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How nonprofits can thrive in challenging times
by Liz Duffrin
It’s a tough time for nonprofits. Competition for foundation dollars is fierce as government funding dwindles and the number of nonprofits continues to skyrocket. At ACN’s annual meeting in June, a panel of four experienced consultants offered advice on how nonprofits can raise money, save money, and thrive in challenging times.
Merri Dee, legendary Chicago broadcaster, former manager of WGN-TV’s children’s charities, and now president and CEO of MD Communications, moderated the discussion.
“The first thing nonprofits want to know is how to get more money,” she observed.
Left to right: Joyce Golbus Poll, Amy Schiffman, Gregg Mellinger, Clara Carrier, Merri Dee
Panelists offered these tips:
Develop Relationships. Clara Carrier, founder of Breaking Through Consulting, LLC, said that nonprofits would do well to “stop thinking about fundraising and start thinking about building relationships.”
It’s essential to know where your donors are “coming from and how you can get them to feel comfortable about their investment in your cause and your purpose,” she explained.
She’s developed an assessment tool to help clients define or redefine their purpose. “I think clarifying your purpose is a key to success,” she said.
Hiring the right fundraiser is important, too, noted Amy Schiffman, co-founder and principal of Giving Tree Associates. It’s essential that your development director be experienced at working one-on-one with foundation officers, individual donors, and with board members to mine their own networks, she said.
Passion for your cause is just as essential as skills and experience, she added. “If someone doesn’t care about what you do, they’re not going to be an effective fundraiser.”
Do Your Research. A fundraising strategy needs to be backed up with data, said Schiffman. Nonprofits should know how much money each fundraising activity costs and generates to calculate a return on investment. They should also know the number of donors at each fundraising level and the names of top funders. Many nonprofits have never analyzed their fundraising data, she said.
Carrier noted that since 72 percent of charitable giving comes from individuals, nonprofits should invest time and resources to understand their individual supporters. “What motivates them to give?” she asked. “How do they like to be engaged—mailers, social media?”
Nonprofits also need to give supporters reasons and opportunities to get involved, such as by volunteering or donating goods, she said. “You have to be specific about what you need.”
Document your Fundraising Strategy. Having a documented fundraising strategy is critical, Schiffman insisted. Every nonprofit should have one, but most don’t, she observed. “Even sophisticated organizations don’t have them.”
A documented strategy is more than a fundraising calendar, she explained: in as little as two or three pages it lays out where the dollars are coming from over the next year, the cost of raising them, the tasks, the role of board members, and the hours each staff member will devote to each step of the process.
Such a document gives everyone including the board clear direction, she added, and prevents mid-year brainstorms (Gala! Golf fundraiser!) from upending the rest of the plan.
Hold your Board Accountable. Many nonprofit board members will offer to do anything to support your cause—except solicit money, said Schiffman. But fundraising, including forging relationships for the nonprofit with potential corporate donors, is a board’s primary responsibility, she explained. “We should hold them accountable for doing that.”
At the same time, board members need clear objectives, she continued. “We go into a lot of organizations that say, ‘We had a fundraising committee but it didn’t work.’ It didn’t work because you didn’t give them anything to do.”
Mid-way through the panel discussion, Dee said it was time to talk about how nonprofits can hold onto the money they’ve got. “How should not-for-profits reprioritize their spending?” she asked.
Work efficiently. Every nonprofit should conduct a work flow analysis—a systematic study of who does what—with the aim of increasing efficiency to better serve clients, said Joyce Golbus Poll, principal of the proposal-writing firm J.G. Poll & Associates. Too few organizations take the time to do this, she added, which wastes the money she works hard to raise.
Her favorite approach is for each department to form a team to study what they do. “That builds team spirit and morale,” she said.
Find your focus. When nonprofits try to do too much, they flounder, Poll observed. “A nonprofit needs to run like a business and realize that it can’t serve everyone and do everything well. It absolutely is imperative that they focus on what is the most important.”
Nonprofits that sharpen their focus increase their impact, said Carrier. She works with nonprofits to hone in on their purpose and then identify one or two first steps to better focus their work.
“When we hear ‘change’ our hearts start going fast,” she said. “But change can be one or two things. Small wins empower the team and motivate them to keep doing more.”
Cut big costs. Nonprofits often don’t realize how much they can save on their two biggest costs—healthcare and payroll, said Gregg Mellinger, a vice president at USI Insurance Services.
Hospitals and insurance companies have enormous profit margins, he explained. Some insurance companies even get kick-backs from drug manufacturers for only covering a more expensive drug, he reported. “We’re dramatically overbilled.”
Those huge profit margins leave plenty of negotiating room on health insurance premiums for those who understand the system, he explained.
Nonprofits can also save money by offering a better benefits package, Mellinger said. Many employees will accept a lower salary in exchange for benefits that meet their needs. Where nonprofits fall short is offering a one-size-fits-all benefits plan rather than allowing employees to pick and choose from a menu of options, he observed.
Position yourself strategically. Nonprofits position themselves to win grants when they can clearly articulate their strengths and advantages over the competition, said Poll.
Knowing your competitive edge can also make you a better collaborator, she continued. Foundations look favorably on partnerships, and competitors can become allies on projects when they know how your unique strengths would benefit them.
Consultants to nonprofits need to position themselves strategically, too—both to compete and collaborate with each other, she added. “Your competitors need to be your friends, because that can only strengthen you.”
Meeting your match: 5 Steps to Successful Cross-Sector Partnerships
by Kelli Moore | Ando Associates | ACN Member
Social sector organizations are no longer called charities, and even the term “nonprofit” is falling out of favor, for good reason. The level of professionalism and results orientation in the nonprofit sector has increased dramatically, and the line between for-profit and nonprofit is increasingly blurred. The dynamic of a corporation or foundation as benefactor and a nonprofit organization as grateful recipient, though, is tough to shake.
How can social entrepreneurs feel like they’re on a level playing field? When considering partnership strategy, social sector leaders need to take stock of what their organization has to offer, with an eye on how they are uniquely positioned to add value to potential partners.
Evaluate your strengths. Small or new organizations can’t offer the levels of brand recognition of more established organizations. But every nonprofit can offer a unique combination of assets that could add value to a potential partner. Maybe you have a vibrant in-person and/or online community, with strong constituent relationships. You may offer a more entrepreneurial perspective, or provide unique insights into emerging challenges or trends or in your sector. Finally, collaboration or programming with your organization could help establish the partner’s credibility in a new area.
Understand what won’t work for you. Determining what you can’t or won’t offer to a potential partner is as vital as envisioning how you do want your partnerships to evolve. Some companies are interested in large-scale volunteer opportunities, but is your organization prepared to handle those well? If not, what alternatives can you offer confidently, such as mentorship or pro bono consulting? Will you provide direct access to constituents, through in-person contact, or via social media campaigns? Know your limits on what information and access can and should be shared before the subject comes up.
Refine your message. Most social sector organizations focus communications on what they do, how they do it, and what they’ve accomplished. To attract partners, however, you should enhance these messages to highlight your unique value and assets. A dynamic invitation to create shared impact shouldn’t be relegated to the “Get Involved” section of your web site; it should be an integral part of both your strategy and your communications.
Identify your ideal prospects. Make your own list! No magazine’s “2018’s Most Innovative Foundations” or “Top 10 Corporate Citizens” constitute your organization’s highest potential partners. Start with organizations whose values and purpose align most closely with yours. Then, look closely at what you’ve identified as your greatest assets and needs and find organizations whose strengths complement, rather than match, your own.
Be creative! Financial contributions are important, but establishing trust and building relationships is far more critical for long-term success. Identify engagement and collaboration opportunities that aren’t focused on funding, at least initially. How might you add value to their employee base through pro bono or other volunteer opportunities? Does the partner have products or even office space to donate, either for a special event or longer term? Can you publish a joint paper on a topic of pressing concern to both organizations?
A partnership strategy can only be successful if given careful thought and preparation. Be proactive. Reach out to unusual suspects. Come up with – and be open to – innovative ideas that engage people throughout the partner organization on various levels. Recognize that no matter the size or scope of the organizations involved, the best partnerships happen when both parties are on equal footing.
By: Bob Campbell, Campbell, Smith & Associates
STYLES OF LEADERSHIP
While there are many definitions of leadership, probably my favorite is: “Leadership is inspiring others to pursue your vision within the parameters you set, to the extent that it becomes a shared effort, shared vision and as a result a shared success.” (Zeitchik, 2013) Before getting into further discussion on this subject, let’s make sure we understand and accept the fact that management and leadership are two entirely different things. Often times these two terms are used interchangeably but, as writer and consultant Peter Drucker once stated, “Management is doing things right; while leadership is doing the right things.” Where we start to run into organizational challenges is when we look at leadership styles and how they may or may not fit with the environment in which very specific results are expected. For the purpose of this discussion I would suggest that there are probably at least six different leadership styles that can be used as the situation requires
>The “Follow me” leader. This style works best when a new direction is needed. It focuses on the end goal and depends on the team to provide the means of getting there.
>The “Do as I do now” leader. This style is usually a good match to an already motivated and skilled team where quick results are needed. In the long term, however, it can overwhelm team members and frustrate individual motivation.
>The “People come first” leader. This style usually works well when healing is needed within the group for any number of reasons. It depends on building relationships with the team and convincing them that they belong to a family of folks seeking a common goal.
>The ”Let me help you improve” leader. This uses a coaching style to help the team develop long-lasting skills that will serve them in the future. It is the least effective in situations where the team is unwilling to learn and/or doesn’t trust the skills of the leader.
>The “I’m the boss” leader. This style follows a “just do what I tell you” philosophy which works in times of crisis. Unfortunately, it also can alienate team members and block individual incentive and creativity.
>The “Consensus” leader. This style enlists the input of all team members on solutions for the challenges being faced. It encourages team members to take ownership and become a part of the solution. This style doesn’t work well in emergencies or when team members are not informed enough to offer creative suggestions.
It is incumbent upon the true leader, who is seeking long-term effectiveness and therefore success, to be able to adapt to any and all of these styles based on the situation and the need of the team members individually and collectively. Teams are destined to be made up of different personalities, different skill sets, different individual goals and different needs in terms of what motivates them. It is the leader’s responsibility to assess and fully understand the different elements of the members of their team and as a result be able to maximize the potential of the team. That’s why we have many more managers and fewer great leaders.
By: Bob Campbell, Campbell, Smith & Associates
We make the comment on our web site that “an organization without a Strategic Plan is merely running around putting out fires every day”. While possibly somewhat of an exaggeration, it’s really more accurate than you might think. Strategic Planning (SP) is defined as “The science of defining and using resources to accomplish a specific purpose”. That seems pretty simple! The reality is, that for an organization to move to a Strategic Plan environment it will require outside professional assistance, commitment of a planning team and a fair amount of time to initially get the plan and all of its tentacles established.
The Planning Team (PT) needs to be made up of three or four people from your Board, your top level operational leadership team (probably three or four) and an outside professional to facilitate and help guide you through the process. The PT must initially define or visit and redefine in writing the purpose for which the organization exists (Mission Statement), a sense for the ideal future of the organization (Vision Statement) and the tenets which are important to and serve as enduring principles which guide the conduct of those who are part of the organization (Core Values). The Mission Statement and Vision Statements should be kept short and very definitive – two or three sentences. The Core Values of your organization will probably require a much broader listing of those things expected of those employed by the organization which will also guide how you do business.
Once this is complete the PT must take on the job of SWOT analysis of the organization and the market it operates in. The term SWOT is defined as follows:
S = Strength Those elements of the organization that make it effective in the accomplishment of its mission/vision and fulfillment of its operational mandates.
W = Weaknesses Those elements of the organization which may hinder it from effectively accomplishing its mission/vision and fulfillment of its operational mandates.
O = Opportunity A combination of external and/or internal factors and/or circumstances which could affect the organization in a favorable manner.
T = Threats A combination of external and/or internal factors and/or circumstances which could affect the organization in an unfavorable manner.
The outcome of the SWOT analysis will be the primary driver as the PT then goes about establishing the
Strategic Initiatives (SI’s). These will propel the organization in the direction of fulfilling the Vision Statement of the organization within the context of the purpose for which it exists and the values by which it operates. As a rule of thumb you will probably only want to establish four to six of these, from an organization capacity standpoint. These will then be followed by Action Plans (AP’s) to accomplish the SI’s with assigned responsibility. The planning horizon for the AP’s should be no more than three years. In our opinion it’s virtually impossible to predict accurately beyond a three year horizon. The PT will review and report to the Board every six months on the SP status along with any impediments that have been encountered on the AP’s and what is being done to overcome them. In this way the document becomes a living document that is driving the organization. Each year a new year is added to the planning horizon.
What I have done here is to provide you with a very abbreviated outline for a very encompassing scientific business process. The SP will allow your organization to stay on goal while at the same time staying flexible enough to respond to the daily emergencies and requirements. The SP will drive your staffing, your financial planning process and even departmental and individual goals. It gets your whole organization pulling in the same direction which usually translates into great results.
By: Laura Stokes-Gray, Stokes-Gray Consulting
Bridging The Gap
During my 20 years serving the third sector, four as a CEO and more than 16 as a consultant, I have seen dozens of nonprofits struggle with a leadership transition. The departure of a chief executive, especially if unanticipated, can result in a lack of momentum, direction, and stability. Staff morale is likely to plummet, funders and partners may be inclined to withdraw support, and critical services and community outreach efforts could be impaired. Unfortunately, there is often a knee-jerk reaction on the part of the board of directors, with some boards experiencing an outright sense of panic.
The worst strategy is to be in a hurry. Rather than taking the time to evaluate the organization's priorities and complete a thoughtful search for a new executive director, many boards rush ahead to get a warm body to fill the vacancy. Sometimes the board chair decides to fill in on a temporary basis, which is a remarkably bad idea for many reasons. Another approach is to promote the second in command, which might be the CFO, COO, or program officer. The finance or HR person might be very good at their respective jobs, but may be a fish out of water as the CEO. Expecting a senior staffer to take on the additional role of "Acting Executive Director" places an undue burden on an already stressed individual. Asking someone to double up and work 50 or more hours a week just isn't wise. Even with a temporary bump in salary, resentment is liable to build. I've seen board members hire friends, pay unscrupulous search firms or staffing agencies to find a likely unqualified candidate in record time (the principled ones won't comply), or try to do an unassisted search with little or no plan or focus. The person who winds up in the chief executive's chair under any of these circumstances is what we call the "Unintentional Interim".
The promotion from within, the board member acquaintance in need of a job, or the poorly interviewed and vetted candidate almost invariably fail. The cycle starts again and the door keeps revolving. I remember one nonprofit who had four executive directors in three years. It was no surprise, after several donors pulled out, that the organization closed its doors for good.
Some nonprofits choose to leave the position vacant, on occasion for as long as a year, with the misguided objective of saving money. Then, predictably, entropy moves from order to chaos. Turns out it wasn't such a great idea, after all. To quote the poet Yeats: "Things fall apart; the centre cannot hold". Laying low and hoping things will just "work out" usually isn't the best strategy, either.
What is the best strategy? How can a nonprofit safeguard and even improve its current operations and service delivery while taking the time required to conduct a thorough search for effective new leadership? A professional Interim Executive Director. An experienced nonprofit consultant with advanced training in transition management. Hiring an Interim ED creates the time and space a board of directors needs to recruit the best candidate for permanent leadership. It also gives an organization the opportunity to step back and reassess its mission and grasp the bigger picture. Using a qualified Interim ED ensures uninterrupted workflow and continuity for programs and services, stabilizes relationships with key funders, keeps revenue streams on track, creates a calm and morale-building atmosphere for staff, and bridges the gap with an unbiased senior leader who specializes in managing extraordinary and difficult situations. A change agent who removes the burden of a steep learning curve or impending crisis from the new permanent ED, giving that person the ability to hit the ground running.
When should a nonprofit consider using an Interim ED? The unexpected exit of an Executive Director would seem to require an Interim. The departure of a longtime or founding leader and/or the lack of an identified or prepared successor would also call for professional interim leadership. Not every nonprofit needs an Interim ED. Some executives announce their retirements well in advance. Some nonprofit boards have taken the initiative to put a succession plan in place. Some nonprofits are so extraordinarily well-run that they may function like a well-oiled machine, though even in that case, an Interim would help keep it that way.
How long do Interim ED engagements typically last? Engagements usually run 4-12 months with a 24-40 hour per week on-site commitment. The schedule depends on the complexity of the situation and assignment, and may increase or decrease as appropriate. It should be noted that Interim EDs are never to be considered a candidate for the permanent position. The success of the Interim largely depends on their ability to remain unbiased.
Can my nonprofit afford an Interim ED? Can you afford to hobble along on a wing and a prayer? Compensation to Interim EDs is usually in line with what you would pay a permanent ED. If your current financial situation is holding you back, consider approaching your key funders for assistance. Those who have invested in your organization want you to succeed. This is not an unusual request.
If your nonprofit is facing a leadership transition, don't struggle unnecessarily. Consider engaging a professional Interim ED. The health and well-being of your nonprofit is at stake.
By: Debbie McCann, W4Sight LLC
One of the services that ACN offers to nonprofits is distributing notifications of Requests for Proposals (RFPs) to its members. Through ACN’s process of distributing RFPs, W4Sight has both successfully secured new business and gained some insight about the RFP process. Last week’s post focused on advice for consultants on going through the RFP process. Today, we’re addressing some advice to nonprofit organizations, from a consultant’s perspective.
Why submit an RFP?
An RFP describes a specific project for which an organization would like to hire a consultant, and provides a set of instructions for preparing a bid. Organizations use RFPs – rather than simply interviewing several consultants gathered from recommendations of friends or colleagues – to provide additional formality to the process and to avoid favoritism or lack of competition. Some funders, particularly public funders, require a competitive process designed to foster a broad range of choices for the agency. Organizations compare RFP responses on price, qualifications, and the proposed approach to the project. Most funders do not require an organization to select the lowest bidder when the RFP is for consulting services.
While going to the trouble to put together an RFP and select a respondent does take time, it also has some advantages:
As a professional association of career consultants, ACN distributes your RFP to a core group of high-quality, reasonably-priced practitioners with a wide array of experience and – just as importantly – a professional network of potential colleagues. For projects of larger scope, ACN members can connect with one another to develop a proposal that meets an organization’s needs: according to the most recent member survey, 19% of ACN members have collaborated with one another on projects in the last year. Essentially, submitting an RFP through ACN is the fastest way an organization can get their project in front of a variety of specialists.
What goes in an RFP?
Thanks for taking the time – Best of luck on your next RFP!
– Debbie McCann, W4Sight
Want to submit an RFP through ACN’s portal? Click here.
By: Debbie McCann, W4Sight LLC
One of the benefits of ACN membership is receiving notifications of Requests for Proposals (RFPs). Through ACN’s process of distributing RFPs, W4Sight has both successfully secured new business and gained some insight about the RFP process. We’ve written two posts about the process from a consultant’s viewpoint – this post focuses on our fellow consultants. Next week we’ll follow up with a post geared toward nonprofit organizations.
Every time we receive an email from ACN announcing an RFP, I take a quick look. If the project description that appears in the ACN “cover email” piques my interest, I take the time to read the entire document as soon as possible. The first thing I look for is whether the services needed are in our area of expertise. Many are not, but it’s important to read carefully. Here are a few tips we’ve learned:
Be mindful of timing: RFPs coming through the ACN pipeline may have been released a week or two earlier, leaving a tight deadline to respond. If you are receive the RFP only a few days or a week before the deadline, some organizations are willing to grant you an extension if you are a qualified respondent. However, you do need to contact them immediately to explain the circumstances and let them know when you can submit a proposal.
Timing is also important because organizations with larger projects also sometimes hold a bidders’ conference, and the date and time are listed in the RFP. It’s important to check right away so that you don’t miss the opportunity to attend. Some bidders’ conferences are mandatory if you plan to respond to the RFP, while others are optional. If you plan to respond to an RFP and there is a bidders’ conference, it’s a good idea to attend. The organization walks through the project expectations in some detail, and explains the response format required along with any other special requirements. If you think you may need to partner with another consultant to provide the whole range of services needed, leverage ACN’s network to find collaborators.
Decide if it’s worth responding: Many consultants avoid RFPs because of the time commitment and/or the inherent risk involved. Consultants often believe that they have a much better chance at securing a contract when they have had a chance to cultivate a potential client and get to know their organization.
However, unless you have reason to believe that the open bidding process is just a sham, it may be worth your time if the project is a good fit for your skills. A few factors to consider before deciding to pursue an RFP:
Develop a Solid Proposal: Of course, no RFP is perfect, so consultants need to find creative ways to create useful proposals. For example, we won one project from a client, despite the fact that the organization was unresponsive when we attempted to ask questions prior to the deadline. Because the project was substantial, and an excellent fit with our expertise, we went ahead with the proposal – though with many documented assumptions. Even though some of our assumptions turned out to be incorrect, the clearly documented work plan was enough to convince them that they should meet with us. We were able to collaborate on the revised scope and come up with a more appropriate statement of work after meeting with the organization. In the end, it was a successful project, and an important credential that we could reference later.
If the RFP contains detailed instructions about the response format they want, then follow what they’ve asked for. However, if they don’t, here’s a suggested outline:
Project Understanding – summarize what you think you understand from the proposal, in your own words.
Best of Luck!
By: James Reeves, Do Well Do Good, LLC.
This guest post, from James Reeves of Do Well, Do Good LLC, highlights some of the great discussion from ACN’s February 25th program. A special thanks to James and our other participants!
This morning I had the honor of speaking on a panel for the Association of Consultants to Nonprofits, along with Bill Bonner of Bonner of IMPR and Leah Bradford of the Kraft Foods Group and the Kraft Foods Group Foundation. In addition to being really impressed by ACN as an organization, I really enjoyed the lively and engaged crowd that had thought provoking questions and great contributions.
My task was to answer two questions:
First, I think it’s important to start nearly every conversation about CSR by defining it. The simplest definition I give is that CSR is managing and organization’s business operations in a way that is good for people, profit, and the planet. CSR deals with a wide range of issues: supply chain & human rights protection, lobbying, workers’ pay and benefits, product life cycles, investments, public disclosure practices, diversity and inclusion, and carbon emissions to name just a few issues.
A very key point is that CSR includes philanthropy, volunteering, and community relations, but as I pointed out, CSR is much more than that. Don’t conflate the two terms.
For the purpose of this article and this morning I treated the terms CSR and sustainability as being synonymous.
A Nonprofit’s Role
For the most part, nonprofit organizations tend not to engage with companies – specifically in helping them with CSR. For the most part, most nonprofits are geared to work with companies in the community relations or cause-marketing spheres. However, occasionally a nonprofit can help companies fulfill their goals related to the social or environmental impacts of their business.
A great example is Aspire, a Chicagoland nonprofit that helps differently abled adults attain meaningful jobs (as well as many other services). The nonprofit partnered with OfficeMax and the Kessler Foundation to develop a training program to help Aspire’s constituents thrive in a retail or warehouse work environment. (Full disclosure: years ago, I worked and consulted for OfficeMax, but I had no involvement in this program). This program helped OfficeMax with its diversity and inclusion efforts while also servicing Aspire’s constituents.
The Difference: A CSR or Philanthropic Role
So how is this not just a company sponsoring a nonprofit? The key distinction for me between a philanthropic program versus a nonprofit helping a company with CSR is as follows…
For cause-marketing or community relations programs (philanthropy/volunteering) a nonprofit’s role is primarily focused on using its assets to help a company. This could be the non-profit’s brand or logo to be put on a product’s packaging to increase sales and support a cause. Or a nonprofit using its Board of Directors to help a company’s executives create relationships in the community and build their leadership capabilities.
A nonprofit is helping a company with CSR when it is primarily focused on using its expertise to help a company. In this case, Aspire has a unique and differentiating skill set that few organizations have: insights into the employment of adults who have a different set of abilities.
Tough Love: A Role for Consultants? Not really.
While I have helped some of my clients with their relationships with nonprofits, I do not see it as a major market for consultants to dive into. So my tough love advice is: will it put food on your table? Maybe. But if so, it’ll likely just be a side dish.
The central question for any business and especially consulting is whether you offer products or services that solve a problem so that people are willing to pay money for it. Companies rarely need help from consultants for match-making services, as an example. There may be some services where consultants are needed for facilitating group meetings with nonprofit organization, but in my experience this hasn’t been a huge market. (I do think, however, that there is a much bigger role for consultants to play in helping non-profits with their cause-marketing, volunteering, and philanthropic capacity.)
However, things aren’t so bleak. The projects I have worked on for my for-profit clients include facilitating such meetings and benchmarking existing and not-existing relationships against future needs related to CSR strategies. Yet, this wasn’t something I specifically “sold” as a service to my clients. Rather, I received these projects because I was already a trusted adviser, known for excellent research, writing, analytical, and facilitation skills. So while those were the services I provided, they just happened to be on the subject matter of relationships with non-profits or Non-Governmental Organizations (NGOs) related to specifically to CSR programs.
Sponsorships between nonprofits and companies dealing with CSR are so closely ingrained with a nonprofit’s core abilities that bringing in consultants would be redundant. In fact, one could argue that it would be a warning sign that a nonprofit may not be as strong of a partner if they have to bring in non-ancillary help.
So my honest advice to consultants is to focus on your core competencies rather than trying to become the central hub of nonprofit and for-profit relationships. If such projects arrive, treat them as welcome appetizers rather than regular entrees.
By: Carey Freimuth, Caritas Financial
In our last post, we discussed the importance of nonprofit Boards creating and maintaining an Investment Policy Statement (IPS). This article discusses the role of an IPS in the relationship between boards and their financial advisors.
A recent survey found that among private foundations with $1 to $10 million in assets, 30% did not have an IPS and additionally, 35% were not working with an advisor. These lapses can lead to a breach in fulfilling one’s fiduciary responsibility.
What is the role of the board vs. financial advisors?
The Board: it is up to the board to actively oversee an organization’s financial performance. According to the Prudent Investor Laws, the board or organization needs to adopt investment policies, thoroughly vet its financial advisors, and regularly review performance to fully fulfill their fiduciary responsibilities. While this sounds daunting and time consuming, board members can delegate some of those responsibilities to an advisor. This increases the investment oversight, especially if the board members lack sufficient time to dedicate to this responsibility. This protects both the organization and the board members: if followed, the individual members of the board and the organization are less likely to be liable for the actions of investment underperformance. While it seems straightforward, many boards are lax in updating or reviewing the IPS (or even creating one!), reviewing performance, and monitoring their advisors.
Financial Advisors: Advisors can help provide board members with confidence they are doing good while acting responsibility. The board can delegate investment decision making to an advisor to help with faster decision-making, implementing a more goals focused strategy to improve risk management, and better track progress against goals. Moreover, many officers and trustees welcome additional education on the standards of care that they must follow as fiduciaries of the organization.
Like many people in their role, board members can be uncomfortable with all of the responsibilities and processes that need to be addressed in order to protect the organization and their position within the organization as a fiduciaries. An IPS lays the foundation for an organization’s overall governance structure to ensure that fiduciaries are fulfilling their obligations. A good IPS should clearly define the relationship between the advisor and client right from the start. These expectations give advisors a better sense of what the clients expect in terms of volatility and returns, while helping to educate clients on realistic outcomes and the importance of staying the course in challenging markets.
In sum, this division of labor that allows boards to supervise third-party advisors and the advisors to do the work of actively investing an organization’s assets creates a solid check and balance. And once your organization has an IPS in place that is reviewed regularly, you can feel more confident you are fulfilling your fiduciary responsibilities.
Best of Luck,
 Source: Association of Small Foundations 2013
By: Carey Freimuth, Caritas Financial
A primary responsibility of board members is to serve as trustees of the organization’s assets by exercising due diligence to ensure that its financial situation remains sound. But while fiduciaries need to protect an organization’s assets, they also need to ensure that aversion to risk doesn’t compromise the mission of the organization over the long term.
The old adage ‘cash is king’ doesn’t always apply in the world of investments. While many fiduciaries believe they are being prudent by conservatively investing all the organization’s assets in cash, this can actually lose them money in real dollar value. Simply put, the compounding effect of inflation over time results in erosion of the organization’s purchasing power.
What is an IPS?
The board needs to weigh the options and establish guidelines and policies that minimize their exposure to identified portfolio risks such as a lack of diversification or a level of volatility that is mismatched with the IPS’s stated goals and time horizon. This is where the Investment Policy Statement (IPS) comes into play as an important document by which investment decisions are based. In its most basic form, an IPS is a document which sets forth in writing how an institution’s money is to be managed by presenting financial objectives in the context of how much risk the fiduciaries are willing and able to bear. While an IPS should be customized to meet the needs and mission of the organization, the document should include:
Why have one at all?
An IPS is essential to an organization’s strategic and financial growth. They offer three major benefits:
1. Provide financial discipline in tough times. An IPS instills discipline in times of market volatility by clearly defining the goals and objectives of the portfolio while outlining a specific plan and strategy to manage the funds in order to reach those goals. It can also be used as a tool to manage and minimize any risks identified throughout the process.
2. Maintain strategic intent. A sound, thoughtful IPS is crucial to advancing the strategic intent of the organization while helping fiduciaries mitigate potential risks to the assets. It helps everyone focus on the mission of the organization and provides continuity in decision making.
3. Reassure donors. By maintaining discipline during tough times and staying true to your organizational mission, you can demonstrate to potential donors your commitment to managing the assets with care, skill and prudence. When a donor contributes money, they do so with the expectation that the board will invest wisely and use that money to further the mission of the organization.
The best way to give donors confidence in this is through the creation and regular review of an IPS.
Example of IPS template:
 While the document is not meant to be changed frequently, it should be periodically reviewed to ensure all language is up-to-date reflecting current fiduciary standards and long-term objectives. For example, the Uniform Prudent Management of Institutional Funds Act (UPMIFA) of 2006 replaces the Uniform Management of Institutional Funds Act (UMIFA) of 1972. It is important to review an IPS to ensure it fully captures the updates of such legislation.
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