Pro Bono news recently reported that nonprofit organisations in Australia have around $295 billion - yes that is billions, sitting in daily trading accounts, where the money attracts little or no return on investment. This sum represents considerably more money than is needed for day to day operation of the sector.
This single factor highlights both a dilemma and an issue for our nonprofit organisations. The dilemma is that they are trustees of public monies and community interests and by nature risk averse. For Boards of Management it is less risky to leave funds lying around, earning little, that to risk the consequences of a poorly considered investment.
This leads to the core issue. That is managers that do not have the knowledge or skills in financial management to be able to provide Boards with well informed and strategic advice on investing. This is a more significant issue than it might appear on the surface. High end financial management is not something to be done intuitively, afterall it can go wrong. It is a learned skill - learned from very experienced and skill people. This requires an investment in appropriate development. Equally importantly it requires board members with similar levels of experience to enable them to firstly understand investment processes and tool; while also assessing the risk of such investments.
At the top level, perhaps in the 1% of larger nonprofit organisations these skills exist. For the remaining 99% of nonprofits, the lack of knowledge, experience and education at both board and management level is creating a situation where money that could be generated and used to enhance service delivery to the community is being squandered and donated to the banks - who, in turn, use your money to make their profits.
What is the answer? A two-fold approach is required. The first is that board members and managers gain knowledge and understanding of financial management, beyond simply setting organiational or program budgets. The second is people involved in the management of nonprofits need to base their investment decisions on knowledge and facts rather than misconceptions about how financial tools may be used; or worse still based upon common mythology.
Let The Journey Continue
John Coxon
Taking You From Frontline Manager to CEO
Thursday, July 15, 2010
Ruckus at Vinnies
St Vincent's NSW have recently experienced their State Board being replaced by its national body, amid claims of 'corporate bullying' and counter claims of 'political interference' and 'wanting to get hands on monies'. Likely the truth will never come out.
The aim of this blog is not to engage in debate about St Vincents or any other church based charity, but to highlight what I believe to be the bigger issue and one that is being faced by many other nonprofits, regardless of their origins throughout Australia and New Zealand.
Most nonprofit organisations are mission-driven, yet increasingly pressure is being placed upon them by funding bodies to become more accountable, to have in place appropriate systems and processes and to maintain a triple bottom line. These demands clash with the mission of many involved in these charities. In short many people cannot grasp the connection between systems and sustainability. They continue to believe that somehow, money will always appear from somewhere and that the service they provide will continue ad infinitum. This issue is compounded by the increasing gap between those that volunteer their services and those that are paid for their services. This issue is not going to go away - despite the best efforts of volunteers to try and achieve just that. The reality is that if charities want to perform to their best ability, by achieving the high possible funding from various sources and providing the high level of service to those in need then they need access to people with appropriate experience and skills.
Is there a way to reduce this tension? Yes there is and the answer lies in doing something different to what is being done at present. The corporate model doesn't sit comfortably with mission driven organisations. Yet elements of the corporate model are necessary to achieve transparency and accountability. The gap between volunteers and paid employees, in particular managers, doesn't sit comfortably in a nonprofit environment; yet these people are necessary as they have the experience and skills to provide transparency and accountability.
I am not laying the blame at the feet of funding bodies either. They disperse public monies, as a donor I expect them to do so in a transparent and accountable manner. Public money is not money to be wasted. Yet I don't believe funders fully understand what it is they are funding or properly fund all aspects of service delivery.
Firstly I believe it is important board membership is made up of people with passion but who also have business skills in areas such as finance, marketing, fundraising, strategic planning and volunteer management. All board members should have a good understanding of governance best practice. Such skills and experience in themselves do not constitute a corporate model; these are simply the preferable degrees of experience to ensure transparency and accountability.
Secondly the time has come to stop treating volunteers as volunteers and instead treat them as unpaid staff members, subject to exactly the same standards and expectations that apply to paid employees. It is time for volunteers to understand that they don't own the business; it does not belong to them, they, as do paid employees, serve the greater community.
Thirdly management groups need to develop the ability to lead through collaborative actions, not through 'command and control'. This means managers need to learn how to engage everyone, at all times, in all aspects of operation, by creating an environment of sharing and continuous learning. This requires an investment in learning and development at every level of the organisation, including volunteers.
Finally, funding bodies, especially Government funders need to recognise the long term benefit of investing in development, of having in place effective systems and processes and having in place people with appropriate experience and skills. They in turn need to fund the development of people. A for-profit organisation funds this development from its sales. In the non-profit sector, Government is the chief source of revenue (so that nonprofits can do the job that Govt doesnt want to be held accountable for) and therefore have an obligation to provide sufficient funding to enable investment in people. To do otherwise is to short change both the sector and the community. Funding bodies claim to have the interests of stakeholders at heart, in particular the needs of clients. They need to understand that there are internal stakeholders as well as external stakeholders; staff also are stakeholders and clients.
Lastly, nonprofit organisations needs to develop hybrid models that enable them to maximise revenue from business activities, without compromising mission, to that they might have sufficient funds to invest in the development of their people. Which of course means, that they will need to build capacity at all levels in business development and business management (which most do not currently have) and so the cycle goes on . . .
Let The Journey Continue
John Coxon
Taking You From Frontline Manager to CEO
The aim of this blog is not to engage in debate about St Vincents or any other church based charity, but to highlight what I believe to be the bigger issue and one that is being faced by many other nonprofits, regardless of their origins throughout Australia and New Zealand.
Most nonprofit organisations are mission-driven, yet increasingly pressure is being placed upon them by funding bodies to become more accountable, to have in place appropriate systems and processes and to maintain a triple bottom line. These demands clash with the mission of many involved in these charities. In short many people cannot grasp the connection between systems and sustainability. They continue to believe that somehow, money will always appear from somewhere and that the service they provide will continue ad infinitum. This issue is compounded by the increasing gap between those that volunteer their services and those that are paid for their services. This issue is not going to go away - despite the best efforts of volunteers to try and achieve just that. The reality is that if charities want to perform to their best ability, by achieving the high possible funding from various sources and providing the high level of service to those in need then they need access to people with appropriate experience and skills.
Is there a way to reduce this tension? Yes there is and the answer lies in doing something different to what is being done at present. The corporate model doesn't sit comfortably with mission driven organisations. Yet elements of the corporate model are necessary to achieve transparency and accountability. The gap between volunteers and paid employees, in particular managers, doesn't sit comfortably in a nonprofit environment; yet these people are necessary as they have the experience and skills to provide transparency and accountability.
I am not laying the blame at the feet of funding bodies either. They disperse public monies, as a donor I expect them to do so in a transparent and accountable manner. Public money is not money to be wasted. Yet I don't believe funders fully understand what it is they are funding or properly fund all aspects of service delivery.
Firstly I believe it is important board membership is made up of people with passion but who also have business skills in areas such as finance, marketing, fundraising, strategic planning and volunteer management. All board members should have a good understanding of governance best practice. Such skills and experience in themselves do not constitute a corporate model; these are simply the preferable degrees of experience to ensure transparency and accountability.
Secondly the time has come to stop treating volunteers as volunteers and instead treat them as unpaid staff members, subject to exactly the same standards and expectations that apply to paid employees. It is time for volunteers to understand that they don't own the business; it does not belong to them, they, as do paid employees, serve the greater community.
Thirdly management groups need to develop the ability to lead through collaborative actions, not through 'command and control'. This means managers need to learn how to engage everyone, at all times, in all aspects of operation, by creating an environment of sharing and continuous learning. This requires an investment in learning and development at every level of the organisation, including volunteers.
Finally, funding bodies, especially Government funders need to recognise the long term benefit of investing in development, of having in place effective systems and processes and having in place people with appropriate experience and skills. They in turn need to fund the development of people. A for-profit organisation funds this development from its sales. In the non-profit sector, Government is the chief source of revenue (so that nonprofits can do the job that Govt doesnt want to be held accountable for) and therefore have an obligation to provide sufficient funding to enable investment in people. To do otherwise is to short change both the sector and the community. Funding bodies claim to have the interests of stakeholders at heart, in particular the needs of clients. They need to understand that there are internal stakeholders as well as external stakeholders; staff also are stakeholders and clients.
Lastly, nonprofit organisations needs to develop hybrid models that enable them to maximise revenue from business activities, without compromising mission, to that they might have sufficient funds to invest in the development of their people. Which of course means, that they will need to build capacity at all levels in business development and business management (which most do not currently have) and so the cycle goes on . . .
Let The Journey Continue
John Coxon
Taking You From Frontline Manager to CEO
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