or the federal government Do you see them as customers If you are like 99 percent of nonpro t managers you see them at least some of the time admit it as the enemy This to say the least is a selfedefeating viewpoint You and your staff and board need to start thinking of your largest funders as your best customers and then start treating them that way But before we discuss how you can do that I need to realign your thinking about who your markets really are Stop and think for a minute Who are your markets and how can you identify them Look at Exhibit 102 for a start in breaking down the concept that the only market you have that counts is the people you serve They are the most important market but they are not be only mareel I have divided the nonpro t marketing miX into three main categories 1 Tbepayer mareels These are the people who send you money They may be the federal state or local government donors foundations users or others Each of these should be considered a different mar ket segment For example if you get money from three different state programs each program should be assessed as a different market seg ment I also include in the payer markets a bOX for referrers These are the critical people who send other people your way They might be mental health counselors social workers friends physicians or mine isters but without their referrals you would be in trouble You need these people Their referrals translate into mission out and income in Tim I Mm a 12m foyMaykgtmg 175 EXHIBIT 102 The Markets of Your Nonpro t ternal Service 0 Board and Smff Service A Payer Client Type 1 0 Government Client Type 2 0 Foundation Service B 0 Membership Client Type 1 0 United Way Client Type 2 o Donation Referrers 0 User Fees 2 Theserw ce mareels These are the people who you serve Think about how many different markets are represented here each different pro gram you provide multiplied by each different age socioeconomic and gender cohort you provide those services to For example if you provide family planning services the way you provide them to mare ried couples is a great deal different than how you would provide the same basic service to single teenage boys and girls You have lots of different service markets 3 The internal mareels These are two different markets sza and 120114727 teem The brutal truth that we ve covered in prior chapters is that you need good solid staff more than they needyou The same is true for your volunteers both governing and nongoverning They are in the truest sense essential markets ones that you have to attend to if you want to do any mission at all Each of these markets warrants special attention You need your payer markets no money no mission If you accept the payer markets as truly being an important customer regardless of whether you like it then you need to gure out how to keep them as your customer You need your service markets to be happy and satis ed otherwise you are not doing good highiquality mission If you run out of service markets you have just run out of a reason for existing You need your board nongoveming volunteers and staff and you need them to be quali ed and motivated they are the key resources available to plan for and provide your mission You are also competing for each and every one of these markets just the way Dell competes with Apple or Delta competes with United The payers the service recipients and the staff and board all have choices and those choices are only going to increase in the coming years Without your paying constant attention to those markets the choice they make may very well be to choose to not have anything to do with your organization 176 MissionRn Pd Mnnthum HANDS ON To get a handle on your organization s many markets do this Sit down with a chart that looks something like the one shown in Exhibit 105 and put all of your markets into it The key here is to try to distinguish segment markets to ensure that you give each the attention that it deserves Note that l have included only one or two wants for each market In reality there will be many You need to ask Also note that there are different wants for the special education districts payers and the special education administrators referrers This is not unusual The paying side wants one thing and the program side another Before we go further I want to give you one overriding caue tion about markets and market segmentation Do not ever fall into what I call the census trap saying that your main market is the 590400 people who live in your county It is not Your mar ket is never everyone It is the people between ages 12 and 90 who enjoy live classical music and have the ability to pay and attend concerts if you are a symphony orchestra it is primarily women between 12 and 50 who are sexually active if you are a family planning organization but it is not everyone This eXtends to the way we will implement our marketing activities we can t eXpect everyone to take our neXt survey developed online on Sure veyMonkeycom What about the people who don t have or use computers No market is everyone so why do we assume it is We were trained to think of our markets by the federal government in this style as a result of what is called capitation funding wherein an organization s government grant each year was based on the service area s population This was poor training but you can begin to relearn if you apply this chart to your many markets And if you do this for your organiZation I guarantee that you will be stunned as to how many markets and market segments you have Don t panic You ve taken an important rst step You know who your markets really are and now you can decide which merit the most immediate attention and which can be lower on the priority scale I Assess the Market Wants Note that I said wants not needs Professionals tell people what they need People buy what they want Tim I Mm a 12m foyMaykgtmg 177 EXHIBIT 10 Market Wants Category Market Wants dem Special education districts Low cost accounmbility Smte department of rehabilimtion Good bookkeeping timely ling Private payers Low cost prompt billing Stdf Speech therapists Career gro Physical therapists Varied patients Teachers Continuing education Administrators Smbility retirement Senice Children 073 with perceived disabilities Happy loving smff Children 375 who need physical or Happy fun place cognitive testing Parents of children 073 in the above Safe place that helps their programs child Referral Special education administrators Highequality services Pediatricians and family practitioners Highly educated smff Disabilityespeci c parents support groups Inclusion uh FOR EXAMPLE Statistics tell us that one in eight American adults g is in need of substance abuse treatmentimostly for alcohol but some for harder drugs If we assume that a third of those people need inpatient care that is still more than 85 million adults in need of treatment There are not oneetenth that many treatment beds available in the country and many of them are empty Why Because as anyone who has struggled with addiction or who is related to someone with an addiction will tell you people will not seek services for their addiction until they want it Do they need help Sure and we can prove it to them medically Heck everyone in their zip code knows they need help But until they wan treatment there is no point in even trying Here is a second example for anyone with kids nieces nephews or grandchildren under the age of 12 How many of your children need additional toys More Video games And do you buy them more Yeah I thought so With this background we now need to establish ways to nd out what all of these markets we ve identi ed want There are a variety of ways to do this and they all start with a basic discipline that has just three letters AeSeK 178 MissionRn Pd Mnnnvpmpm It is really very simple You ask people what they want why they came to you what made them happy or not so happy about your services whether they will return and if so why and if not why not and how you can improve services to meet their wants By developing a discipline of ask ing by getting everyone in the organization in the habit of market research through asking you will learn eXtremely important things many of which will completely astound you How do you ask You can ask formally through surveys or focus groups You can also ask informally every chance you get You should at the very least establish some kind of baseline of employee and consumer satisfaction through a formal survey You can then remeasure that satisfaction every twelve to eighteen months You should also ask everyone who seeks or utilizes your services in any way how he or she came to you Was it a referral from a friend Did he see the ad in the paper Did she hear about you from her doctor or minister or art teacher You need to know these things and evaluate trends over time There are a variety of ways of asking Surveys and focus groups often sound very technical compleX and expensive Not always so They are essential tools for you as you develop your asking skills so let s look at them in some detail SURVEYS Many organizations wrongly assume that establishing baseline sure vey data is very eXpensive and the purview of only eXpensive marketing rms like Harris Polls or Gallup And certainly polls and surveys can be expensive sometimes prohibitively so But let s focus on the ve important components of a good survey and then you will need to decide whether you can provide or nd the eXpertise inehouse online from an eXpert volunteer or whether you need to go outside of the organization for help 1 Surveys need to be focused around a central theme Do not ask a refer ral source the same things you would ask an employee and also do not ask the employee ten questions about job satisfaction if your main survey goal is to nd out what the staff wants in terms of noncash compensation Your survey needs to ask the rigat questionsiones that will generate the information you need In deciding what questions to ask be frugal What do you really want to know Is it about customer satisfaction in general or their satisfaction with a particular program Target your questions You need to ask the questions rigat There is a great deal of difference in the responses you will get depending on how you ask the question I can generate a huge difference in responses about a particular program if I ask the question On a scale of 1 to 5 how much did you like the N W nm I Mm a 12m foyMaykgtmg 179 program as opposed to asking Did the program appeal to you or not Surveys need to be 59071 enough to have people ll them in As a rule if it looks like it will take more than four minutes and the respondent is lling out the survey only out of kindness it won t happen You can have longer surveys lled in if you are compensating them giving them money a lunch a free coupon for a pizza etc To make the whole exercise worth it you have to survey enough peo ple to have a representative sample If you are a church and you want to survey your congregation s attitude toward a new church building asking three people out of a congregation of 600 will not tell you what you need to know However not making a move until you have sure veyed the other 597 members is foolish and suffers from the curve of diminishing returns A V As you can see many of these issues are technical and thus most organi zations get some help in setting up their surveying There are some excellent written resources on surveying and these can be easily found online A sec ond source is the marketing department of your local university where you might get adopted as a student project Also the marketing professor might be willing to help you pro bono or for a much lower fee than a proprietary marketing rm For some surveys the online option is terri c I use SurveyMonkeycom as do many of my client organizations which for many surveys is free There are other services online as well but the key is that you can construct your survey quickly and with great exibility You can distribute it without paper as people ll out the survey the results are tabulated instantly and without any input errors and you can read report and show the results instantly Each year I have an ongoing survey of training client satisfaction and the link to the survey results is shown in the training area of my Web site Thus potential customers can see what other customers said in detail in real time Think about this for your organization for say a volunteer satisfaction survey with the results posted on your volunteer information pages Surveys also allow for one use that no other form of asking does trend analysis If you ask the same questions cycle after cycle and thus you need to get the questions right the rst time you can see trends that can really help you manage your services your staff and your mission better You will know that 75 percent of your staff the last three years were completely satis ed with their jobs but this year the number dropped to 70 percent and thus some more inedepth analysis needs to be done as to why You ll be able to tell a funder that each year your client satisfaction number has gone up and how much Trend analysis is a great use of survey data 180 MissionRn Pd Mnnnvpmpm Surveys are excellent informationegathering tools but get some help with your rst one and don t do just one Do them regularly and compare and analyze the data you receive FOCUS GROUPS Focus groups are great While they do not generate the kind of objective data that surveys do the subjective information gathered on feel ings reactions impressions and opinions is invaluable At their core focus groups are sessions of one to two hours with a focused set of questions posed to ten to fteen people who represent a market or homogeneous group A focus group is almost always run by an outside facilitator and I urge you to nd a local facilitator who is experienced with focus groups because the quality of the facilitator makes or breaks these sessions The great bene t of a focus group is that a talented facilitator can follow up on ideas and answers generated by the group investigating leads that you could never expand on in a formal survey For instance a facilitator might ask What kind of service improvements could we make for kids and a participant might give an excellent idea Right then and there the facilitai tor can pose the new idea to the rest of the group gathering onitheispot reactions and modi cations that can lead to earlier and ultimately more suc7 cessful implementation When looking for a facilitator look for the talent in group facilitation rst and the knowledge of your program second Once you retain the facilitator he or she needs to get up to speed on all aspects of the issues your focus group will be discussing including jargon and potentially controversial issues You also need to hold separate groups for separate issues even though it is more time consuming and costly For example don t expect a group of lowerrincome service recipients to be as forthcoming if they are mixed in with af uent donors or staff to share openly in the same group as funders You also need to focus your questions You just can t ask everyone every thing you might want to know People wear down after about two hours so don t wring them dry THE DISCIPLINE 0F ASKING AND LISTENING Asking people what they want is in itself an image enhancer for your organization I have facilitated more than one hundred focus groups in the past ten years and our rm has surveyed at least 15000 people During those activities one of the comments we hear most often is Thanks for asking No one ever has before That is both a terrible indictment and an amazing opportunity Rememi ber that by asking you get valuable information and make people feel better about your organization all in one action A twofer However there are several other important points to keep in mind about asking If you ask you must listen And you may not hear things that make you happy especially at rst You will almost certame hear criticisms of your Tim I Mm a 12m foyMaykgtmg 181 programs your management style your philosophy of service Take them as opportunities to improve not as personal assaults on your capabilities and character And if you listen you need to respond both orally and in writing Thank people for offering their insights perhaps in a memo to all who participated in a survey or in a personal note to those who took the time to offer their reactions in a focus group In that correspondence close the loop with them and let them in on what you are doing with their ideas You can put the main ideas that came out of the surveyfocus groups into four categories as follows 1 Things that are suggested that you will be able to do right away 2 Things that you will have to work on over the near term 3 Things you will need to defer to future years 4 Suggestions that are inappropriate or impossible Tell people all of those things If the ideas are going into a strategic plan say so If they are being passed on to your main funding source let that be known If they are going to be used to plan a major capital campaign a new program for a speci c group an additional site or any tangible outcome let people know Be forthrightng not promise what you cannot deliver on but do get back to people What can you learn by asking Wonderful things it FOR EXAMPLE A few years ago my rm helped a rural primary g care health center with a community perception survey and focus groups I facilitated a number of focus groups two of current patients one of former patients and one of community of cials I found several common complaintssuggestions during these ses sions These are listed below with the actions that the health center took to respond 3 quotYour center looes mn down inside and out The center found that the grounds maintenance service was not doing the job Over time the appearance of the facility had declined and the staff had not noticed But the patients who only came in once or twice a year noticed the difference The clinic changed maintenance contractors with an emphasis on trash removal and neatness Inside a new coat of paint and more staff emphasis on picking up and neat work spaces resulted in a much higher satisfaction rating in this area the following year Total cost 500 in painting continued 182 MissionRn Pd Mnmwpmpm continued El Your receptionist is rude This feeling was prevalent among former patients but a fact that the administrator had never noticed because when he was treated he did not enter through the normal patient reception lines The receptionist was given sensitivity training That did not help much so she was transferred to a different clerical job Total cost 100 for the training Your toys are dirty I worry about the kids catching a bug when they play wit9 them In fact the toys were cleaned every night they were just old The center bought new toys each year and had the staff clean them in front of the patients every day Total cost 200 per year I After these items and a few others were resolved the center got back to all those interviewed with particular emphasis on the former patients noting the changesinew toys new receptionist better maintenance that had resulted from the information gathered at the focus groups Every single former patient returned within the next six months for an of ce visit The patients liked the practitioners and the practitioners had not thought that they cared about these nonmedical but still important issues The center never would have known why patients were leaving if they had not asked Ask listen act respond It works Develop and Redevelop the Product or Service Only now that you know who your markets are and what your markets want can you to varying extents modify your service array or develop a new service Some readers will be hamstrung by service de nitions dictated by their funding source You must provide inpatient 287day residential rehae bilitation or You must have each child tested in an approved setting every 18 months or whatever guideline you must follow But you need to try to match your services to your markets and their wants as closely as possible noting that those wants will change over time This is an excellent place to note the con ict represented in the pre ceding paragraph The funder wants you to provide a service in a particular way regardless of whether the recipient wants it that way Look carefully at what is going onito meet a payer s want service provided within spe ci c guidelines you may have to give the service market s want a lower priority This is an excellent example of the con icts that you need to try to resolve and the balance that you need to try to achieve It is tough Tim I Mm a 12m foyMaykgtmg 185 and no one should misunderstand that Often a program that is wildly suc7 cessful in one community catches the eye of a funder who wants to have it replicated elsewhere Too often the success was a result of a con ui ence of events in that initial communityia key staff person or volunteer a community event that precipitated demand for the programiand not because of the fundamental attractiveness of the program itself In his book Reinventing Government Boston Addison7Wesley 1992 David Osborne recounts the story of a woman in the Bronx who organized a tenants group to run their lowiincome housing unit and turned it around The group worked out all sorts of ideas and methods to reduce crime increase occupancy and improve tenants lives But Osborne who advocates similar empowerment programs elsewhere in the country also found that without the key leader all of the other items no matter how admirable were not used In marketing terms if enough or the right people did not want it to happen enough to work for it it won t happen and in many cases your organization will take funds to try to replicate a program before there is a emand for the program This is very hard work In these cases you also need to ask and ask regularly to see if you can re t improve and customize the program to meet the wants that exist in your community now rather than in some other community three years ago You must also make sure that you have listened and that all of the staff is on board and prepared for the changes the market wants uh FOR EXAMPLE A few years ago my rm was asked to assist a num7 g ber of community substance abuse rehabilitation providers with assistance in broadening their markets In discussing this project with the providers it was clear that they wanted to move beyond the Medicaideeligible client to as they put it serve the executive covered by Blue Cross The reasons for this market shift were understandable and valid The providers could recoup 320 per day from Blue Cross for a service for which they were then get ting 165 per day from Medicaid But were they ready to provide the services They said they were and many had in fact upgraded their physical plant markedly I asked them if their staff were also ready to serve this dif ferent clientele noting that business executives even ones with substance abuse problems have signi cantly different expecta7 tions than their traditional clientele those eligible for Medicaid I was assured that the staffs were ready for this change I doubted it continued 184 MissionRn Pd Mnnnvpmpm continued So we checked We had a woman on our staff call each of the agencies in question and ask for help for her husband who was portrayed as an alcoholic who worked for a large rm and had Blue Cross coverage She also called the community hospitals that had competing substance abuse programs in each commue nity In every single case the community rehab center staff blew it The receptionist did not have any knowledge of Blue Cross She referred the patient to a staff person who was either equally limited in knowledge or never called back There was never any followup to the call in writing or by phone Conversely every single hospital had its act together The caller talked with a knowle edgeable and sympathetic nurse immediately in each case The nurse followed up by phone and with solid marketing material in the mail I returned to a meeting of the community providers armed with this information and they frankly didn t accept it as valid So I asked them to exchange business cards with another provider take a break and go call in pretending to be a person seeking care They returned 15 minutes later and reported their experiences which were uniformly awful They and their staff were not yet ready to serve the market that they had targeted They were not ready to meet the market wants because they had not asked the market what they wanted They had assumed that they knew and in marketing assuming that you know what the market wants is not only egotistical and arrogant it is suicide I Ask but also listen to the answers Price the Service There are so many variables in pricing most of which you do not control thatl won t take a lot of space discussing pricing here Also there are many excellent resources in pricing strategy Suf ce it to say that most nonpro ts underprice their services through either the training they have gotten from funders throughout their careers funders don t want to reimburse all of their costs or naivete or both However learning how to price to say nothing of what providing an individual unit of service actually costs to provide is a critical skill to develop in any organization Knowing what your costs are and which programs are making money which are losing money and which are breaking even is a key component of any plan for nancial empowerment see Chapter 11 Tim I Mm a 12m foyMaykgtmg 185 I do however at least need to cover a few key points Pricing is both an art and a science Price development is uid not static It exists in a world where there are many dynamics occurring Pricing is composed of the following four components FIXED COSTS Fixed costs are the costs that you normally think of as over head Technically they are the costs that are xed whether sales rise or fall So for example in a school the administrative costs and building and maintenance are xed costs because they won t change if the enrollment the sales goes from 70 to 90 or 70 to 50 The crux of charging a xedecost component is the issue of how quickly you want to recover these costs over how many sales For example if you tried to recover the entire xed cost of a Nissan factory in one auto the price would be a little steep Nissan tries to recover that cost over millions of cars But if it adds too low a charge for the xedicost component in each car s price and does not sell enough it loses money on its xed costs VARIABLE COSTS Variable costs are the costs that vary as the sales vary In manufacturing they include the raw materials for the product the unit costs of labor and the energy to produce the product In my school example they would be the costs directly associated with each student food supplies linens and differing energy costs for a residential school As the enrollment increases these costs increase PROFIT Yes pro t is okay A nonpro t can have a pro t and nowhere in any regulation or law does it say that you can t It is justyour funding sources that say you shouldn t The pro t you make will help you pay off debt and put money aside This critical issue will be discussed further in Chapter 11 Financial Empowerment but for our purposes here let s just note that you need a pro t and the component of price attributable to the pro t will depend on how quickly you want to recover your initial investment and how much the market will bear The pro t margin will usually be some small percentage probably 2 to 6 percent of the price COMPETITION AND MARKET CONDITIONS The competition has much to do with what your price is If you price out your item eg tuition at our hypothetical school and nd in comparing your tuition to the competition s that yours is 20 percent higher what will that mean It may mean that you will lose some students to the loweripriced school Conversely it may mean that you will gain some students who want to go to only the elite read expensive school Obviously this is a very uid situation In the case of the school let s imagine a teacher s union arriving and a contract signed guaranteeing 186 MissionRn Pfl Mnnnvpmpm increases in salary for the neXt ve years What just happened to xed costs They went up What if three graduates get full scholarships to Harvard or if the test scores for seniors are tops in the state or if the football team is nationally ranked Demand for enrollment will increase In one case your price tuition needs to go up due to cost increases in the other the price and the pro t can go up due to market conditions Don t fall into the trap of assuming that you can just underprice everyone and that that will make people come to your organization First it s just not smart which is not to say that people do not do it all the time If you just keep cutting prices and have prices less than your costs you will soon be out of business unless you have very deep pockets and can outlast your competition All one has to do is look at the suicidal price wars that the major airlines constantly engage in to see that A second good eXample is auto rebates They do encourage sales but at a loss to the automakers I can think of a dozen eXamples of my nonpro t clients in business development coming to me and saying that they planned to compete on price without knowing whether they could do so and still make money As noted earlier there are a number of good resources on pricing and your auditor may also have ideas on this One nal takeeaway for pricing Remember it s never about the cost as always about the value If cost ruled with all customers we wouldn t have Ritz7Carleton or Whole Foods or Lexus or NeimaneMarcus For some customers cost ma be 99 percent of value but there s always something else Think downscale to Fair eld Inn or WaleMart Low cost sure but if nothing they sold worked they would not have customers So it isn t just about cost What value can you add to your services And who gets to decide what s valuable Not you No the customer decides what s valuable and to gure that out you have to ask See how all this is interrelated Promote the Service There are dozens of ways to promote your services on your Web site word of mouth referrals traditional or online advertising personal contact pref sentations to community groups yers put under windshield wipers and of course the classic twoefold sixepanel brochure How you promote your service will depend on your budget your service and the people you are trying to inform that you are there But no matter what your status think about this With all of the different payer markets and all of the different referral markets you have to say nothing of all of the different service mare kets you are trying to attract and retain does one brochure with a short history of your organization and a picture of your building really get your point across Of course it doesn t Yet that is what many nonpro ts still have a brochure that talks about the organization s genesis lists its services often Tim I Mm a 12m foyMaykgtmg 187 in jargon and sometimes does not even include a phone number Worse many organization s Web sites are just electronic representations of these outdated pieces of paper My question is Who really cares about a picture of your building No one cares but the architect and the builder Who cares about your history Hardly anyone cares except those who were there at the time Can one short brochure or one bland Web site really attract people with all sorts of different wants to your organization Can it really explain how your organization can meet the wants of funders donors referrers or service recipients Of course not Promotion whether in person online or on paper must never sell the program Rather it must attempr to solve the customer s problem If I am the parent of a developmentally disabled child do I care how long you ve been in business No I want good evaluation and educational opportunities for my son or daughter I want you to recognize me as a customer I want to feel that you are sympathetic to my feelings and that you will provide only the best services on the planet to my child I want to know how much it is going to cost me So your marketing material must say those things clearly and in straightforward prose Show me the bene t that I will receive by sending my child to your organization Remember the number one rule of promotion and sales Don t sell the productisolve the customer s problem You need to let the potential users of your service the potential funders staff and board in other words all of your many markets know what bene t they will gain from using your services or donating you money Don t just tell them who you are or what you do Make the connection between what you do and how it will hel them Wording such as XYZ agency provides substance abuse rehabilitation services is much less compelling than If you or a loved one have a problem with substance abuse the staff at XYZ can help put them on the road to a more productive less dependent life The rst sentence talks about services in jargon whereas the second promises bene ts The other major aw in most nonpro ts promotion comes from falling into the census trap discussed earlier in this chapter in the Hands On activity Organizations that wrongly assume that their market is the entire population often also assume that the entire population needs to know about their organiZation and these organizations waste a great deal of time and money trying to achieve that goal n FOR EXAMPLE A client of mine a rehabilitation facility spee g cializing in head injury patients recently bemoaned the fact that it had done a public awareness survey and only 06 per cent of the area s population recognized the organization s name comlrmed 188 MissionRn Pd Mnnmrpmpm continued and knew what general services were provided Both the execue tive director and the board were adamant about spending money a great deal of money on a public awareness campaign that would in their words solve this problem What problem I asked Not enough people know about us was their startled answer So Do patients selferefer No they replied Do you get 5 percent or more of your money in small donations from the general public No they replied Where do your referrals come from From area neurologists and surgeons they said What percentage of those physicians know about your pro grams in detail We don t know was their answer Find out and forget about the public They don t need to know about you nor do they want to for that matter You need to focus your efforts on your referral sources I This eXample is a classic one of misunderstanding the target market as well as the market wants Provide Distribute the Service Once you have developed the service you need to provide it Here you have lots of choices and are probably doing an excellent job in being exible but let s review the options Just like solving a mystery writing a story or preparing a book report the key parameters of service provision to meet a market waan are who what when where and why Wboprovides be senice You can t just have someone who is knowle edgeable in the service area you need someone who can connect with the service recipient Someone who doesn t speak Spanish is not going to be an optimal provider in a largely Hispanic neighborhood Someone who acts very square probably will not be the best with kids in a youth minist ml We service is provided You ve already established this through the previous steps Tim I Mm a 12m foyMaykgtmg 189 Where the service is provided Your clientele need easy access to the extent possible Is the place you provide service convenient Is there adequate parking suf cient security In the past few years more and more hospitals are providing offesite radiology and therapy sites that are closer to where their patients live This helps the patients avoid having to come to the central hospital where parking is often dif cult security is sometimes inadequate especially after dark and patients must walk long distances from their car to their service site When the service is provided A family planning seminar for teenagers is pointless if held at your of ce on weekdays The kids should be in school The exible when is a key component of market sensitivity in today s predominantly twoeincome and or singleeparent families People seek services at odd hours and they value timeesaving convenience over many other considerations Thus Domino s Pizza thrives Toys R Us stays open aroundetheeclock during the pre7Christmas period and 247hour convenience stores are solid franchise investments Be convenient and you will increase both market share and market satisfaction Why Don tforger the why Why is Ih is particular service heingprovided To educate to prevent to entertain to cure to soothe to enlighten The why becomes a key component of the provision mix and it should always be close at hand Evaluate the Marketing Effort As mentioned earlier you need to know how you are doing Getting baseline information is a good start but steady and consistent asking is essential Are your staff happier than they were last year Are you getting better quorums than you were two years ago Is attendance or occupancy up or down Are more people responding to advertising or to referrals You need to ask regularly and consistently Also be cognizant of the fact that the wants and needs of the markets are constantly changing Thus you may need to change with them The only way to accurately assess the changes is by asking and tracking the answers over time Asking Does Make a Difference I spend a lot of my time speaking to state or national nonpro t associae tions and I regularly point out to them that their best customers are their biggest funders There is usually uncomfortable silence I then ask them When was the last time any of you went to your state federal county 190 MissionRn Pd Mnnmrpmpm project of cer and asked How can I make your job easier There is either silence or laughter I then point out that this is basic marketing After these sessions I am often asked What difference will it make if we ask bureau crats how we can make their life easier They have no control over our money This is an understandable question and in response I want to offer two examples of what a difference such a simple noicost technique can make FOR EXAMPLE As I told you earlier in the early 1980s I was the executive director of a health systems agency a nonpro t formed as a result of federal law and almost 100 percent federally funded We did health care planning and regulation for a speci c geo graphic area Our federal contacts were in Chicago at the Federal Regional Of ce Building Shortly after I became executive director I had to go to Chicago for a meeting and I made it a point to meet not only with my federal program of cer who was nominally my key con tact but also with the woman who was our grants administration of cer the person who processed our budget vouchers and grant checks This woman whose name was Betty worked in a wine dowless of ce in the midst of a vast drab government building but she was warm personable and obviously pleased to have been visited I rarely get to meet the people at the agencies she said In fact I think it s been three years since I got faceetoeface with someone from the eld I said that l was glad to meet her and that I hoped that our staff would process all of the forms for her correctly but if we messed up I wanted her to call me right away Betty responded appreciatively noting that everyone usually denies lling in the forms wrong or complains about their length instead of offering to cooperate I told her I just would think of her as my best customer She laughed and we parted friends The next time I was in Chicago and the next and the next I stuck my head in Betty s of ce and said hello That was the total extent of my marketing with her Two years later ten days before our 2007page grant applicae tion for federal funds was due our nancial manager quit on three days notice and left the nancial part of the application income plete I did my best to ll it out and get it in on time and I beat the deadline by twelve hours Three weeks later lfound out thatl had not done a very good job Betty called me at work on a Thursday afternoon to let me know that a number of gures were wrong and that she could not Tim I Mm quot127 foyMaykgtmg 191 submit our application to Washington the neXt day at 500 PM unless they were redone My heart went through my shoes How could I rework all those gures and still get them in to her in 24 hours Betty said Stay cool Just put me on hold pull out pages 23 through 27 of the nancial section go make a copy of them and get back on the phone I obediently did so Betty said Okay see line 27c column 2 You have 356798 there now Change it to 398558 And so it went Betty had done my work for me She had spent the previous evening redoing over 100 calculations and essentially saved my organization I lled out a new form and ovemighted it this was the era before faxes to Chicago We got the grant 1 have always believed that because I treated Betty like a friend and a customer rather than as a bureaucratic enemy she went the extra mile for me There was no serious cost to this it was just good marketing FOR EXAMPLE A few years ago I did a number of focus groups for a residential school that worked with behavioridisordered teens One of the groups was with a primary referral source juvenile delinquent of cers UDOs The session was spent assessing what the school was doing well not so well and what it could do bet ter At the end of the session I posed the question What can the school do to make your job easier After a long silence one JDO said Interesting question and one I ve never heard before But one thing does come to mind You know the admission veri cai tion form 17345A that you need to ll out after you admit a child that we refer to you Well my supervisor is all over me to get those in because then we get our federal match Your people are getting those to me in 45 to 60 days and they re only one page long Could you get them to us in 21 days maybe The other ve JDOs in that session concurred with the need for these forms to be turned in sooner I said How would seven days be Terri c they replied Oh and thanks for asking Keep letting us know what we can do I said I returned to the school to report on the session and brought up the request No problem said the staff We didn t realize they needed the form in a hurry We ll get them out the same day as part of the admission protocol They started implementing the change that day continued 192 MissionRn Pd Mnnnvpmpm continued The next year the referrals from those six JDOs were up 15 percent and at this writing seven years later they continue to climb and those six people constitute the highest referral group for the school The lesson here is twofold First by asking we made a very positive impression By responding we made an even bigger one It was a small thingia minor question a noicost response but it paid huge longeterm rewards Do not assume that people who work in a bureaucracy are necessarily mired in it Choices have to be made where pilot money goes or lapse funds or the most interesting research is run and on and on If you meet the wants of the funders the funders will help you meet yours Recap Marketing is an excellent example of the topic that was broached in Chapter 1 that the business world has a lot to offer the nonpro t world in terms of techniques and expertise As a missionibased manager you want to tap that experience in surveying market identi cation promotion and pricing all in an effort to do more mission more ef ciently and effectively You market every day Your staff need to understand this and that they are a critical part of the marketing team If you don t market aggressively if you don t work to keep your market share you may have none in ten years In this chapter we have covered several issues that are central to the improvement of your organization The fact that everything you do every day is marketing ml The fact that your markets are much more numerous and diverse than you may have previously thought In The real process of marketing ml The ways to ask what your markets want The ways to develop a discipline of asking ml The methods to ensure that your marketing efforts are on track Examples of organizations that have pro ted by asking and by giving even their governmental funders what they want Hopefully you have found ideas that you can incorporate into your organization as you go about building a culture of marketing a tradition of asking and an organizational appreciation for your markets their diversity and their changing demands Tim I Mm a 12m foyMaykgtmg 195 The importance of continuing marketing cannot be overstressed It needs to become part of your culture and should also become an integral component of your staff training and continuing education programifor everyone in the organization Questions for Discussion Who are our markets Within those who are our target markets What do our markets want How do we know How often should we ask our target markets In surveys focus groups How do we ramp up our informal asking Should we look at staff training in this area What about customer service satisfaction training for staff Can we instill the idea that everyone even our funders are customers and that every one is on the marketing team N W A For much more on this subject see my book MissioniBasedMarleeting Hoboken N John Wiley 8 Sons 2002 CHAPTER 11 Financial Empowerment Overview A refresher What s Ibefwst rule of nonpro ts That s rigat MISSION MISSION and more MISSION We talked about this at length in Chapter 4 and learned that everything you do every resource you allocate every action you take should result in more or better mission being provided Mission rst But then what s the second rule Easy It concerns the enabler of all mission money The second rule of nonpro ts is this NO MONEY NO MISSION Mission is rst and money is a close second Money should never ever be rst but without it you can t provide mission So again it s a balancing act Too much mission and spending all your money leads to no mission at all your organization closes Too much money and not enough mission and you become well just a business You have to factor into your zeal to provide more and better mission the reality that there is only so much money to work with The fact that your organization is a nonpro t does not mean that the rules of economics are suspended You still need working capital to grow still need to make money to have the money to innovate still pay back debt from pro ts just like any other organization Chapter 9 focused on using the business model to provide more services while making money to provide even more services The purpose of this chapter is to show you how to use nancial skills and concepts from the business world to make sure that the money you receive from all sources goes to do more mission and most important more mission that you want to do not the mission that your traditional funders limit you to Imagine having funds that you can both depend on and that you can spend without approval from anyone other than your own board of 195 196 MissionRa Pfl Mnnnvpmpm directors Imagine having a great idea or noting a terrible problem in your community and being able to attack it head on this year this moma without having to go to a foundation or your state capital or to Washington DC for a lengthy review and then denial Sound great You bet This is the reality for many nonpro ts today the ones that have worked toward nancial empowe ermem and away from the traditional dependency and thus subservience model discussed at length in Chapter 2 Successful nonpro ts those that will ourish over the neXt ten years rather than wither will be those who are nancially empowered Here s the hard truth If you want to be around doing good ser7 vice in ten years you had better work toward nancially empowering your organization starting today Here s the good news You don t have to be big to do this small none pro ts can be just as empowered as large ones and often remain more exible a key ability of a social entrepreneur Also you don t have to have been around since 19327many starteups are positioning themselves for nancial empowerment from day one Here s the bad news If you are like the vast majority of nonpro ts you are anything but empowered you are regularly teetering on the brink of nancial disaster you have little or no operating reserves and your cash ow is too often a trickle in and a river out For you and this includes most nonpro t managers the road to nancial empowerment will not be short or smooth But you can do it in fact you must if you are to do your job at all In this chapter we will cover the issues that will allow you to start your plan toward becoming a nancially empowered organization For those who are already working in an organization that is nancially stable these dis cussions hopefully will reinforce your good habits and perhaps provide an insight or two to help you improve further In the following pages you ll learn about the eight characteristics that eXist in nancially empowered orgae niZations You ll learn which of the many numbers you can review mean something important how to communicate about nances inside your orgai nization and how to estimate the capital needs that you will have from eXpansion in the neXt decade Then we ll concentrate on how to keep what you ve earned how to nd and work with a lender and how to use your empowerment to bene t your mission your clientele and your community By the time you nish this chapter you will know what you need to do to become and remain nancially empowered What Makes a Financially Empowered Nonpro t I de ne a nancially empowered nonpro t organization by the followe ing eight characteristics which I break out further into three subgroups Firmwt ml 197 measurable having quanti ed outcomes management requiring some change in policy or attitude and mission things that directly impact or enhance your ability to do mission Let s look at the eight in a little bit of detail Measurable 1 The organization has more revenue tban expenses in at least seten out of ten years Right out of the chute in Chapter 1 I provided you with my Three Core Philosophies of Nonpro ts The third of these was Not for pro t does not mean no pro t To review Nowhere in any state or federal law or regulation does it say that just because you are a nonpro t you must lose money Remember you are formed for purposes that are primarily charitable and thus not forepro t No one in Congress ever said you had to lose money or just break even to qualify for your 501c3 In fact the Internal Revenue Service IRS code says that the pro ts of the 501c organization shall not inure to the bene t of proving that pro ts are legal in the lRS s eyes The point Making money is good for mission On a practical level we all know that an organization that loses money each year will eventually foldiit s just a question of how long it will take I contend however that each of you should evaluate having an organizational goal of making money nearly every year to allow you to continue to provide highiquality services in the years to come Why For many of the reasons we discussed in Chapter 2 little real new government funding coupled with higher demand for services at the same time that there is more competition for everything You need a pro tiyes a pro tito give you some maneuvering room to give you the working capital to try new ways of providing service or to eXpand to help more people Note Remember in Chapter 1 I also noted that this does not mean that every service has to be pro table just the organization as a whole Some services will always lose money That s why you have a development department and it better make money The organization has a cash operating reserve of at least ninety days So many nonpro ts go from nancial crisis to crisis and I see organiza7 tion after organization struggling to make rent and payroll every month Why The most common answer is that we just never seem to be able to get ahead Trust me getting ahead never just happens It is planned It is the result of careful discipline A comfort reserve is not only stress reducing on senior management it is also a turnover reducer a morale booster for both staff and board As you become nancially empowered you should strive to have funds in an accessible interestibearing account N 198 W A MissionRn Pd Mnnmrpmpm equal to at least ninety days operations For some organizations ninety days would be far too little while some funders do not allow grantees to keep more for most readers having more cash reserves than they do today would be a good thing on many levels The organization gets at least 5 percent of its annual operating income from its endowment Endowment Yes endowment They are not just for the big organizations the ones that have been around for decades I have a client organization that is only ve years old grosses only 250000 a year but annually gets between 5000 and 7000 from its 125000 restricted fund Endowments for nonpro ts are the best way you can get and maintain a source of income that is steady and inviolate You cannot like a forepro t sell stock or even usually issue debt although that is changing You can however use your 501c3 designation to secure longeterm funds in a restricted account or subsidiary corporation more about this later The organization has sources of revenue from nontraditional none goternmentalfunds It has business income More and more nonpro ts are developing a business that supports its mission without drawing its revenues from traditional sources This means risk We discussed business development at length in Chapter 9 and won t go into all of it again here Suf ce it to say that organizations that do meet this test have done one of the things we need to do eXpanded their universe of income streams Don t assume for a moment that these entrepreneurial organizations are swimming in cash and now independent of their traditional funders they aren t and never will be But they do have a source of funds that is no longer dependent on bureaucratic or political whims and that is a strength in and of itself Management 5 The organization shares its financial information widely and practices bottomeup budgeting John Chambers of Cisco Systems the people who build the stuff that runs the Internet says this about his huge organie zation No one of us is as smart as all of us This wisdom requires him to share information about the company with all of his staff For you the empowerment bene t comes from training all your staff how to read nancials in general then how to read your nancials and then to see them regularly You need to get staff more involved in budgeting and spending those budgets This is by far the most threat ening criterion of empowerment for most organization s management teams and we ll spend considerable time later in the chapter on these techniques Firmwt ml 199 6 The organization is appropriately leveraged Leverage which is de ned as borrowing against an asset allows many nonpro ts to do more mission sooner It is not for every organization however and certainly not for every situation The ironclad rule is Never borrow unless you are making money or plan to shortly Thus borrowing is a way to do more mission not a way to bail out past poor management deci sions And as odd as it may seem your organization can have too little debt We will discuss more on borrowing later in this chapter Mission 7 The organization supports its mission directly by establishing and using a rapidrresponse mission reserve More reserves you ask Where does all this eXtra money come from7 First it is not eXtra You need all your money but putting aside a mission reserve allows you the ability to respond to local needs as they occur not when someone far away with control of the dollars nally recognizes the problem This is the ultimate result of nancial empowerment HANDS ON Empower staff to do what you need done here The absolute best way to use this is to decide on your amount of reserves you can start today with 500 or 1000 and then solicit ideas from staff to spend that amount or some part of it on direct service Once all the ideas are in convene a group of line staff members and let them decide which ideas should be funded The key here is to let your line staff make the decision not you You get much more motivation and ownership if you let them spend the money I 839 m 1 A n 1 1 v 1 1 J 1 in the service delivery patterns Far too many nonpro ts have all of their limited assets in their buildings and none in cash Thus when an opportunity arises they cannot take advantage of it And their mission capability suffers Financial exibility may mean having access to cash quickly through a line of credit or it may mean looking at more leasing and less owning Or it may mean a larger than 907day cash reserve Whatever it takes if you are going to be a social entrepreneur you have to let your nances empower you to do so As we move through the rest of the chapter we ll examine some tech niques to become empowered some of which are basic good nancial management and some of which are a bit more entrepreneurial 200 MissionRa Pd Manavpmpm Something should be emphasized here and now Becoming empowered is not easy and it is not the result of a single action in a single year It is a longiterm strategy that combines a commitment to nancial wellebeing by all members of the board and staff a setting of reasonable goals in each year savings reexamining the budgeting process fundraising and usually some corporate restructuring It is a multiyear and in some cases decadeilong task But it can happen in almost any organization with the will to make it happen So let s get started Numbers That Mean Something and Those That Don t While it is important to have more and more diverse income and to spend less through bottomseup budgeting it is also a staff responsibility to manage what you have well This means knowing where your money comes from where it goes what causes income and eXpenses to go up or down and in general to understand the nances of the organization Many managers think they know their organization when they really don t For eXample I know of ten large organizations in which the executive wants to know the cash ow cash in over cash out for the day but never asks to see a cash projection So what if cash ow is positive or negative today For a capable manager it s the trend the projection into the future the analysis of a long period of the past that is important not so much the present These execs think that they are in control because they know how much money is in their organization s wallet They aren t On the other hand Robert Crandall the former CEO of American Air lines ran a multibillionidollar corporation with hundreds of thousands of employees billions in assets and operations in forty countries Was it pos sible for him to know what was going on everywhere Of course not But Crandall did need to know what was important the numbers that did mean something and every day seven days a week for the nearly fteen years that he was CEO he got a sheet with ten numbers on it the ten key numbers that helped him run the airline What were they He never told but in an interview with him he noted that the ten numbers changed over the years as the priorities of the airline changed Why just ten numbers and not twelve or twenty Crandall noted that that is all anyone can really usefully keep track of and that he set the number as a discipline for himself If there was some thing off from the goal or standard in a particular number he investigated pursued prodded and demanded answers If not he left it alone A number of points should be noted here First Crandall who was a very successful leader realized that his job was too compleX to spend all his time with a spreadsheet but that didn t mean he should ignore the numbers Ignoring the numbers is a key mistake that managers who were not initially Firmwt ml 201 trained in business which includes nearly every reader of this book make I ll leave those to others who really like to deal with numbers This is a big mistake and one that can be fatal Remember while the subject of the chapter is nancial empowerment the point of the exercise is mission If you as a missionibased manager do not take the time to learn how to most effectively use your nancial resources you are shortichanging your orgai nization and the people you serve Second Crandall realized that he would lose the big picture if he drowned in detail pardon the mixed metaphor Therefore he limited his daily and I assume weekly and monthly numbers to a critical few Crandall made his own job easier by setting benchmarks and goals If the number he got was good in relation to the benchmark he moved on if not he asked questions This is called putting your numbers in context This is a critical tool of the successful manager and it will make your job a lot easier Instead of just getting a report with a bunch of numbers whether it be a budget an expense report a report on occupancy or new donors always put it in the context of the past and the goal So what if you had 45045367 in income last year Was the budget the context that you should have had 440000 in income or 500000 If your occupancy is 78 percent is that good or bad It depends on the context which for occupancy could both be a goal or the trend from the past three months Here s the rule Numbers by themselves can be interesting Numbers in context are useful So what numbers do you need to know The choice will obviously depend on your organization Most if not all readers will be in organizations that cannot produce daily numbers of any great accuracy But that does not mean that they cannot produce numbers at all or on a more regular basis than just monthly Again what you need to know depends on your organization but let me at least propose some general areas that you need to have information on You will see that most of these numbers are either trends or numbers weighed against a goal or an industry norm This is important to give you perspective to give you context Also later in the chapter we will discuss internal reporting and there will be some actual sample forms for you to consider Cash 1 make everyone in my training sessions write this down CASH OXYGEN Without oxygen you die Without cash your organization dies even faster You need to have reasonably accurate cash ow projections for six months in advance and you need to see these every two weeks have them updated after each payroll This can be done most ef ciently on a spreadsheet and most good accounting software can also produce them or export them to the spreadsheet easily Having a good cash ow projection is essential to 202 MissionRn Pd Mnnnvpmpm your organizational wellebeing in that you know when you will be cash rich and when cash poor Daily cash in and out is ne but it is the trends and future projections that you need to focus on most Income If you have incomeesensitive numbers that you can see read them regularly For example if you are a museum and your income is heavily dependent on the number of people through the turnstiles each day or week take a look at that number and compare it to a month ago a year ago and any goals that you may have If you are a school and get reimbursed on a basis of student days what was your attendance last week If you are a managed care hospital you probably want to know your inpatient occupancy and hope unlike fteen years ago that your beds are amply not full If you are a church what was your count of parishioners this week and what was in the collection plate Payables Payables is the amount that you owe people in the short term Particue larly if you don t write the checks yourself you need to know the trend in this area What is the amount of payables that you have usually recorded monthly versus a month ago or compared to average monthly expendie tures For example if your average expenditures per month are 100000 and your payables are 150000 you are not paying your bills in thirty days Worse if that payables number is climbing while your expenditures are staying the same you are falling further and further behind something you really want to avoid Keep on top of your payables and ask questions about making sure you are keeping current and not incurring late fees You should also see with your monthly reports a listing of any and all accounts that are late usually thirty days past due Find out why these are late and do your best to get them paid If they are going to be very late call the business or person you owe and explain why as well as your plan for repayment Receivables This is the other side of the coin Particularly in organizations in which primary customers government foundations insurance often play such a huge part in your income stream you need to stay on top of what you are owed It is very easy for organizations to pay you late if you let them You need to understand your funders systems know how they work and be a pleasant bug in their ear to get paid sooner rather than later You Firmwt ml 205 need to know how old your receivables are and have a policy of when you personally get involved to get a late payment sent Again if your income is 100000 per month and your receivables are 140000 month after month or are growing in relation to income you are getting paid late and it is getting later Watch this number as a trend and take action as needed Expenses Usually eXpenses are recorded and fully accounted for once a month on a monthly statement I assume that you see the statement the minute it comes out but do not be content with just the overall statement You should see the income and eXpense statement compared to your budget for the month and your yearetoedate statement compared with the budget for the year to date Only by having these comparisons can you ask reasonable questions about expenditures make staff justify any changes in the budget and generally stay on top of this key area Again this is a onceeaemonth set of numbers but many managers just look at the bottom line and don t examine the statement against their previous goal as embodied in the budget Remember too that your highest eXpense unless you are very unusual is your payroll You want to keep a handle on how much your people are costing because cutting people is the most painful thing you will ever have to do as a manager Finally keep in mind that eXpenses are really investments in mission We talked about this in Chapter 9 and you need to know your eXpenses to be able to calculate the return on that investment not only in nancial terms but also in mission Balance Sheet and Ratios Balance sheets are nancial snapshots of your organization at the end of each month assuming that you generate balance sheets monthly They show your assets what you own or what you are owed your liabilities what you owe or are obligated to over the short and long term and your fund balance assets minus liabilities For many non nancial managers bal ance sheets are often confusing However balance sheets can be used to generate important numbers that help you manage nancial ratios Like so many other tools ratios are often misused and too often misunderstood A nancial ratio is a comparison of two factors on your balance sheet or on your balance sheet and your income and eXpense statement that allow you to get a common denominator viewpoint on your organization s nancial position 204 MissionRn Pd MnnmerPm There are literally hundreds of such ratios but you do not need to deal with more than a few key ones Like everything else which ratios you need will depend on your organization Talk to your CPA or nancial eXpert on your board about which ones are most important to you and how to use them Examples include Pro t margin Net revenue pro t divided by total income Is the per centage of pro t high enough Current ratio Current assets divided by current liabilities This is a measure of how much liquidity you have can you pay off your cur rent obligations with cash and current receivables The number should always be higher than 10 and probably your goal should be between 15 and 50 not including your endowment Much higher means that you are probably sitting on too much cash Debtetoe rnd balance The total debt divided by your fund balance This number measures the ability of your organization to take on more debt if you need to and monitors your debt against your net worth You don t want this too high or you will get overileveraged and interest costs will begin to eat you up As I noted there are lots more of these than bear discussion here since the speci c ones that will help you may be very obscure See your CPA and your banker Talk with them about which ratios will give you the best help in monitoring your nances Administrative Costs I truly hate having to talk about this since administrative costs commonly called admin costs are far far too much a concern in our eld particularly to large funders Funders want to have a way of measuring good manage ment from one nonpro t to another and they ve decided that this is the metric that tells all It doesn t actually tell them anything from nonpro t to nonpro t and the enforcement of arbitrary good and bad admin per centages has done great damage to the sector Most nonpro ts I interact with are underadministered not overadministered And for what it s worth I challenge any foundation to show me that it can administer its organiZai tions for 12 percent a year I ve been in lots of foundation of ces and I bet they can t come close My feelings on this aside you need to keep track of your admin costs and report them on your IRS 990 Funders want to see this and what funders want In truth looking at your organization s administra tive load over time Is it going up going down staying steady can help you manage your own organiZation better Just don t waste time comparing Firmwt ml 205 your admin load to another nonpro t down the street You won t learn a thing To decide what goes in your admin percentage sit down with your CPA and come up with your contributors to administrative costs You have to do this anyway for your 990 so make good use of the numbers Then keep those contributors steady Don t add and subtract them at will N on nancial Indicators Not all of the numbers you need to see have to do with money There are other items that bear regular scrutiny that are indicative of whether or not you are succeeding with your mission your people and your stewardship For eXample the number of units of service provided per FTE staff person the number of people on waiting lists for service the average turnover of staff per quarter or per year the number of people seeking service for the rst time or the number of people who return repeatedly all could be important to you Now that you understand that even a non nancial manager needs to pay attention to the numbers don t limit those numbers to the ones with dollar signs in front of them Pro t and Loss You need to know what you are earning and losing and this is so important an area that I ve broken it out separately Knowing What You Earn and Lose As you have read repeatedly in this book it s okay for a nonpro t to make money Not just that it is essential that you make money seven out of ten years to maintain and improve your ability to help your community To do that you have to know what programs and what parts of your organization make money and what parts lose money and in both cases how muc money is involved It is ne to have some programs that are subsidized by others There are things that nonpro ts do that will never be fully reime bursed and as we ve discussed before that s ne if they are missionirich But you have to balance those programs with pro table ones or you will be out of business The problem for most nonpro ts especially those who get government reimbursement is that they are trained to manipulate the numbers and this training leads them to take shortcuts in actual accounting so that they do not know their real costs of operation for anything I m not talking about any thing immoral or illegal just about cost shifting a very common practice in our sector 206 E MissionRn Pd Mnnmrpmpm FOR EXAMPLE A nonpro t mental health agency in the South received federal funds for one of its programs For the past ve years this particular program has allowed for a 15 percent over head charge for all administrative support in addition to rent utilities and actual documentable costs Whether the actual time spent on the project by the administration was 9 percent or 19 percent the charge was 15 percent the allowable maximum If it was higher the administrator would just say That s the most we can get reimbursed If the actual administrative cost was lower the administrator would rationalize We can get the reimburse ment and we need it to cover underpayments elsewhere In truth probably no one in the agency ever checked the real costs of administration by watching them for a three or siXemonth period Thus they never really knew the real costs As time went by the agency began an internal accounting method that charged each program for administrative time The percentage 15 percent of the amount that they had all gotten used to as their overhead cost But was it really 15 percent7 Almost certainly not and de nitely not on every program I You need to know your real costs of doing business If you are like most organizations you probably are pretty good at recording income by program and in doing estimating and accounting of direct costs for an individual prof gram the costs of the people supplies transportation and equipment used each d ay week or month But it is in overhead administration rent depree ciation and utilities that many organizations grossly under or overestimate their e Xpenses HANDS ON Time sheets are a start in teaching your staff where their time is really spent I admit that they are no fun particularly when staff have never used them before To make a point with administrative staff about how important accurate accounting is try this Ask your administrative team to estimate how many hours in the coming week they will spend on different tasks You should ask them to break their roles out by program where possible and then by administrative task budgeting marketing evaluation fundraising and so on Develop categories that make sense for your organization and then let staff ll in their hour estimates in advance Firmwt ml 207 Now collect their estimates and have them do it for real in 15 minute intervals for that week Have them carry their time sheet with them all day and stop intermittently at least at lunch and at the end of the day If your staff are like most of us they will nd serious differences between their estimates and reality Use this to underscore the fact that a standard organizationewide percentage is not the best way to account for overhead and administrative costs Once you know your real administrative costs you can really begin to eXamine which programs are pro table and which are not Why Are you going to simply cut out the losers and keep the winners Of course not There will always be programs that you need to provide that will lose money and it is naive to think otherwise But knowing which programs are making money and which are losing and how much each year is part of both the management and policyisetting miX If for eXample a program that is a high priority in your needs assessment or strategic plan is losing money you will probably be more willing to subsidize a large amount than with a program that has outlived its missionibased usefulness Alternatively decisions about where to put your marketing dollars will be a mix on where the most net income can be generated to subsidize other programs and how much mission will be accomplished Thus the pro tability of a program is not and never should be the only issue But it is an issue and one that your management team needs to consider Spending Less through BottomsUp Budgeting I will start with the assumption that you have an organizational budget If you don t STOP READING AND GO DEVELOP ONE Now that you are back let s discuss why bottomsiup budgeting saves money because if it is appropriately implemented it always does even in the bestirun organiza7 tions The term bottomseup budgeting comes from the idea that people at the bottom of the traditional organizational chart those nearest the provision of service make the best decisions about resource needs and use As you already know in my ideal organization these people would be nearest the top of the chart just below the recipients of service But no matter The people who need to develop and then monitor your budget are the people who are as close to the provision of service as possible These people know more than you ever can about what their real needs are how to spend 208 MissionRn Pd MnnmerPm money most effectively and how to monitor outcomes best Why Because it affects their lives on an houretoehour basis The Components of BottomsUp Budgeting You cannot just make a major change in your budgeting process by going to your line managers and staff and saying Here write the budget and expect it to work You have to do the whole process and that includes some things you may not care much for Bottomseup budgeting has some important components Training and orientation Many of the staff that will be included in the budgeting process will have never seen the budget much less under stand how it was generated You need to walk them through the budget and help them to understand where your income comes from and its limitations as well as the history of your expense numbers and how they have been developed in the past NI Delegating 1901 budget responsibilizy and amborizy In using this pro cess of budgeting the entire point is to pass the responsibility and authority for the budget development and implementation to other than senior staff But note thatI said responsibility and authority If you just ask your staff to help you develop the budget but then micromanage its implementation you are no better off and arguably worse than you are now What you want is for staff to have ownership and input into the budget development process Once the budget is reviewed by senior staff and adopted by the board the line items in the budget should within programs be authorized and approved by the line managers within those programs Thus if your board has authorized a 5000 line item for supplies for one of your programs you as an executive should have no real oversight into what supplies are bought or when or from whom as long as the program meets any bidding requirements and stays within its 5000 per year For some readers this will require changes in procedure for payment approval and rethinking their control systems That is probably overdue for many organizations and this is a good time to look at these areas Remember it s key to give authority with responsibility Rise taking and risk reward This system will not work without the added component of risk and reward Staff who are monitoring budgets must be at risk for their implementation Thus their evaluation should in part incorporate their budget management skills More important if staff come in under budget on the expense side or overbudget on the income side for those programs that can impact on their income Finm ml 209 statements they should be rewarded My recommendation is that when a program beats its budget it should get to keep half of the net In other words if you are a private school and your preschool staff cut their eXpenses by 40000 under budget they get to keep 20000 at no penalty on neXt year s budget to do with as they see t buy eXtra equipment fund training allocate funds for a partitime aide and so on This reward system is absolutely essentialiotherwise the staff do not have the incentive to look for bargains or cut their costs Any less than half of the savings and your incentive levels really start to drop Don t be greedy as an administrator Remember you just got some free save ings too Share the wealth and there will be more Get greedy now and the source of those savings will dry up Regular feedback and repom ng The only way that your staff can mone itor how they are doing is by regular reporting back to them from your accounting people The best format is to have a monthly statement that shows actual income and eXpenses versus budgeted for the current month and year to date These should be done for each program and the administrator in charge of overseeing that program should go over the statement with the line staff and manager but only question lines in which there are large discrepanciesiperhaps 10 percent in a monthly line and 5 percent in a yearrtoidate line This communications ow will help everyone be more comfortable with the delegation of responsibile ities and ensure that no program area staff have concerns or questions that are not answered If you do this kind of budgeting you will see results 10 to 15 percent savings in nonpersonnel lines and even personnel cuts in some cases I would not however suggest that you implement this wholesale if you have had a traditional topidown approach Try this neXt year in the one or two programs with the highest likelihood of success orient all staff to the new approach and at the end of the year publicize the results and eXpand the program Don t eXpect all staff to welcome this idea Again here we have change on the march Perhaps your biggest surprise will be that those staff who always gripe about not having enough say will resist having control over their budget FOR EXAMPLE A few years ago a good friend of mine took the job of headmaster at a large residential school on the East Coast His predecessor had been at the school for twenty years and had continued 210 MissionRn Pd Mnnnvpmpm continued been the penultimate autocrat For the rst full year my friend was there he listened to staff griping about management making ridiculous decisions and how the allocation of resources was just plain stupid In his second year at the school the rst in which he was responsible for budget planning my friend called all the program heads into his of ce and told them that they were going to make the allocations of resources based on the budget mark amount that had been received from state funders He told them that the rst year they would only have to allocate the purchases of equipment books and classroom supplies This meant that the managers who had previously been given these allocations and could just sit back and gripe about not getting enough now had to come to a consensus on how to divvy up the school s entire allocation for each line item The program heads bated the job and found it was much tougher than they had ever imagined Four days later they came back to the headmaster and asked that he take back the responi sibilities he had delegated to them He refused saying that it was crucial for them to have the ownership and understanding of the budget dilemma and the allocation of resources I Resistance to change aside this process works If you can come in underbudget for the neXt three years and have enough discipline to then set the funds aside you are well on your way to a culture of nancial empowerment Reporting Inside the Organization One of the key areas where empowered organizations excel is in the area of internal reporting In eXternal nancial reporting what you do is dictated by your funders by your auditor and in some cases by tradition But internally you can be much more exible and creative Internal reporting means getting the right numbers to the staff and board All organizations are different and what you report and who you report it to will vary with your management style your organizational policies your organizational history your size and whether you have a collective bargaining unit a union but no matter what your shape and size there is one key tenet of internal nancial reporting GIVE PEOPLE THE INFORMATION THEYNEED IN THE WAY THAT THEY WANT TO SEEITAS OFTENAS THEYNEED IT Firmwt ml 21 1 Why should you be exible in your reporting Why not just give everyone the monthly pro t and loss statements and perhaps a cash ow projection Let s look at the different groups you need to report to As you review this list ask yourself Do all these people need the same information on the same schedule BOARDiAll IN BOARDiFinance committee BOARDiTreasurer and Chairperson Im STAFF7CEO nu STAFFisenior management STAFFiMidmanagement I STAFFiservice providers Of course they need different numbers in different forms at different times And with today s accounting and reporting software giving each of these groups what it needs in the way it wants as often as it needs it is neither time consuming nor expensive In the neXt few pages we will review some sample ideas of the kinds of information these different groups might want in your organization as well as look at some sample formats that transmit this information the most ef ciently Understand that these lists are starting points for you not all inclusive because they cannot be You will need to nd the miX of reports and the types of formats that work best for your organization and to do that you need to return to our most basic marketing technique Ask Ask the people in these groups what information they need how often they need it and why they need it Ask whether they want their reports in numerical form on a spreadsheet in graphs or interpreted in writing Or do they want some combination of these Once you have established what people want and how much they need remember to ask them regularly if the information is working If it is great If it is not amend it Remember this kind of information targeting is cheap in both time and money particularly if it gets the information that people need in their hands promptly If you gave each of twenty people a half hour a month by saving them from wading through unnecessary data that s 120 person hours per year or three weees of staff time saved This is not an unusual savings obtained by targeting your information There is however information that is o lz mz ts information that should not be generally shared Brie y this information includes salaries perks retirement and medical information as well as information on individ7 ual contracts and contractors Additionally you should never send out inaccurate indecipherable or misleading numbers reports charts or graphs For excellent examples of just such inaccurate or misleading 212 MissionRn Pd Mnnthum information look at charts and graphs included in many advertisements and much of the press With all of that as background let s examine when you do send infon mation and who gets what Let s start with some premises 1 Tbe more your people really understand bow your organization s finances run tbe better If your organization is like most few if any of your staff outside of your central management team understand how your nances work Most of your staff assume that the money comes from the state feds city foundations that you have lots of it and that you are just stingy in giving it out They probably have no real under standing of how long it takes you to get paid the reporting requirements that you have to go through or the true nature of your balance sheet In truth most of them have probably never seen a balance sheet and would not know how to read one if they saw itithrough no fault of their own If you plan to include staff in budgeting give them responsibility for their areas of budgeting value them as individuals Let them see the numbers that help them do their job I work with dozens of organizations in which no staff but the executive director and comptroller nancial manager ever see the budget or the monthly pro tiandeloss statements or know how much over or under their budget line they are They don t know where they are in relation to their budgetihow much they have left to spend in any line item But consistently in these organizations the exec will tell me that his staff are involved in the budget process and have spending authority How can they when they haven t a clue about where the money came from is or will be going Tbe more people participate in tbe budget development process and are beld accountable for its implementation tbe better We ve already dis cussed how you save money by including staff in the budgeting process Letting line staff develop and be responsible for the budget in their area saves money But for staff members at any level to be involved mean ingfully in the budget development and budget implementation process they have to have the information they need at the time they need it in a format that they can understand and use A little knowledge especially in tbefinancial areaiis a very dangerous tb ing Imagine and this may not be too much of a stretch for those read ers who have had this very thing happen in their organization a staff member who makes 35000 per year being given a copy of your orgai nization s balance sheet and reading things like Total Assets 1450000 or Cash and Securities 267560 To a person unfamiliar with nancial terminology that could sound as if you have bags of money hidden in your of ce somewhere Without the context that perhaps 90 percent of N W Firmwt ml 21 5 your total assets are xed buildings or that most of the cash and secue rities are in restricted funds this person will be justi ably upset with the fact that the staff got only a 2 percent raise last year or that needed programs have been cut What is the moral If you are going to hand out nancial information Irairz your people in how to use it and what it means If possible have an outsider who will be seen as neutral come in and go over what a balance sheet is and eXplain an asset a liability a fund balance a restricted account a xed versus liquid asset and how your cash ow really works Have the trainer eXplain how your income streams are set up how staff can in uence them how growth may actually mean less cash in the organization s hands instead of more and how an organization should con gure itself for nancial strength This training is not only important for the development of the staff involved but it is a key preventative against a general uprising over resources Now let s look at who needs what Staff CEO The CEO of your organization will need a variety of information Again what the CEO wants is a decision he or she will have to make but at the least the CEO should see the following Gas9 ow prOjectiorz The cash ow projection should be for the coming siX months shown by payroll or by the 1st and 15th of each month It should have a rolling net cash line to show the total cash situation This is a key piece of information that too few people have Monthlyannual statements versus budgetiorerall arid by department area This statement should show the actual income and expense in the previous month and for the scal year to date versus the budget for the same period Problem discrepancies should be investigated Working capital projections How much is the eXpansion of the organi zation going to cost How much should we set aside for a new program These numbers tell that We will go over how to project these key pieces of information later in the chapter Receivables agirzg How long has it been since your major funder paid you How much are you owed now versus a month ago and a year ago This item is important for the CEO to know as he or she interacts with your funders Occupancyutilization If you have a capacity number or a census show it versus a month or a year ago For eXample if you have res idential beds what is the percentage of occupancy in each program 214 MissionRn Pd Mnnnvpmpm If you have a capacity of ticket sales what percentage was sold Or what is your count of patrons last week or the number of students or parishioners Trends here are key Cost ofcapz ml How much is the cost of the capital you have For most this will be a calculation of the overall cost of any debt reduced by your cash invested and adjusted for your working capital losses Talk to your CPA about how to calculate this but watch the number carefully from quarter to quarter You don t want it to rise too steeply How often and in what format should you provide this information Look at the samples of a CEO Data Sheet Exhibit 111 a Statement of Income and Expenses Exhibit 112 and a Cash Flow Projection Exhibit 113 Note the simplicity of the executive director s sheet the come bination of numbers and charts Some people like their information this way If so give it to them SENIOR MANAGERS What senior managers want and need depends on the areas that they supervise They will need at least an Organizational cash ow Overall agency statements of income and expense versus budget NI Similar statements for each department they supervise Budgeting information In Occupancyutilization gures for the areas they supervise SERVICE STAFF Service provision staff need information too If you agree with my philosophy of information being a good thing and of staff becoming involved in the budgeting process then they need at least Organizational cash ow In Statements of income and expense versus budget for their area of work Board of Directors Does the board of directors need the same information as the staff No most of the board should focus on policy and have no need to see the nitty gritty They are however duciaries and responsible for supervising the appropriate utilization of your financial resources The board members need Information that they can use ef ciently ml Information that makes sense Information without jargon In Information that is not out of date 215 EXHIBIT 111 CEO Data Sheet Current Month Last Month Last Year Budget or Goal Revenue Occupancy unit 1 Number of hours billable outpatient Smff turnover 12 months Receivables in days Payables in days Current ratio Cash reserve in days Cash Flow Summary Toml receipts Toml disbursemean Net cash ow Ending cash balance 144533 870 2435 240 435 321 050 476 Month 1 142456 880 2490 260 450 320 056 456 Month 2 132677 Month 3 144000 Month 4 Month 5 Month 6 144000 133271 10729 34289 144150 132831 11319 45608 149400 134861 14539 60147 134080 180541 46461 13686 120575 133371 12796 890 265625 216611 49014 49904 216 EXHIBIT 112 Statement of Income and Expenses Line Item Income Smte program Medicaid Donations Total Income Expenses Salaries Total Expense Net Monthly Actual 55400 144533 105800 Monthly Budget 144000 107900 Monthly Variance 2100 189 0 of Budget 45 73 4500 454 4500 04 YTD Actual 310045 887592 623980 108529 YTD Budget 321000 3000 887592 602300 755 835 1643427 YTD Variance 10955 7500 36008 21680 1951 23228 59236 of Budget 434 18 217 EXHIBIT 11 Cash Flow Projection Month 1 Month 2 Month 3 Month 4 Month 5 Month 6 Smte program 53000 Medicaid 61000 United Way 10000 Fees 19500 Debt received 0 Donations 500 Total Receipts 144000 Disbursements Salaries 107900 Fringes 9 71 1 Occupancy 2 500 Insurance 0 Utilities 1 200 Debt service paid 7960 Supplies 2500 Total Disbursements 133271 Net Cash Flow 10729 Ending Cash Balance 34289 Smrting Cash 23560 53000 61000 10000 19500 0 650 144150 107900 9711 2500 0 800 900 7960 45608 53000 61000 10000 24500 0 900 149400 107900 9711 2500 53000 0 10000 18500 40000 12580 134080 107900 2500 120 180541 46461 13686 53000 0 10000 17450 40000 125 120575 107900 9711 2500 0 1450 900 7960 2500 450 133371 12796 890 53000 183000 10000 19500 0 125 265625 107900 9711 2500 49014 49904 218 MissionRn Pd Mnnnvpmpm Let s look at the differing needs of different parts of the board from the people who need the most and the most detailed information to those who need just the overviews BOARD TREASURER AND CHAIRPERSON These two people need to mzdeiL stand how the money ows in your organizationihow it is earned and how it is spent They need to be able to articulately advocate for your nancial needs in front of a funder as well as to give the other board members some peace of mind that someone understands your arcane nances Thus they need to see at least Organizational cash ows In Statements of income and eXpense versus budget Critical information about new or crisis programs To be involved early in the budget development process In Early information on major changes in funding streams a rate change a foundation award BOARD FINANCE COMMITTEE The nance committee is the key oversight group of the board and should have at least Organizational cash ows In OccupancyutiJiZation gures Statements of income and expense versus budget each month Budget projections m Working capital projections Close involvement in budgeting prior to the budget s going to the board BOARD GENERAL These people need to be the least involved in the nane cial oversight if there is a strong nance committee and if the treasurer really understands how the numbers run They need II Summary information on cash and income and expenses In Audited statements from your CPA Management letter from your CPA 1m Organizational cash ows See Exhibit 114 for an eXample of a Board of Directors Summary Report Remember with the board that you can put all the nancial information not just the report summaries online in the board area of your Web site so that those board members who want more detail can easily get it Again the key to all of this is to give people what they want in the format they can best use and to train train train in the information s use 219 EXHIBIT 114 Board of Directors Summary Report Income and Expense Line Item Monthly Actual Monthly Budget Monthly Variance 00 of Budget YTD Actual YTD Budget Toml income Toml expense Net Cash Flow Summary Toml receipts Toml disbursemean Net cash ow Ending cash balance Revenue Occupancy unit 1 Number of hours billable outpatient sm turnover 12 months Receivables in days Payables in days Current ratio 144533 138004 6529 Month 1 144000 140799 3201 Month 2 533 2795 Month 3 04 420 3328 887592 779063 108529 Month 5 923600 144000 Current Month 144150 132831 11319 45608 Last Month 149400 134861 14539 60147 Last Year Budget or Goal 144533 142456 132677 144000 120575 133371 12796 890 49014 49904 220 MissionRn Pd Mnnnvpmpm and meaning Good information is critical to nancial empowerment in your organization Don t force t your people s needs to one format Scrimping of the time and software to make exible reports will only cost you big time in both the near and long term Finally remember to ask at least annually whether the information is still working People s needs and wants change as does the key information the organization produces For example a particular program that was running in the black last year may be a loss center this year and need more senior level attention Or you may have received some kind of accreditation and need to monitor a new data set Ask and amend as necessary but no less than once a year Planning for Your Future Cash and Capital Needs One last part of constructing a nancially empowered organization plan ning for your future cash and capital needs This is an area in which many organizations foripro t and nonpro t fall at on their faces because they forget that growth costs money You need cash for new programs and cash for growth Unfortunately it is not just the cash that you will spend on equipment or on a new building or on people It is the cash that will be lost in the mail working capital Working capital is the money you need to operate on between the time you manufacture a product or provide a service and the time you get paid The more business you do the more working capital you need The longer it takes people to pay you the more working capital you need A simple example is this If one of your programs is currently reimbursed at cost for 120000 per year and if the funder of that program pays you in sixty days you need two months working capital 20000 just to carry your receivable for that program Now suppose the program doubles in size presquou need 40000 Or perhaps the funder now decides to pay in 90 daysiyour working capital needs just went up by 50 percent This is why so many rapidly growing organizations are starved for cashiit all gets sucked up into their working capital Exhibit 115 is a working capital needs worksheet You will see a format for estimating your working capital needs that I recommend you use every year The rst column shows the current income per year the second column shows the projected income and the third column shows the days to get paid If you subtract the projected income from the current income and multiply that times the days to get paid and then divide by 365 you ll get the new cash needed next year for the growth in that program If as in this example you do it for all your programs you ll get a better idea of your working capital needs for the entire organiZation If 221 EXHIBIT 115 Working Capital Needs Worksheet Programs SmrtAUp Costs Current Budget Next Year Budget Days Payable Currently Days Payable Next Year Cash Need Residential Day Outreach Hot lunch Prevention new 0000 45 000 440000 Total New Cash Needed 94973 ZZZ MissionRn Pd MnnmerPm the number is very large you may need to start working with your banker to borrow funds to cover the cash shortfall The second part of the format has to do with the new program working capital needs Here you have the development costs the upifront costs and the working capital costs which are the income per year times the days to payment divided by 365 Here you see the agency needs 80082 just to open the new program that will bring in only 197000 per year Do these calculations They are part of your better understanding of how your organization works how the cash really ows and how to do business in an enlightened and empowered manner Keeping What You Earn 1 wish I had a magic potion to give you to avoid what is still a major problem for many nonpro ts in this country being punished for being nancially responsible However many funders from the government to foundations to the United Way still have the feeling that if you do not use up what you said you were going to spend on a project or a service they deserve the money back Worse some funders still feel that if you have any money you do not need theirs So if you do become empowered and you have reserves for mission or for simple nancial stability how do you keep it7 How can you do what I suggest and make money seven out of ten years and not get punished There are a number of ways and these work solely or in some combination for most of our clients However I must caution you In some states the government is extremely aggressive about coming after excess funds They have an overdose of what I see as what is yours is ours discussed in Chapter 2 Thus for some readers there may be little protection today You may need to start now to lobby for some commonsense regulation that allows you to set aside your earnings in the future Here are some techniques that have worked 1 Avoid quotuse it or lose it Contract rather than grant When negotiating with a funder contract for a speci c set of services rather than accepting a cash grant Negotiate into the contract wording that says that you will provide X services for Y at Z level of quality and that any excess is yours to keep not theirs to recapture Please understand that this means that if you don t keep your budget under control and you spend more than Y you eat the losses You can t go back to the funder to ask for an increased contract unless it changes the scope of services that it wants Put t ncorneproduct ng ventures andor property into separate corpoe ratt ons In Chapter 9 we discussed earned income ventures If you N Firmwt ml 225 start having large enough net revenue from these ventures it may be bene cial to place them in a new nonpro t subsidiary to harbor their assets Many nonpro ts have their property buildings vehicles equip ment in just such a second corporation and lease it at fair market rates to the primary corporation since the funders will reimburse rent but not depreciation or interest on debts Please understand that core porate restructuring is a tool not a panacea You will probably have to have a related uncontrolled corporation hold your assets to quale ify for reimbursement and thus technically will lose control of your assets Check your funders regulations on relatedeparty transactions before setting up a second corporation to house assets other than a foundation Hate restricted accounts Set up accounts that are restricted in use for speci c items eg a depreciation account a capital fund account etc Funders are more likely to attempt to go after general revenue than targeted restricted funds Have a board resolution to restrict the funds and have your accountant show them that way in the audit Set up afomtdcttt ort Later in the chapter we will eXamine the need for an endowment The most common method to house this money is in a second 501c3 that people loosely term a foundation Note You do not want to be a foundation in the technical sense with the IRS If you le your own paperwork for your new 501c3 do not check the line that says Private Foundation A foundation corporation will allow you to keep the money that you raise out of your current 501c3 and will be a marketing tool for donors some of whom will be concerned that their donation will just get eaten up in operating eXpenses W A HANDS ON Note that even though your endowment funds will be off the balance sheet of your nonpro t they won t be hidden in a y sense nor should they be Your audit will contain a notation titled Related Party Transactions or Related Entities and your auditor will spell out the relationship your nonpro t has with its endowment I 5 Work with your funders Try to work with your funders to help them see the cost of growth in working capital the cost of future capital expenditures and the need for nancial stability and a quick reaction fund for your mission Explain to them that you are not just hoarding the money you are managing your resources to the best mission outcome possible 224 MissionRn Pfl Mnnnvpmpm You can t be nancially empowered if you lose everything you have gained Try these ideas to retain your earnings Does Your Board Prohibit Debt As I work with nonpro t organizations around the country I regularly see organizations that have boardigenerated policies prohibiting the organiza tion from taking on any debt Often these policies are many years old and may have resulted from abuses by former staff from former board members concerns about major funding cuts or from a feeling that this policy reduces the board s risk and eXposure When I ask each organization s board about the policy the conversation usually goes something like this Board We cannot mke on debt because our funding is only approved annually If our funding were cut we would be unable to pay a loan back Peter HOW many of you have lifetime guarantees of employment No hands go up How many of you live in a house that you paid cash for No hands go up Okay so you took on a debt a risk even though your major source of income your salary may be ended at any time Board But that s different We are individuals Our board job enmils responsibility for an entire organization and We must be prudent True But nonpro t organizations are also business and business is risk The real issue here is how much risk your organization is willing to take on behalf of the people you serve Understand that I am not talking about highly leveraged subiprime loan craziness This is not the Real Estate with No Money Down commercial you see on television What is important to understand is that in some instances taking on debt to eXpand a service build a building or purchase equipment may be a good risk to take on behalf of the people you serve Each organization is different as is each situation but I strongly recommend that you consider all your options in planning your future and carrying a prudent amount of debt is one avenue many highly successful businesses both foripro t and nonpro t use to grow and serve their customers better Working With Lenders As a CEO or CFO chief nancial of cer you may think that your most important working relationship is with your board president with your key mm ml 225 governmental or foundation funding source or with another key staff per son But sooner or later your most key business relationship is going to be with your banker The problem is that if you are like most nonpro t staff you have little or no relationship with a bank other than having a checking account and perhaps a certi cate of deposit or money market account Why is this a problem7 There are a number of reasons the most impor7 tant of which are At some point as your organization grows you will need to borrow Inn The lending decision process excludes you In Most bankers don t understand nonpro t nances and all bankers fear what they don t understand Let s look at each of these in more detail You will need to borrow Sooner or later you will almost certainly need a loan either to cover cash ow when your major governmental funding check is late and you have to make payroll or to cover the advance costs on a new contract Nearly all organizations need some form of debt at some point and your credit rating how lenders look at you is in uenced in no small part by how well those lenders know you and how promptly you have repaid any past debt But commercial banking is oddly enough a personal business and your personal relationship with a single person in a single bank will go a long way toward improving your creditworthiness Nothing of course can help you like a solid balance sheet and pro table net revenue over expenses operations but you will nd that even with good numbers no one will want to take a risk on your organization until they know you and understand your organization more on this later The borrowlug process excludes you Second when you go in for that loan you will let us hope have prepared your numbers showing the need for the debt the term length of the loan you need and how you plan to pay it back where the funds will come from over and above your normal dayetoiday expenses You will give this information to your banker and the banker will ask you a number of questions and then say Thanks for coming I ll get you the answer in a week What happens now The banker prepares whatever forms and appli7 cations are necessary and takes the application before a loan committee made up of people who probably don t know you who have only a super cial understanding of your organization and whose job it is to minimize the bank s risk in other words gure out all the reasons they can to turn your loan down N 226 MissionRn Pfl MnnmerPm Your only advocate aside from the material you prepared is your banker If you have not kept your banker up to date on your orgae niZation your activities and your plans the odds are that the bank particularly in the current environment will not take a risk on you and your loan may be reduced be made very expensive a high interest rate or loan fee or denied altogether So you need your banker solidly in your corner and later I will show you how to do so Banas don t understand nonpro ts The third issue is one that makes the rst and second tougher to resolve Banks and bankers often don t understand how nonpro ts work To a banker not knowing about something is risky and risk to bankers is like acid rain to industrialistsisomething they would rather avoid thinking about thank you very much W Look at it from the banker s point of view You get most of your money from one source governmentiand every one knows tbat tbis source is at best unpredictable and in any event only guaranteed for one year at a time You tbe executive director are probably not a trained manager and your organization prides itself on giving services away and does not collect very well from tbose wbo are supposed to pay You are overseen by a citizens committee of welleuisbers and doegooders sta ed by a buncb ofprogram zealots Wbo is watcbing tbe store and wby sbould I lend my banes moneyPI mean you are a nonpro t and loans are only repaid from pro ts Sound exaggerated It s not I have heard every single one of these arguments from wellieducated wellemeaning bankers referring to nonpro t organizations that were despite the banker s prejudice very well run An just think about the bank s willingness to take risk after the 2002009 nane cial meltdown They went from too high a willingness to take risk to no willingness at all So having an advocate inside the bank your banker is even more important than ever The problem is one of education as much as it is internal operations but you do have an uphill battle with most lending institutions no matter how much they love what you do and no matter how much they have given you in donations or staff time in the past There are a number of things that you can do to beat these problems and to develop or improve your relationships with your lenders Here are the steps to take 1 Fix up your nances First get your internal house in order No business foripro t or nonpro t is going to be given a loan if its nancial house is outside of the metrics the bank wants Make sure your internal act is Firmwt ml 227 together before you go the bank Regular statements an annual audit and good cash and receivable controls are all essential So are many of the things we ve talked about in this chapter making money knowing which programs make money and which lose tracking your productive ity being aware of trends in your eld In short be businesslike while pursuing your mission Seek a banker get 20 know him or her Once your house is cleaned up and if you don t already have one go down and meet a real commere cial banker As noted earlier banking is at its heart a personal business The banker will want to know lots of information about your organiza7 tion and will also be keenly interested in youiyour background your attitude your management skills Meet with this person regularly every siX months one good time to go in is just after your annual audit comes back then on a sixemonth basis Talk businessiyour industry your past siX months of opera tions your high and low points Let the banker see that you know your organization from a business point of view Give the banker lots of information As we said before what people don t understand they fear This information should include at least the following your monthly statements your audit your newsletter copies of all major grant awards certi cations and so on and all news releases and newspaper articles on your organization and your eld Keep your name regularly on your banker s desk The more he or she knows the better off you are N W Invite the banker to visit your program sites once a year If you have multiple programs at many locations pick a different one each time Invite the banker to a board meeting particularly the one that includes discussion of your budget Let him or her see you in action If you have an open house or ribbon cutting or press conference send the banker an invitation When you are developing your strategic plan invite your banker to sit in on the nancial parts of the discussion or at least review the numbers The same for a business plan a capital spending plan and so on Such a consultation will have lots of bene ts First you will receive excellent advice and ideas Second you ll know what to eXpect from your banker if any part of the plan requires debt Equally important your banker will be similarly forewarned about your requests and you will give the banker more ownership in your organization The idea is to develop a longiterm relationship that bene ts your orgai nization and the bank It is an ongoing process a discipline but one that will pay off enormously when you need it most Remember the banks want good 7 business You want to be a good business that does good things By working together you can both accomplish your goals 228 MissionRn Pd MnnmerPm Finding the Right Bank Now you know why a good relationship with a banker is so important to your organization But there s more to it than that The banker with whom you work will only rarely be the owner Bankers are employees of the bank and must abide by its policies processes priorities and of course its prejudices These may very well affect your banker s ability to meet your needs and thus may preclude your wanting to invest a lot of time fostering a relationship that as far as you are concerned is a oneiway street running the wrong way So what should you do Well rst let s get our perspectives straight You are the customer I know that s hard to believe given the way some banks treat you but it s the truth Remember the bank is selling you money In fact the bank is almost certainly selling your money your checking deposits to other people for short periods of time Unfortunately some bankers tend to forget this with small businesses or with nonpro ts and it is up to you to remind them politely of the fact Still you want to nd the bank with the best set of services and the best possible attitude toward your organization Just as with anything you buy it is prudent to shop around for a bank even if you have been using one to your satisfaction for some time some would say particularly if you have been with one bank for a long time But what is the best way to compare Here are the steps to take 1 Simian9810p Find someone who knows the CEO of each of the three or four or more banks that you wish to check out Have that person let s call him Mike phone the CEO let s call her Jan and inform her of your interest let s call you joe Have Mike say jan This is Mike I heard that joe s organization is looking around for a new bank and I thought you might want to give him a call since I know you re always looking for some new customers He s got an annual budget of around 15 million Just thought you d like to know Now what has Mike done He s done his friend Jan a favor and he has not taken any risk by declaring you a good risk Proving that is your job Now you wait and see how far down the organizational chart you dribble If Jan or her rst vice president calls you back and invites you to lunch at the bank to explain the bank s services you know the bank is interested and will probably treat you pretty well assuming its prices are competitive If on the other hand you are never called back or your call is returned by a junior loan of cer with 2500 in personal loan approval authorization then you have a good idea about what that bank thinks of nonpro ts in general and of yours in particular Firmwt ml 229 2 Remember baryon are be customer For the banks that call back you need to take the neXt step shop prices and services Always ask what services are available for a commercial account Are there checking fees What minimum balance waives such fees Do balances in checking over a minimum earn interest How much Are investment services CDs money market accounts available What types of loans does the bank make What collateral do they want Who makes the decisions Also ask for comparative interest rates and terms on lines of credit equipment loans and receivable loans HANDS ON Banks will often tell you that your loan is two over prime The question to ask is Whose prime and what is it today Some banks use New York prime and some use their own often in ated over New York by 1 or 2 percent You need to know the rate so that you can make a valid comparison I Ask the bank for smallebusiness references as well as references on other social service clients Be prepared for a shocked look Bankers are rarely asked to give references Then check out the references Ask the reference person at least the following questions Who is your contact in the bank How is your relationship with that person Do you think your contact person values your business with the bank IN How long have you been a customer Why did you choose this bank What services of the bank do you use Are they of high quality Were loans easy to apply for or a major hassle IIIJ If there were periods during which you had a downturn did the bank stand by you or get nervous How did your banker act toward you in hard times In Do you feel that your banker understands your business What has your banker done to show interest in your organization Im Explain a little about your organization Would you recommend your bank and banker to me Any advice on how to deal with your banker Weigh the nancial information along with the reference checking and then make your move If you are bringing a major account to the bank over 1 million in payroll in most towns less with smaller banks negotiate for the waiving of fees Once you choose your bank stick with it unless service declines or prices jump dramatically You should build a longiterm business relationship with the bank and the banker Jumping 250 MissionRn Pd Mnnnvpmpm from bank to bank is bad business unless you are poorly treated over a period of time Note however that many banks are being bought and sold these days If your bank is acquired by a new owner this should lead to a reevaluation on your part of whether the bank still sees you as a priority customer You should also reevaluate whenever you are assigned to a new loan of cer Finding a good bank one that values you for your economic contri bution to the community as well as for your mission is one of the best management moves you can make It takes some time but you will reap the bene ts over and over in the coming months and years Creating an Endowment Wouldn t it be nice to have a cash machine one that churns out money every yeariregardless of whether the government funds you or donors give to youwne that you could depend on not have to advocate or beg for There is such a cash machine It is called an endowment and lots of your peer organizations have one even organizations that are very new and very small My rule for endowments is this You need a large enough endowment to have at least 5 percent of your total annual income come from the endow ment s earnings That means if your endowment earns 5 percent return each year it needs to be the same size as your annual budget If it earns 10 percent it needs to be half the size of your annual budget Why do you need to do this For a number of reasons First it s good funderaising marketing You need a steady source of income and sophistie cated donors know this if you just ask for money with no endowment you can ask only for operating or special funds If you create an endowment usually in a separate 501c3 foundation you can attract larger funds from people who know that their gift will keep on giving Second you need the steady income income that is free of the need to lobby the need to beg And don t stop at 5 percent That s the If you can have 20 percent of your income per year from the endowment great Just think of all the additional things you can do Third you have the resource of your 501c3 status which allows you to take nancial contributions Use it and not just for current operations Show some longiterm vision and save for the future I am not an expert in development and fundraising Thus I will not even attempt to tell you how to go about this I would merely lead you astray There are however a number of excellent teth on the subject Make it part Firmwt ml 251 of your longiterm planning to put aside funds in a restricted fund or in a foundation established so that you get the income but do not touch the principal This is the toughest part the discipline of not touching sources of funds when you have done without for so long Learn how and your organization will really bene t Using Your Empowerment Getting to the point where you feel you are nancially empowered will con tinue to be a tough longihaul job So why do it Why raise the expectations of your staff board and yes yourself to do this work now for the bene t of others in ve ten or even fteen years For a number of reasons First it s your job You are not just a senior staff person for this year s work you also are building a better organiZation for the long term at least you are supposed to be I hope you buy property for the long haul with an eye to minimal maintenance and hopefully to appreciated resale value I hope that you buy computers and software with the capability to upgrade easily and inexpensively and that you buy vehicles based on utilization and on repair and resale records If you are doing this you are investing in the future When you spend money and time on a strategic plan you are investing in the future And when you train staff or start a marketing plan you are counting on a future reward for your investment Imagine if you or your predecessor had started nancial empowerment planning for the organization ten years ago Just think what you could do with that money now The second reason to become nancially empowi ered is that it is good mission Only by becoming less dependent on your key funders will you and your organization be able to meet the needs of your community quickly and with the skill and knowledge that you alone possess Your ability to do good mission and thus the value that your com munity places on your organization will both rise If the mission is the reason for your eXistence nancially empowering your organization is a key component and one that you need to start onito ay One other caution It is key in empowerment planning that you bring all the staff board and funders in on the plans early if possible You need to educate your staff and funders to the fact that having money is okay and the fact that you have some funds now and are putting other funds aside is not an indication that you have given up on the mission and are hoarding You need to let them know that these funds that you are setting aside are targeted for mission for longiterm income and for nancial stability As noted above when we discussed keeping what you earn work with your funders and staff on the front end to let them have input and it will pay off here 252 MissionRn Pd Mnnnvpmpm Recap If only doing all of these things could be included in your neXt oneeyear plan But there is much to be done and some of it takes a great deal of time no matter how good your intentions or how great your nancial or service needs But by reading this chapter you ve made a start on the long road We have covered a lot of ground in this chapter and have started you on the road to empowering your organization nancially Now you know the eight characteristics of nancial empowerment You know how to use numbers to your bene t and how to pick those numbers that mean some thing to you and those that don t You have been exposed to methods of using nancial and non nancial indicators to tell how your organization is doing and how to give different people in your organization the numbers that they want and need to do their job Finally I have shown you some ways to predict future nancial needs so that you can plan well in advance and not get caught short Again no money no mission Financial empowerment will take your organization from being a creature of the 1970s to being a thriving cone tributing member of your community in the twentyi rst century Questions for Discussion What parts of this chapter apply to us How do we do in relation to the eight characteristics of empowerment Where can we do better What can we do to improve our internal reporting What information do people need to see when Can our software accommodate different reports How do we feel about spending the time and money training our staff to understand our nancials Do we want to share them Why or why not How do we get started on an endowment How soon can we get some7 thing in place N W A V CHAPTER 12 A Vision for the Future Overview Nonpro ts that succeed that thrive that are going to be providers of the best mission over the next decade all know where they are going A Vision for what you want your organization to be and a road map of how you want to get from here to there is absolutely essential if you are to be a good steward of your nonpro t s resources This chapter will give you some handseon ideas of how to plan and how to use both the planning process and the plan itself as a tool for the bene t of the organization In this chapter you will read about the nine distinct phases of the plan ning process and I will provide some detailed ideas on how to use that process to your best bene t We will review the four reasons why you should develop and maintain a plan examine some varying philosophies of plan ning and I will offer recommendations on how often you should plan how inclusive the planning process should be and how to go about evaluating the planning process and the plan s implementation status After that we will look at various types of plans de ne some important terms in the planning process and look at outcomes that you can expect from a good planning process and plan I will also describe a variety of uses for your plan once you have it completed We will look at some barriers to planning and I will include an outline for your plan to help you get started By the time you nish with this chapter you should have a better under standing of the task you need to tackle If you are new to planning reading this chapter will help you get acquainted with the need for planning and how to do it if you are an experienced planner you will probably pick up a nugget or two for how to do your next plan even better 255 254 MissionRa Pd Manavpmpm The Phases of Planning Good planning comes in several phases The following phase list is fairly complete and we will review each phase in some detail However I want to make several points about the list as a whole First the sequence listed is just that a sequence While it allows for a great deal of exibility in how you actually do the planning I urge you to do your planning in this order In my quarter century as a consultant I have helped well over seventyi ve nonpro ts of all types and sizes develop their planning processes and their plans and this sequence has been tried and tested It works While there may be a certain overlap for example with Data Gathering starting about the same time as the Retreat and extending into the time of Drafting Goals and Objectives the basic sequence should be preserved The phases of planning that I suggest are Preparedness The retreat Data gathering Drafting goals and objectives Outside comment Final draft and adoption Implementation Evaluation Go to step one and start over FOWF QV ERSNNE We will go through each phase in some detail but rst we need to discuss some philosophies decide on which type of plan you intend to develop provide some de nitions and look at the outcomes of planning that you can expect Why Plan Too few organizations that I consult with have a strategic plan The excuses are many and we will discuss them in more detail near the end of this chapter but the most prevalent concern is with rapidly changing circume stances I don t want to be stuck with some plan that is totally out of date I agree But the planning horizons that we will talk about are not overly long three to ve years and the key to strategic planning is one of strat7 egy not of tactics The issues that you should be considering in a strategic plan need to be planned for and should not be greatly changed within the planning cycle Also your planning process should be ongoing so that if some major change is initiated in your eld you can adapt the plan to it I would also argue that few if any major changes in service delivery or A Wsz39on ir the Future Z55 funding patterns show up for work at 8 AM one morning unannounced Usually major changes are researched discussed rumored and debated for months or even years before they are enacted Thus in the part of the planning process during which you look at the environment you will be able to predict most of these changes in advance Still organizations resist Many people tell me that they cannot plan when things are chaotic or in times of organizational trouble They contend that so much is up for grabs that it does not make any sense to plan for the future I disagree When things are at their most unknown what do you need to show you the way to help you make choices to guide you back from the abyss Your mission Yes Your values Yes And your strategiesithe decisions you have made on what is most important which service markets are your priorities and what your organizational core competencies are and what they are not If you have those three things mission Values and strategy you can get through a lot of disorder change and disruption And if you have the rst two but not the third in a chaotic environment developing the strategy can point you in a clear direction stopping you from feeling like you are fumbling around in the And when things change and they always do good plans actually help you remain exible because like good marketing they keep you and your organization focused on what is important They assist you in not wasting resources and not getting tied down in fruitless or outiofidate services and keep your staff and board upitoidate on the realities of the world in which you are working Finally the wellirun planning process is often a wakeiup call for board and staff members who still think they are working in 2003 and this enlightenment makes later change less dif cult for them With that in mind let s eXamine the four reasons that you should eXpend the time money energy and political capital to develop a plan 1 Without a Plan the Only Way You Get Where You Are Going Is by Accident What Your Organization Does Is Too Important to Occur by Accident Yogi Berra said it even better If you don t know where you are going you will wind up somewhere else uh FOR EXAMPLE Let s look at the planning process through the g metaphor of a family vacation If you and your family are get ting ready to go on vacation once you know you have the time off and want to go together preparedness you will certainly get together as a family and decide where you are going the retreat Let s assume that you decide to drive to San Francisco and stay for a week You have to rst set the longiterm goal of getting there continued 256 MissionRa Pd ManavaPm continued Your strategy is to go by car To achieve your goal you may check out some options for things to do online buy a road map make sure you have suf cient funds and review the condition of your vehicle data gathering and plan your route program your GPS and set your itinerary set goals and objectives You will check the conditions en route and in San FranciscltFthings like the weather roads tolls and fuel and hotel costs assess the environmentiand probably call some friends who have been to San Francisco recently for ideas and feedback gather outside comment You will investigate their suggestions online look at reviews and make your decisions about how to use your time You then nalize your plans get packed and leave implement If between home and San Francisco you nd that a road is under construction there is a place you had not heard about or there are other sights that you want to see you may vary either or both of your route or your timetable Congratulations You have just done strategic planning The important thing to remember here however is what you did not do You did not just pack up drive to the rst corner and say Where are we going and then go to the neXt intersection and say Which way 7 and the neXt and the neXt That would be an interesting vacation indeed But in your organization when you do not have a plan when you act only in reaction to events when you go from only one funded program to the neXt or one community need to the neXt you wind up in some very strange and sometimes dangerous places just the way you would on your vacation if you chose each turn at random Planning allows you to see where you are going and to transmit that information to the people who are going with you your staff board funders community and most important the people you serve 2 A Strategic Plan Allows All Other Planning Budgets Staf ng FundRajsinQ to Be Coordinated When you have a good current strategic plan you can coordinate the active ities of your organization better by using the strategic plan and its overall goals as a backstop for decisions You can discuss management program and policy choices in light of the priority goals of your plan You can ask questions about whether a particular item in the budget supports the long range plan For example if in your strategic plan you have a veeyear goal to build a new building and you need to have 30 percent of the cost of the building put aside you probably need to show that seteaside in this year s A Wsz39on ir the Future 257 nancial plan And if as part of that building program you intend to have 40 percent of the cost paid for by a capital fund drive starting in two years your marketing and development staff had better be laying the groundwork for that fund drive this year Without your strategic plan you cannot accomplish this type of coordination 5 Plans Allow You to Delegate More Effectively Successful managers know how to delegate well and how to push the line staff to make as many decisions as possible Giving up responsibility and authority is very dif cult for some people and having the framework of the strategic plan can make that action easier The manager who is delegating has a work plan based on the strategic plan for the subordinate to work with Also if the subordinate was involved in the planning process his or her understanding and ownership will be much higher and the likelihood of effective delegation will increase 4 Plans Are Good Business And Good Stewardship By now you know that I consider your nonpro t a missioneoriented busi7 ness Good businesses of all types know where they are going They know their markets and their resources and they have a plan of how to use the second to please the rst They may differ in their products or services and often differ in their internal philosophies but they all have one thing in common a strategic plan that frames the rest of their activities and provides a benchmark for evaluating their success or failure Planning Options There are a variety of ways to do planning These options include how often plans should be updated how inclusive the planning process should be and whether to regularly evaluate the implementation of the plan I have summarized these choices below to point out some of the advantages and disadvantages of each I then provide my recommendation for each area Frequency While there are an in nite number of permutations of the combination of planning horizon how long the plan is to be in effect and planning update how soon should the plan be redone the following options are the most common A veeyearplan updated everyi128 years This is obviously the longeterm view and the advantage is that you only have to think about the plan 258 MissionRn Pd Mnnmrpmpm twice each decade The problem is that it assumes that everything will go as planned both inside the organization and outside it for the full ve years and that is naive to say the least Imagine a veiyear plan written in January 1998 It could not have foreseen the 2000 crash in tech stocks the 2000 election of George W Bush or the September 11 2001 terrorist attacks In addition over ve years people on both the board and the staff will have left and there may be only a few of the core planning team remaining Thus the lessons learned and the ownership gained will be lost In short ve years is too long A oneeyear plan updated each year This sounds and acts an awful lot like your annual budget accompanying work plan document It is the most capable of reacting swiftly to changing circumstances but you lose the big picture and tend to be shaped by events rather than shaping them We criticize the government at all levels for not thinking beyond the current scal year Don t fall into the same trap Strategic planning needs to be that strategic A fweyear plan wit9 oneeyear components This is a combination of the rst two but one that works fairly well It allows for the longiterm strategic vision to guide the exible annual plan developed each year The problem with this is that the overall big document is not done often enough at least in my experience My recommendation A plan will a fneeyear bon zon redone every three years I believe that the best way to approach the strategic planning cycle is on the basis of a veiyear plan redone completely every three years but with annual work plans done every year Let me eXplain A veeyear horizon forces the staff and board that create the goals and objectives of the plan to step back from the dayitoiday concerns of the organization and do some bigipicture thinking This is essential By reworking the full plan every three years you accomplish three impor7 tant things You keep the planning process fresh in the organization you can react to environmental changes and you can have each board member take part in the creation of a strategic plan once in each of his or her threeeyear terms which is the term limit that I recommend in Chapter 6 By having an annual plan of actions that support the stratee gic plan you have the staff pull out the highest priority items for each year s work plan and the board is kept apprised of the implementation status of the plan Process Once you decide what planning horizon and update schedule you will use you then need to decide what process of planning you will have Here you A Vlslon ir the Future 259 have what I think is a golden opportunity to maximize the use of the plan ning process itself as a tool for organizational growth improving staff and board morale and marketing your organiZation However your realiZation of that goal is dependent on the type of process you choose Some choices are Keep ll small The idea here is to have the fewest possible number of people involved in the planning process so that you get it done quickly Thus staff and board might go on a short retreat to set the goals and priorities then the senior staff would draft the plan and bring it to the board for review and approvalishort and sweet and in the implementation stage soon The problem with this idea is that it short circuits one of the biggest bene ts of planning bringing more people in for their ideas and thus giving them ownership ngbly lncluslie Speaking of ideas and ownership that is what the inclusive process is all about Inclusion in the planning process is designed to get input from all of your staff board funders commu7 nity representatives clientele or their families or representatives and any other group that you may need or want such as referral sources or alumni You do not need to put all of these people on one giant planning committee They can be brought in three ways having a planning committee that is more broadly representative than just board members asking a large number of people for input through surveys and focus groups during the dataigathering phase and encouraging a broad review and comment on the draft plan during that phase In this way you offer the opportunity to have input to a much larger group they in turn now have a feeling of pride in being asked and ownership in the nal product that would not have been possible in the keep it small philosophy Inclusion obviously takes longer and is somewhat more expensive but I am a strong advocate for using this method Planning commlaee generated This model has the board appoint a strong planning committee made up of board members or board and staff combined who generate the plan on their own and bring it to the board for review and comment Although not exclusive of the inclusion method noted above this type of process usually does not include a dataigathering phase that looks at more than hard data such as demo graphics and almost never includes outside review and comment before the board sees it It is a variant of keep it small but the one that orga7 nizations with strong committee structures which I also advocate for tend to fall into Again this process is fast and controlled but it loses the opportunity for inclusion It also does not include the entire board in the retreat setting which I feel is a mistake Z40 MissionRn Pd Mnnnvpmpm Sta generatedboard reviewed In a strong staff model of organization there is the tendency to allow the staff to lead the board and this some times includes the development of the longirange plan Here a group of senior staff would develop a draft plan and have it reviewed and usually adopted with few changes by the board This model leaves the boardian essential resource out of the loop and also usually forgoes the inclusion that we have been discussing It is fast and it is controllable but I feel that it has more drawbacks than bene ts My recommendation Be as inclusive as possible My recommendation is easy to predict here Include as many people as time and money will allow Start with a retreat of all board and senior staff Then give the primary responsibility for coming up with a draft plan to a planning committee made up of board senior staff line staff clientele and come munity members Ask lots of people for their input Circulate the draft plan and listen to the comments Publish and distribute the plan widely This method is a lot of work but it is the best method of maximizing the value of the planning process in addition to getting the best plan Evaluation Unfortunately most people don t evaluate their plan at all or hold off doing the evaluation until it is time to do the neXt plan if you are going to use the plan as a management tool you need to constantly be reviewing where you are in relation to where you wanted to be your deadlines for your goals and objectives You need to review your progress toward your goals regularly Other wise you will get to the end of the planning cycle three to ve years look back and discover that you have achieved only 15 percent of your goals because you got distracted My recommendation Use the plan as a management tool Once a month review it in senior staff meetings asking the questions Are we on schedule for this goal If not why not Have conditions changed Are the resources that we thought would be available not there 7 The same holds for board meetings but this should only be done quarterly Also when the plan is complete your planning committee needs to make written recommendations to the board about how to do the planning better the neXt time These can be used by the neXt planning committee If you don t write it down now you will forget it and the eXperience of this committee will not bene t the neXt one A Vm39on ir the Future Z41 Types of Plans There are several categories that I put plans into I have seen literally huni dreds of strategic plans and I think that these categories are relatively fair All of the plans that t into these categories are intended to be strategic plans and every one of the people who wrote them intended them to be useful and exible But something happened along the way and the results are as follows Tomes These are documents that rival a New York City telephone directory in size take a professional football lineman to lift and that nobody reads They include everything you ever wanted to know plus a lot more and they are too imposing and alleencompassing to be exible and useful Work Plans These are just work assignments for the staff often put together to submit to a major government funder They cover the what in minute detail but do not relate it at all to the alliimportant why or the how 7the mission and the strategy They also ignore the larger issues that ow from strategies such as which services should be provided to which constituencies Public Relations Documents These documents purport to be plans but spend most of their time selling the organization They focus on the need for the organization in the community and the wonderful things it has done in the past This leads to a lack of objectivity and an inability to see the organization warts and all which is crucial to good planning Also a strategic plan is not an appropriate place for you to do your marketing It is not supposed to be a sales brochure or a feelegood document History Text These plans make up for their lack of forward thinking with a heavy emphai sis on past accomplishments and how your organization was formed and grew They are often produced by organizations that have grown rapidly and are so caught up in looking back at how far they have come that they forget to look ahead and see where they are going This kind of plan is a great document for a student of your discipline who wants to know your Z42 MissionRa Pd Mnnnvpmpm history but it usually only pays super cial attention to the changes in your community and where you want to be in ve years Doctoral Dissertation This is a highly technical document full of jargon and acronyms These types of papers are written by staff people who use the technical veil to hide a lack of understanding of some of the fundamental issues such as What is our mission They cannot see the forest for the technical trees and such a document is useless to nonprofessionals in your eld such as your board some staff the community and the people you serve Working Document This is a document that provides strategic vision but also practical applica tion It is a document that attends to the mission and a document that is written in lay language This document is one that is true to the wants of your clientele and eXpresses the best of what your board and staff have to offer In My recommendation I want you to do your best to get a working doce ument as the product of your planning process I m sure you do too but be wary of the traps that others have fallen into and try to avoid the other types of plans listed above Planning De nitions Now it is time to de ne whatI mean in the planning process There are lots of different de nitions and ten times that many misuses of the terms listed here But for purposes of our discussion here are my de nitions m Strategic plan A working document that discusses the organization s mission the environment that it will work in over the planning period three to ve years and the goals and objectives to realize the mission over that period This is not a work plan but it should be written with enough speci city that it is usable on a monthly basis by staff Goal A statement of desired longeterm outcome A goal may or may not be quanti ed but it usually does have a deadline Objective A much more speci c statement that supports the goal All objectives must have a deadline be quanti ed and have an assigned responsible agentithat is the person group or organization that is responsible for implementing the objective on time There can be many A Vision n the Future 24 objectives to implement a goal Sometimes they will be sequential sometimes simultaneous Im Action statemenr The most speci c item on the list action statements support the implementation of an objective They too need to be qudne Iified and have a deadline and an assignment ofresponsibilizy For most organizations these statements will be included only for highepriority goals or in the oneiyear plan that ows out of the veiyear plan Outcomes of Planning What can you eXpect from the planning process If you use my recommen7 dations and renew your plan every three years use an inclusive model and evaluate the plan regularly you can eXpect at least the following bene ts Be er and more e ective senices By evaluating during the plan develi opment process what is needed and wanted and what is not by asking people instead of assuming you know by bringing customers clients patients students or parishioners into the planning loop your plan will result in better and more effective services You may nd that you need to reduce or eliminate services that no longer make sense in terms of mission or in terms of markets and you may nd that services that you are sure are needed are not wanted and that certain services that you never even considered are in high demand You will also hear a lot about current services what works what doesn t small ways to make big improvements and practical and sometimes impractical methods of being more effective The planning process helps you focus your resources on what is important and that means better and more effective services IIIJ Higher ownership and morale If you follow the inclusive model rec ommended here you will have a higher overall morale of staff board funders community and clientele Just asking people their opinion just including them in the loop atters them If you then follow through and actually use some of their suggestions and get back to them and let them know that they were listened to all of those who participated now have a stake in what you do and who you are Additionally if you are like most organizations that either a don t have an organizational strategic plan or Cb developed it a long time ago with only a few people most of your staff as well as many of your board may never have been given the opportunity to see the big picture to step back and look at the organization as a whole Being part of an inclusive strategic planning effort allows that to happen Z44 MissionRn Pd Mnnnvpmpm Lower levels ofcon z cz Planning and the planning process I recommend facilitate a forum for healthy debate over resources discussions over direction and airing disagreements over policy and the shape of the organization in the future By providing a positive structure for healthy con ict to emerge and for unhealthy con ict to be vented you allow those who harbor a grudge have not had their say in the past have felt muzzled to get on their soapbox and have that say While not a pre ventive for all con ict in the organization around policies and resource allocation planning does provide the forum and it does also let people have a clearer view in writing of what the organiZation stands for This will confront some board some staff and perhaps some funders with the choice of staying or leaving but the clarity of purpose and the focus on the future shape of the organization do make future actions more predictable and it is often when people are surprised by actions that they are most upset You will hear much less nobody told me we were going to 7 than before you developed and then published your plan at least on major issues The Planning Process Now for the planning process itself As I said earlier I hope that you will adopt a process that meets your own organization s needs and capabilities but still holds to this basic sequence There is a lot of room for customization in this outline For eXample you can vary the time set aside for each activity You may want the entire process to take three months which is very very fast or allow it to take eighteen months You may want to do focus groups only in your dataegathering phase and not to do primary research or surveys You may decide to have the planning committee meet monthly or just three times during the process You may decide to minimize the preparedness phase or take three months to have everyone in the organization trained in goal setting All of these variations are ne as long as you don t skip any of the phases altogether I know it is tempting to go straight to the fun partithe drafting of goals and objectivesibut if you do you miss a once in a three to veeyear opportunity for your organization Take the time to do this right Preparedness There is no point in starting this until you are ready To get prepared make sure that a number of things are in place First ensure that your senior staff and key board members agree that planning is important and that they A Wsz39on ir the Future 245 are willing to commit the time and the money necessary to see the process through Second develop a planning process and get your board to agree to it Third using the draft planning process develop a planning budget both of time and cash that will be committed to the plan Cash costs could include a retreat facility meals and travel dataigathering costs such as surveys focus groups and possibly a consultant I always recommend that organizations get a facilitator for their retreats and if this is the rst time you have planned you may also want to hire a planning consultant to help you lay out the process and advise you around the potholes Never hire a consultant to write the plan That is your job The Retreat The best way to get started is by getting away I strongly suggest that all board members and senior staff go away for a day to cover at least the following things a review of your mission an agreement on the planning process itself a discussion of the environmental conditions under whic you will be operating the development of preliminary goals a prioritization of those goals and an appointment of a planning committee Have such a retreat at the start of each revision of the plan every three years in my model m HANDS ON Having facilitated more than siXty retreats I strongly prefer the eveningimorning model over any other Get your group together for dinner let them review your planning process review the mission and consider in what kind of world they will be oper7 ating in the evening Then quit and socialize In the morning the retreat participants will return fresh and ready to set goals and put them into a priority order for you This model produces better results because it gives people a break and also allows the staff present to socialize with the boardia key eXtra bene t At the retreat you need to do at least the following 3 Review and agree to the planning process E Review and update your mission statement as necessary 5 Discuss your predictions for the world in which your plan will be implemented What trends or activities are going to affect you and how Walk through a SWOT analysis at this time as well SWOT stands for strengths weaknesses opportunities and threats 3 Set preliminary longeterm goals 5 Discuss the goals and do an initial prioritization Z46 MissionRa Pd Manavpmpnt Data Gathering Once you have the key goals you can begin the job of data gathering You can do this through hard data research and gathering from your internal data or at the library Additionally you can run focus groups and surveys of such people as staff clientele funders alumni and the like For more information on surveys and focus groups see the section on them in Chapter 10 The data that you gather now will be used to help the planning commit tee and its subcommittees make the most knowledgeable decisions about the issues that confront you Some data gathering will go on throughout the planning process and you do not need to wait to begin drafting fuller goals and objectives until all the data is in Drafting Goals and Objectives Now comes the fun part the examination of the goals and the setting of objectives to support them You can use one of two methods for this The rst is to have your planning committee do all of this work for all of the goals set at the retreat The second used by most of the organizations that l assist in planning is to have specialty subcommittees that examine certain areas in depth For example you might have a subcommittee on Administration one on Finance one on Programs one on Development one on Marketing and so on The breakout of the groups will depend on your organization A school might break the issues out by primary middle and secondary programs A church might have subcommittees on Finance ChurcheBased Programs Outreach Ministries and Buildings and Grounds The bene ts of using the subcommittee model are that each subcome mittee can go into its subject in great detail and you can add people to the planning subcommittees who are experts in this area More inclusion Whoever is setting the goals and objectives needs to look rst at the goals that came out of the retreat Can they be consolidated Improved Are there important issues that were overlooked in a oneeday retreat Once the goals are established then each goal in turn should have objectives added to it This will happen before during and after the data are gathered In fact the setting of preliminary objectives will help you identify additional data that you need to go after Remember that the goals are longeterm statements of desired outcomes but the objectives need to have a deadline be quanti ed and have someone or some organization responsible for their implementation Outside Comment This is really the most important step for the organization as a whole Once the goals and objectives have been fully drafted it is time to get outside A Wsz39on ir the Future Z47 opinion Let as many people as you have time for offer their comments You can do this online and on paper Post the draft plan on your Web site in pdf form let people know it s there by email and ask for comment In addition distribute the plan in paper form to those who you feel will not use the online version I usually suggest that major funders your banker key referrers com munity leaders representatives of your clientele and all of your staff get a chance to review and comment with a deadline for getting their comments to you of about two weeks Bring all of the comments to the planning com mittee Many organiZations resist this stepiand do so to their detriment By asking outsiders you get great ideas develop relationships and foster ownership Don t skip this step Final Draft and Adoption When the planning committee has reviewed the comments and any late arriving data the nal draft can be written At this time a second prioritizai tion should be done and the highest priority goals should be tackled in the oneiyear plan for the rst year of the planning cycle This oneiyear plan should be developed by staff and should include action steps to accomplish highepriority goals and objectives The staff should run the oneeyear plan by the planning committee but it really needs only a cursory review The oneiyear plan is really a work plan for staff and board and it is the plan that needs the most careful monitoring Once the board adopts the plan get it printed and distribute it widely Implementation As noted earlier the plan should be a working useful document Its use as a tool will be discussed in a page or two but the point of the product is to do what the plan says You have invested a great deal of time and effort getting the plan together and while the process has been useful you still need to do what you ve committed to Implement Evaluation I have already told you how I think you should evaluate the plan s imple7 mentation but you also need to evaluate the planning process Write down any things you would change or improve and le them away for the bene t of the neXt planning committee to bene t from Z48 MissionRa Pd ManavaPm Go to Step One and Start Over In three years start again By then you will have had three oneeyear plans conditions will have changed you will have accomplished a great deal but probably not all of your goals and it will be time to develop a new veeyear plan Using the Plan as a Tool Once you have the plan completed printed and distributed you now need to use it There are a number of uses for your plan some of which people neglect or never even consider A Management Tool It should go without saying that the plan should be written in a format that allows you to use it as a management tool Too few organizations do however The plan tends to collect dust until it is time to update it and then there is no interest in doing the update The progress in achieving the goals objectives and action statements in the oneeyearplmz should be reviewed at least monthly in staff meetings and in some cases every two weeks to make sure that you are still on track that situations have not changed or that resources have not been reduced to make it more dif cult to implement the plan The senior staff as well as the line staff need to stay on top of anticipated deadlines and work toward meeting them The strategic plan implementation should be reviewed monthly at staff meetings and quarterly at board meetings as a formal part of the session Either staff or the planning committee can report on progress As new issues develop during the year staff and board need to consider their impact on the plan How will this affect our ability to complete the goals and objectives If it will interfere is this a higher priority Which is more in line with our mission and our strategies Use the plan as a guide but do not be constrained by it A Marketing Tool An organization that has a plan has a marketing tool I know that I said that marketing and sales material belong in a marketing or sales piece and that is still my position The plan should be written as a plan not as a sales brochure But the very fact of your having a plan puts you ahead of many organizations forepro t and nonpro t It is like having a mission statement It helps people to know who you are and where you are going For certain A Wsz39on ir the Future Z49 people funders potential donors elected of cialsiit lets them see who you are and where you intend to go This is excellent marketing in and of itself A Policy Tool A plan will help you do good policy because the strategies included will remind you and help new staff and board who join you to see what the belief of the organization is For eXample if you are a school for hearing impaired children your organization may have adopted a communications policy that calls for the use of ASL American Sign Language the language preferred by most deaf people as opposed to signed English on the campus This policy will be re ected in your goals Within two years the school will have 100 percent of faculty and 90 percent of nonteaching staff uent in ASL and objectives The Director of Instruction will provide four ASL courses each year for staff The Director of Instruction will offer three off campus ASL courses for parents per year The Director of Instruction will offer ASL to the general community three times neXt year All of these push the communications policy further and actualize it with a speed that would have only happened haphazardly otherwise If you don t agree with the policy of ASL implementation the plan tells you right up front and if you are an ASL advocate you also know that the school is in agreement immediately upon reading the plan A Recruitment Tool As with the use of the plan as a marketing tool the plan becomes an excele lent recruitment tool to attract the board and staff that you want You can show people the plan and they will know before they decide to come what kind of organization you are and where you are going If they like what they see they are more likely to stay Also the better potential candidates both staff and board will be impressed with the simple fact that you have a plan and are more likely to choose your organization over a competitor for their time or services I hope that you recognize that your plan is valuable in a number of ways beyond the process and the document You have spent a lot of time effort and money to develop the plan Now as a good steward it is your responsibility to use this new resource as fully as possible Sample Plan Formats I have included some outlines of plans to get you started or to help you revise and update your plans if you already have them These are templates 250 MissionRn Pd MnnmerPm and ideas that you can use and improve on Do not be wedded to them if they don t work for your organization Rather use them as a starting point I have included outlines only for strategic marketing and business plans You ll also need a technology plan and for many organizations a quality assurance plan For each type of plan I have included my suggestions on the purpose horizon how long the plan should look out and cycle how regularly the plan should be rewritten as well as a de nition of what the plan should support Note that the horizon is often longer than the planning cycle That is intentional I want you to think long but rewrite regularly enough to keep abreast of current events Strategic Plan Purpose To guide the organization as a whole toward the realization of its mission The plan supports The mission Planning horizon Five years Planning cycle Develop a strategic plan every three years with annual components written every twelve months STRATEGIC PLAN OUTLINE 1 Executive summary Key areas of action priority goals 2 Introduction to the plan Why you developed the plan how it will be used 3 The planning process Who was included what the process itself entailed 4 The history of your organization No more than two pages on your organizational heritage 5 The organization today A three to veipage description of your ser7 vices clientele and funders 6 The world we will work in A listing of assumptions about the future environment and how they will affect your organization 7 Goals and objectives 8 Oneeyear plan The priority goals and their objective and action steps for the rst year 9 Time line A visual representation of the goals objectives and action steps usually called a Gantt or PERT chart 10 Evaluate and update methodology How and when you will evaluate progress toward implementation and when you will revise the plan 11 Appendices Minimal supporting information for the plan A Vision n the Future 251 Marketing Plan Purpose To guide the organization as a whole toward the realization of its mission The plan suppons The mission Planning horizon Five years Planning cycle Develop a strategic plan every three years with annual components written every twelve mont s MARKETING PLAN OUTLINE ND t W A V G 00 9 Your mission statement Executive summary A brief summary of the marketing plan including a list of your target markets your core competencies and how they match up with the wants of the markets Introduction and purpose oftbeplan A rationale for the uses of the plan This section can also include a brief recitation of the planning process and its level of inclusion Description of the markets A full description of your major markets their wants their numbers and projected growth or reduction in demand from these markets Description of tbeserzices A description of each of your services includ ing number of people served service area or criteria for service and any accreditation that these services may have earned Analysis of market wants A review of the surveys interviews or focus groups that you do to prepare the plan The wants of the markets and how they match up to your core competencies should be included here Target markets and rationale Out of all your potential markets you will choose a few priority targets Describe them here in more detail along with your reasoning for their prioritization Marketing goals and objectives The goals objectives and for annual plans action steps that will get your marketing strategies implemented Appendices Minimal supporting information for the plan Business Plan Purpose To guide the organization as a whole toward the realization of its mission The plan supports The mission Planning horizon Five years Planning cycle Develop a strategic plan every three years with annual components written every twelve months 252 MissionRn Pd MnnmerPm BUSINESS PLAN OUTLINE 1 Title page identi ing the business plan as the propeny of your organi zation This cover letter includes your name address and telephone number and the month and the year that the plan is written or revised One paragraph states in simple terms who the business plan belongs to and the limitations on its distribution Table of contents Summary of the plan A brief paragraph about your organization a four line description of the product or service a fouriline description of the market a brief paragraph on production and one on distribution if needed and a short paragraph on the nancing requirements Description of your organization and its business wit9 the following sube headings The organization III The product or service The target consumer The consumer s want for the product or service E The sales strategy Description of the market For your product or service including informa tion on the competition and cost price comparisons between competitors and your organization Marketing plan that includes information on The mar ets Customers Competitors The macroienvironment How each of these areas affects the marketing and selling of your product or service Evaluation of potential pitfalls Financial plan wit9 sources and applications of cash and capital and a An equipment list A balance sheet Breakeven analysis Cash ow estimates by month for the rst year by the quarter for the second and third years Projected income and eXpenses for the rst three years and notes of explanation for each of the estimates Goals and objectives wit9 a timeline Minimal appendix wit 39 Management resumes III Survey or focus group data from customers Other pertinent material about your organization and its work you A V G m l l poo A Wsz39on ir the Future 255 Recap In the rst pages of this chapter I said that without a plan the only way you get anywhere is by accident and what you do is much too important to be accidental Too many people depend on your organiZation and its services to let your management and policy setting be one long ad lib You need to have a plan to focus you to help you set priorities and to guide you in the most stressful times that you will face In this chapter we have covered the key parts of planning the four reasons why it is critical both in the process and the product for your organization to have a consensus on where it is going I have urged you to use an inclusive process which will help your implementation of the plan and improve the ownership in your organization the morale of your staff and the positive impression of your funders We have seen a planning process that has worked well for many of my consulting clients and nally I have reviewed for you the outcomes and uses of planning how to get the most out of the document that you have put so much into Planning is good management and thus good mission It is a way to get everyone involved in having your organization meet its mission commit ments more ef ciently and effectively You have the time to plan All you need to do is choose to Questions for Discussion Are we doing all we can to focus on our future through good planning Should we consider developing or revising a strategic plan in the neXt year How can we integrate more longerange planning into our culture Who should be involved Should we rethink our planning process to be more inclusive 4 What kind of plans do we need that we don t have N W CHAPTER 13 The Controls That Set You Free Overview All managersifor pro t or nonpro tiworry They worry about things going wrong people messing up accidents happening checks not clearing the network going down wrong items being ordered lowequality services being provided donors backing out supervisors not following disciplinary procedure and the thousand little and big things that can occur without warning Over and over in my work managers and executive directors tell me that they worry about not being on site all the time because people won t know what to do if something goes wrong and I m liable if they screw up This of course chains the executive director to his or her desk because it assumes that the staff people are unable to handle all but the most ordinary and routine situations If you agree with my suggestions and theories on delegation that were laid out in Chapter 7 you know that you cannot reach your potential as a manager nor as an organization until you delegate well at all levels of the organization But how can you do that and still sleep at night You can with good controls in place good training on how to use those controls and accountability to make sure that those controls are used each and every time Let s rst de ne controls Controls are sets of policy and procedure that both standardize actions in your organization and clearly lay out account ability and responsibility in key areas of the organization You want controls that protect you while at the same time do not overly hamper your exibility and creativity and admittedly that s a bit of a balancing act Too much con trolling and people have no room for personal creativity and contribution too little control and people lose the guidance and checks and balances that come from wellewritten balanced policies and procedures 255


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