4 ms·

I'm on a few non-profit boards and one of the things I don't see the author mention at all or specifically is the primary directive of the board is the financia

by yardie 4y ago

I'm on a few non-profit boards and one of the things I don't see the author mention at all or specifically is the primary directive of the board is the financials. The CEO/Director is in charge of the day to day operations. The board has very little interest in that. A non-profit will have some or most of it's money from donors and those donors want to make sure that donation is being spent effectively. And that is where a good or bad board becomes responsible. If the money is being spent to drive the mission of the non-profit successfully no one cares. We show up for the board meeting, order sandwiches, and ask questions. And plan the next meeting. If the money is not being spent effectively or the mission isn't being met well we ask questions, sometimes offer advice, or raise more money. Maybe staff need to be changed or a new director hired. The board does not need to know the technicalities of the non-profit it just wants it to be governed with good care. You can't operate a non-profit the same technique as a for-profit. They are orthogonal in duties. A true non-profit has to spend almost every dollar it takes in. The board is all voluntary and there is nothing in it for them, except those sandwiches!

thaumasiotes 4y ago
> You can't operate a non-profit the same technique as a for-profit. > A true non-profit has to spend almost every dollar it takes in. Can it spend them on... salaries? Wasn't the New York Stock Exchange a nonprofit organization for quite some time?
- snowwrestler 4y ago
  Yes it can spend on salaries. In fact this is one of the failure modes of a nonprofit that a board has to watch out for: the staff (especially the executive staff) soaking up all the fundraising with raises. Nonprofits don’t have investors who are watching their own personal financial returns carefully. The “returns” of a nonprofit are the mission. So the board has to do the work to verify that the money coming in is being used to advance the mission. You have to pay salaries to do that of course… but not overpay. > Wasn't the New York Stock Exchange a nonprofit organization for quite some time? Yes and the NFL is a nonprofit today! It exists as a neutral body to organize the league. The individual teams are for-profit.
nickff 4y ago
I think you're missing the trees for the forest, in the same way the OP describes. If you don't take interest in, and pay attention to the significant details, there's no way you can understand whether "... the money is being spent to drive the mission of the non-profit successfully...". I have served on a non-profit board and observed this problem.
clairity 4y ago
much like a startup, the key thing to understand about non-profit boards is that the board members' primary job is to fundraise (directly or indirectly) and secondarily to make productive introductions (donors, partners, 'customers', funding organizations, etc.). a distant (but not insignificant) third is strategic direction, which is often what we imagine board members do, but that's a relatively minor part of the role. some board members might have some operational input, but that's usually not expected for any but the smallest non-profits.
- TigeriusKirk 4y ago
  This matches my experience on a small arts non-profit. People were added to the board rather explicitly for their fundraising contacts. I was there partially for my arts contacts, but mostly because I was shameless about hitting up local politicians for grants and such. The executive director was in charge strategy-wise, the rest of us were along for the ride. Because of my particular role, I had considerable say over which artists were involved, but almost no input on overall direction. Because of the fundraising focus, it could be stressful at times (there's never, ever enough money), but working the government systems was very educational and I'm very happy about the time I spent doing it.
- compiler-guy 4y ago
  "that the board members' primary job is to fundraise ... and secondarily to make productive introductions...." Although this is a common structure and plan, there are plenty of nonprofits structured differently than this--especially if the nonprofit is small and has only one or two employees, or maybe none at all. In which case the board does work on the ground.
  - clairity 4y ago
    right, that's the "operational input", in case that wasn't clear.
    - compiler-guy 4y ago
      You have that as a distant second though. There are boards where operational work (not just input) is the first priority for certain board members.
ghaff 4y ago
I'm on the board of a very small non-profit--actually a student organization (that all of the board belonged to at some point in time, often quite a few years ago). We actually pay quite a bit of attention to financials and discussing them takes up a decent chunk of a board meeting including whether fundraising letters are going out (and reviewing them), overall financial situation, lease renewals, larger purchases, etc. As for responsibilities, I'd say it's a bit of a mix. There's an executive board--which I'm on--where specific responsibilities are pretty clear. The rest of the board probably much less so other than showing up for meetings. >A true non-profit has to spend almost every dollar it takes in. We certainly try to have a reasonable reserve. And, fortunately in recent years, we've been able to fulfill the basic mission while staying in the black.
erosenbe0 4y ago
Non-profit space is almost always dominated by healthcare. Charity and charities are bit players.
nanis 4y ago
> You can't operate a non-profit the same technique as a for-profit. Keep in mind that profit maximization subject to a budget constraint and cost minimization subject to an output constraint are equivalent problems. A non-profit ought to minimize the resources expended to achieve a given "mission" or maximize the amount of "mission" it can achieve for a given amount of resources (depends on the circumstance), but achieving those does require it to act like a profit-maximizer. In reality, non-profits are promotional vehicles and power exercises for people behind them with "mission" being secondary. And, obviously, people who are involved in non-profits do personally profit (reputation, influence, networking -- and in some instances by steering non-profits to spend money on things that benefit their other directly profit making activities).
mcv 4y ago
But how does the board know that the money is spent in an effective way? Doesn't that require more knowledge of the way the organisation operates?

by yardie 4y ago

thaumasiotes 4y ago

> You can't operate a non-profit the same technique as a for-profit. > A true non-profit has to spend almost every dollar it takes in. Can it spend them on... salaries? Wasn't the New York Stock Exchange a nonprofit organization for quite some time?

snowwrestler 4y ago
Yes it can spend on salaries. In fact this is one of the failure modes of a nonprofit that a board has to watch out for: the staff (especially the executive staff) soaking up all the fundraising with raises. Nonprofits don’t have investors who are watching their own personal financial returns carefully. The “returns” of a nonprofit are the mission. So the board has to do the work to verify that the money coming in is being used to advance the mission. You have to pay salaries to do that of course… but not overpay. > Wasn't the New York Stock Exchange a nonprofit organization for quite some time? Yes and the NFL is a nonprofit today! It exists as a neutral body to organize the league. The individual teams are for-profit.

nickff 4y ago

I think you're missing the trees for the forest, in the same way the OP describes. If you don't take interest in, and pay attention to the significant details, there's no way you can understand whether "... the money is being spent to drive the mission of the non-profit successfully...". I have served on a non-profit board and observed this problem.

clairity 4y ago

much like a startup, the key thing to understand about non-profit boards is that the board members' primary job is to fundraise (directly or indirectly) and secondarily to make productive introductions (donors, partners, 'customers', funding organizations, etc.). a distant (but not insignificant) third is strategic direction, which is often what we imagine board members do, but that's a relatively minor part of the role. some board members might have some operational input, but that's usually not expected for any but the smallest non-profits.

TigeriusKirk 4y ago
This matches my experience on a small arts non-profit. People were added to the board rather explicitly for their fundraising contacts. I was there partially for my arts contacts, but mostly because I was shameless about hitting up local politicians for grants and such. The executive director was in charge strategy-wise, the rest of us were along for the ride. Because of my particular role, I had considerable say over which artists were involved, but almost no input on overall direction. Because of the fundraising focus, it could be stressful at times (there's never, ever enough money), but working the government systems was very educational and I'm very happy about the time I spent doing it.
compiler-guy 4y ago
"that the board members' primary job is to fundraise ... and secondarily to make productive introductions...." Although this is a common structure and plan, there are plenty of nonprofits structured differently than this--especially if the nonprofit is small and has only one or two employees, or maybe none at all. In which case the board does work on the ground.
- clairity 4y ago
  right, that's the "operational input", in case that wasn't clear.
  - compiler-guy 4y ago
    You have that as a distant second though. There are boards where operational work (not just input) is the first priority for certain board members.

ghaff 4y ago

I'm on the board of a very small non-profit--actually a student organization (that all of the board belonged to at some point in time, often quite a few years ago). We actually pay quite a bit of attention to financials and discussing them takes up a decent chunk of a board meeting including whether fundraising letters are going out (and reviewing them), overall financial situation, lease renewals, larger purchases, etc. As for responsibilities, I'd say it's a bit of a mix. There's an executive board--which I'm on--where specific responsibilities are pretty clear. The rest of the board probably much less so other than showing up for meetings. >A true non-profit has to spend almost every dollar it takes in. We certainly try to have a reasonable reserve. And, fortunately in recent years, we've been able to fulfill the basic mission while staying in the black.

erosenbe0 4y ago

Non-profit space is almost always dominated by healthcare. Charity and charities are bit players.

nanis 4y ago

> You can't operate a non-profit the same technique as a for-profit. Keep in mind that profit maximization subject to a budget constraint and cost minimization subject to an output constraint are equivalent problems. A non-profit ought to minimize the resources expended to achieve a given "mission" or maximize the amount of "mission" it can achieve for a given amount of resources (depends on the circumstance), but achieving those does require it to act like a profit-maximizer. In reality, non-profits are promotional vehicles and power exercises for people behind them with "mission" being secondary. And, obviously, people who are involved in non-profits do personally profit (reputation, influence, networking -- and in some instances by steering non-profits to spend money on things that benefit their other directly profit making activities).

mcv 4y ago

But how does the board know that the money is spent in an effective way? Doesn't that require more knowledge of the way the organisation operates?