Tuesday, July 26, 2011

Charities Would be Wise to Adopt Professional Management and Oversight Standards

Doug White, director of the Heyman Center for Philanthropy and Fundraising at the New York University School of Continuing and Professional Studies, provides excellent advice for management of nonprofits.  

Sometimes it does amaze me how nonprofits operate without any business sense whatsoever.  As a business owner myself, I understand the concept of responsible money management.  However, I frequently see nonprofits that spend beyond their means, or offer compensation far beyond the capacity of the organization, or have boards of directors that haven't the first clue as to their roles and responsibilities.

The link in the title above leads you to Mr. White's book.  Might be a good idea to pick one up and pass it around your board.  Bunnie

Charities Would be Wise to Adopt Professional Management and Oversight Standards
by Doug White

Although the nonprofit world has grown tremendously over the past decade – nonprofit expenses fast outpacing GDP, for example – the management approach at charities has, in large part, stayed informal.  In the past, charities were largely comprised of a few people who shared similar heartstrings and, if nothing scandalous happened, the public pretty much thought they were doing good by society.  Although that’s true today for many charities, scrutiny by the public and by regulators has increased dramatically, and charities – large and small – would be wise to adopt professional management and oversight standards.

Unfortunately, those standards don’t exist.  At best, we’re relegated to wobbly conversations about best practices; the worst among us just don’t care, and think their philanthropy is an extension of their business ventures or their personal egos. Does the name Madonna (Raising Malawi), Greg Mortenson (Central Asia Institute), or Lance Armstrong (Lance Armstrong Foundation) ring a bell?  All have run charities where either they or their charities have run into trouble – within the last few months.  And there have been others.

Not all charities need the highest, most sophisticated levels of governance; not all charities need federal and state charitable tax experts– attorneys and accountants – to serve as either advisors or board members; not all charities need the most accomplished executive directors.  But all charities – as they all have in common that they were formed to serve the public good in a way that neither business can nor government will – must do their best to run themselves in a businesslike manner.  At least to a point – and, as important, run themselves as stewards of the public trust.

Admittedly, there is a limit to the idea that a charity is a business.  There is no question that charities need to balance their books and operate in a professional atmosphere – indeed, almost all charities are incorporated as businesses – but while business principles provide the basis for the basics, they alone do not serve a charity well in fully pursuing its mission.  For that, a nonprofit needs vision and an understanding that the enterprise is not at all private: it is public in the most literal sense of the word.  When an organization is granted tax exemption – when its donors are entitled to a tax deduction and its own profits are untaxed – it takes money from the public; it diverts money from the Treasury.   For that reason – a reason quite separate from the growing swell of public scrutiny – charity leaders, both staff and trustees, need to be fully aware of financial, governance and ethical pitfalls.

That awareness does not come about by accident or even goodwill.  It grows from a sincere commitment to serve society in an intelligent way.  And that means tomorrow’s leaders (and as many leaders of today who are open-minded about staying up on things) must take seriously opportunities for learning.   Tomorrow, take note, may be here sooner than we think: A recent study by the Meyer Foundation, “Daring to Lead,” reports that fully two-thirds of all nonprofit executive directors are planning to leave their jobs within the next five years.  Talk abut turnover.  The replacements will need solid training to prepare them to deal with issues that, quite frankly, most of them probably don’t think they should have to anticipate.  But today’s daily headlines should be a forewarning to them, as well as a warning to executive directors and board members who are on the job today.

Like anything else, running a nonprofit is a skill no one is born with.  Just as future professionals enroll in universities that offer business, law, and medical programs – as well as many other types of graduate learning – today’s nonprofit leaders would be wise to understand that their organizations will have the best opportunity to thrive if they are run by people who know what they are doing – by design, not by chance. 

Doug White is the academic director of the Heyman Center for Philanthropy and Fundraising at the New York University School of Continuing and Professional Studies. His most recently published book is "The Nonprofit Challenge" (Palgrave Macmillan).