Tuesday, June 23, 2009

Conducting Due Diligence in Your Executive Director Job Search

by Bunnie Riedel, Host

There is no doubt that the competition for jobs is fierce. For some, just having a job is enough. But if you are someone who is Executive Director material, or who wants to be an Executive Director, it may be tempting to take a position with a Nonprofit organization without conducting necessary “due diligence.”

What is “due diligence?”

Due diligence is finding out as much about the organization as you can, especially the financial health and legal status of the organization. If you are under consideration for an Executive Director position remember, if you get the job, you will be the chief officer of the organization and you will be responsible for the organization through good times and bad.

If you have been called for an interview and before you say “yes” to the position, there are certain things you should do. My first recommendation is that you research the Nonprofit on sites like Guidestar or Charity Navigator. Guidestar provides IRS form 990 (the Nonprofit tax return). With the 990 you can see income and expenses, how much Board Members are paid (if anything), how much the Executive Director is paid, how much is spent on program and often what kinds of programs the Nonprofit is conducting. Charity Navigator provides a breakdown of program v. administrative expenses, how much is spent on fundraising and a rating of the Nonprofit (according to Charity Navigator). My caution here is that both sites’ records are typically two to three years behind and in the Nonprofit management world two to three years can be an eternity.

Next, I would Google the organizational name. What press can you find about the organization? Is it good? Is it bad? Is there very little? If you know the sitting or previous Executive Director’s name or Board member names; Google them. You can learn a lot about an organization by searching the internet.

Before the interview, ask the Board for the following:

  • A copy of the bylaws
  • Minutes of Board meetings (if they aren’t posted on the organization’s website)
  • Three years of audited financial statements
  • Any literature or brochures or newsletters or journals the organization prints
  • An organizational chart (if they have one)

The bylaws can tell you a lot. How many Board members are there? What are their terms of service? How are Board members selected? How are Board members removed? Are the expectations of Board members spelled out in the bylaws?

Just as bylaws can provide a lot of information, so too can minutes of meetings. While minutes really are only supposed to contain action items and how they were handled, many organizational minutes will contain whole conversations. You can frequently gauge how Board members behave and interact with one another or the previous Executive Director from the minutes.

I have had organizations resistant to handing over three years of audited financials, which in my opinion is crazy because financial statements are a matter of public record for Nonprofits. If they don’t have audited statements, that will tell you something. Look at the statements with an objective eye, if you have a friend who is a CPA, ask your friend to look them over. Certainly pay attention to red flags, such as negatives noted in the management letter, but also consider that Nonprofits, like any other industry have good years and bad years. If the financials aren’t that great, the question you need to ask yourself is “Can I work with this?” Maybe you are the wunderkind who can turn the organization around. In my opinion, bad financials are not a deal breaker, the deal breaker is the conversation you have with the Board about their approach to turning things around. If it is sensible and doable, fine; if it sounds wacky…it probably is.

The literature will help you learn more about the organization’s programs and an organizational chart will help clarify the roles of the various players in the organization and may even reveal information that is not readily apparent (for instance, you may discover a field office nobody has mentioned before).

One of the critical questions you will want to ask during the interview is if there is any pending legal action against the organization. Organizations frequently face the prospect of lawsuits, so legal action (in my humble opinion) is also not a deal breaker but you must be aware of any actions so you can make an informed decision about accepting the position. Is the action going to be a huge distraction to you as you begin your new position? And if so, are you willing to deal with it?

In asking for this information you will learn a great deal about the organization. Is it transparent or is the Board trying to hide something? Being fully informed about the organization is important to your career decision; you want to make sure you give yourself the best possible chance for success, even if that means you might have to politely remove yourself from consideration.



By the way, I would love to have comments on your experience in searching for an Executive Director position, please make sure that all comments provide anonymity to the organization you may be commenting about. And if there's anything I left out of this list, let me know that too!

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  3. I would add to that list a few things (learned the from my own experience as Managing Director of a non-profit):

    1. What is the board's role in the organization? Do they participate in any events or tasks? Or are they purely an "advisory" board. Is the board actively involved in fundraising?

    2. How many staff members and volunteers are there? What are their duties and how long have they been in their positions?

    3. What are the key funding sources including percentage from earned income of the overall budget? Are these funding sources stable or volatile?

    4. Next go to foundationcenter.org and use their free 990 finder to print off their last three years 990s as well as a list of grants made to that organization over the past three years, and you can pull the 990 for the grantors if you don't recognize them or want to see how their finances are.

    5. Talk to people on the board and who work for the organization, get to know them. Get to know what they truly need and are looking for. In my opinion the "right fit" is as important as the finances.

    Good luck!

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