No decision you make regarding your nonprofit organization carries more importance than who is chosen to lead it. The members of your board of directors make up the governing body of your nonprofit and are legally accountable for its actions. …
The concept of who owns a nonprofit organization can be hard for some to grasp, especially given that the answer is, “No one…and everyone!” We encounter this confusion with new clients on a fairly regular basis. And, given people’s understanding of how basic business operates, it is understandable. In order to fully appreciate the concept of “non-ownership”, it is helpful to first talk about the various types of business entities. Then, we’ll look at organizational purpose. By the end of the article, it should make a lot more sense.
There are several different types of business entities. For-profit companies make up most of them. Here are a few (there are others)…all of these have an owner or owners:
Sole Proprietorship: One person who conducts business for profit. The sole owner assumes complete responsibility for all liabilities and debts of the business.
General Partnership: Two or more individuals as co-owners of a for-profit business.
Corporation (for-profit): The corporation itself assumes all liabilities and debts of the Corporation. A corporation is owned by shareholders. A shareholder enjoys protection from the corporation’s debts and liabilities.
When starting a 501(c)(3) organization, there are generally two choices of how the organization will be classified. It can be a public charity or a private foundation. Though greatly outnumbered by public charities, private foundations bring a lot to the…
It often seems that when otherwise business-savvy individuals become involved in a nonprofit organization, they set aside all they ever learned in business and proceed to operate their nonprofit as if business rules do not matter. As most soon find out, they matter a lot. In this post, let’s take a look (in no particular order) at 10 business basics that nonprofits ignore at their own peril.
Money. This may come as a shock to some, but being “nonprofit” does not, cannot, mean NO PROFIT. With the notable exception of GM, AIG and a few others, a business must make a profit to survive. Your organization was probably not on Tim Geithner’s list for TARP funding, so red ink should be regarded as impending doom. With the uncertainty of this economy, you simply must be solvent. You and your board may have to make some tough decisions. Some programs may have to be scaled back or eliminated. Fundraising must become even more focused and intentional. I won’t repeat a lot of what we’ve discussed recently concerning funding…suffice it to say you must keep a lid on overhead…now more than ever.
This is installment #2 in our ongoing series on leadership. Our first installment was more of an introduction. In this post, we are going to explore the concept of governance vs. management.
Governance and management: For many, these are interchangeable terms. They shouldn’t be. And in far too many nonprofits, the leadership fails to understand the difference. Properly separating the concepts of governance and management can be critical to the success of your endeavor.
Governance is leadership of the big picture. Primarily the responsibility of the board of directors, governance describes the notion of governing.Several ideas are simultaneously embodied in the concept of governance, including: mission establishment, strategic development, planning, goal setting, responsibility, accountability, oversight…the list goes on. Most successful organizations rely on a group of individuals with a diversity of talents who collectively chart the course for the organization and actively pursue the accomplishment of its mission.
The word “leader” conjures up a variety of images: your old Little League coach, a military general, your boss…even the president of the United States. Regardless of who (or what) comes to mind, there is the common thread of someone who leads. But what does leadership really mean? Certainly it means more than just being in charge. And in the setting of a nonprofit organization, is the meaning different?
I would submit that while the meaning is not so different, the goal of leadership often is. For example, in a for-profit setting, the goal is the financial success of the company. Sure, there are other intermediate goals and purposes. But when you get down to brass tacks, it’s about the money. The leaders expend their energy leading employees and influencing prospective customers in an effort to make a profit. In politics, the goal may be the establishment of a political agenda. Leaders attempt to influence voters to support their particular brand of government. Just look at most election cycles. Not that pandering is the same as actual leadership, but I digress…
So...you want to start a nonprofit. Fantastic! That puts you in pretty good company. In any given year, as many as 75,000 applications for 501(c)(3) tax exemption are filed with the IRS. Less than half survive the process, but there…
Founder’s syndrome. It affects nonprofits and for-profits alike. And it can be crippling to any organization. Understanding what it is and how to avoid it is crucial to the future of your 501(c)(3).
Taken from that most-reputable of sources, Wikipedia, founder’s syndrome is defined as, “a pattern of negative or undesirable behavior on the part of the founder(s) of an organization”. While that can be true, we find that most cases of founder’s syndrome within nonprofits simply involve a founder with too much influence. In plain English, it means that the universe revolves around the founder…and not in a good way. Here is an example of the way it usually works:
Occasionally, you have to protect people from themselves. Even those with the best of intentions can mess things up so badly that it can jeopardize what they are trying to accomplish. In the nonprofit world, there are best practices, good…
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