Increased Board Performance Through Diversity

Nonprofit Board Resources - Increased Board Performance Through DiversityWhen non-profit boards underperform against the expectations given, it’s a natural reaction for those in charge to want to terminate board members who sandbag.  But there’s no quick fix for turning around inactive or ineffective boards, so the planning of board member selection needs to be done strategically with deliberate action of injecting cultural and professional diversity.  It’s through diversity that you can increase board performance from the beginning.

Here in the United States, nonprofit organizations are required by law to have a board of directors for the governance of their operations.  Individual states set the requirements that dictate a minimum number of members needed, their duties and responsibilities to the public, and policies they’re mandated to draft.  But depending on the state in question, this may differ.  While forming an organization and acquiring tax exempt status is an arduous task, establishing an effective board of directors remains even more challenging for many.  I’ve seen this first hand.  Someone with a great idea wants to satisfy a need in society, so he or she hastily forms a nonprofit organization to fill that void, oftentimes overlooking program longevity.  The founders of these startup nonprofits recruit board members from their immediate circle of influence including their friends, family, or acquaintances to satisfy those pesky legal requirements.  These are people they trust, which adds a certain amount of comfort in bringing them on board, but over time, what seemed like a great idea turns into a nightmare with challenges around fundraising, recruiting volunteers, managing finances, appointing a CEO, developing programs, and the list goes on.  The board has passion and wants to support.  After all, this is their friend.  But what went wrong?  The answer is simple, what the board of directors lacks in professional know-how, business sense, and social capital, cannot be made up through any amount of passion alone.

What I’m about to say here isn’t new, nor will it shock you, but most people surround themselves with others like them.  While this isn’t a bad thing, and even though these friends (the newly appointed board) are well intentioned, there’s an increased likelihood these “friends turned board members” have similar values, points of views, and perspectives.  The board likely has cohesion, and while not always the case, there’s a possibility that this can result in social behaviors like groupthink.  This is when decision making becomes impaired by cognitive inhibitors due in part to lack of openness and perspective.  The appointing of the board of directors has greater implications on the tone, culture, and overall performance of the non-profit they govern.  Forming the board is one of the first steps in founding a non-profit organization, and it’s also the most important.  Forming the board needs to be done through diversity, because in the end it affects performance.

Strength through diversity

Josefa Iloilo, the former President of the Republic of Fiji once said, “We need to reach that happy stage of our development when differences and diversity are not seen as sources of division and distrust, but of strength and inspiration.”  While this was said in the context of diversity as a sovereign nation, the same can be applied to any workplace, volunteer corps, and board of directors.  There’s a certain agility that comes from having ethnic, gender, and professional diversity.  Having diversity creates a permissive environment for shared openness, different perspectives, a wide array of professional expertise, and social capital.  Pew Research Center projects the disappearance of a single racial or ethnic majority in the United States by 2055, so with a more diverse America, a board that can think and act through the lens of the communities they serve provides advantages.  This is the bottom line; having a diverse board creates an environment where creativity and innovation flourishes.

Why diversity matters in the long run

It’s always the easy choice for organizations to recruit board members from their pool of members and associates (and even friends and family).  However, it’s not always the best idea.  The board has a primary function of ensuring the organization fulfills its commitment and responsibility to the public as stated through their mission, code of ethics, and charter.  They achieve this through a check and balance system where accountability plays a vital role.  Diverse thought and experience will benefit the board when creating policies around whistleblowers, conflicts of interest, and financial auditing and management because diverse groups are likelier to have stronger accountability measures.

Another function of the board is resource acquisition.  When acquiring resources for longevity of organizational success, you also increase the avenues in which you look for support, thus increasing one’s networks.  Some of the resources in question may include human capital or be related to finances, but through diversity, acquiring said resources can be accomplished with social capital.  This can include the board’s access to personal and professional contacts that have the necessary resources for the organization.  A diverse board will be able to satisfy the acquisition of resources through their reputation or credibility (this is mostly true with members who have high visibility).  High visibility board members can create a sense of “legitimacy” to the organization’s stakeholders and the public.

More importantly for organizations that are focused on social reform and advocacy work, there’s also the consideration of board members who have political clout.  Political capital that exists amongst the board (think connections with local, state or federal governance) can work wonders when advocating or trying to change legislation that impacts those you serve.  Diversity can also assist in setting the organization apart from others.  There’s an added benefit of being held in higher esteem by the public versus organizations that aren’t diverse.  Boards that are diverse are adhering to social norms and acceptance, sometimes resulting in garnering more support.

Tips to increase diversity

Whether your board is already formed, or you’re starting from scratch, it’s not too late.  Try some of these practices to develop a board that’s inclusive and starting off on the right foot.

  • Implement and enforce board terms and term limits.  Have a set number of years per term, and also limit members to a set number of terms.  This forces selection of “new blood.”  With the introduction of new members comes new ideas, different perspective, skills, and access to resources that can be acquired through a member’s social capital.
  • Avoid generalized screening methods.  Implement a process that screens for particular skills and expertise in areas where you have requirements.  With a more stringent vetting process, you weed out those who may be well intentioned, but lack management skills or those who may be incompetent.  This results in onboarding of members who exercise critical thinking and sound decision making and who work effectively.
  • Provide diversity training.  Invest time and money into training your board of directors like you would for other volunteers or paid staff.  Like skills training, other forms of training will benefit the governing board.  Even though the effectiveness of diversity training is largely debated, there’s evidence that training helps create empathy, reducing discriminatory behavior.  Training alone isn’t the cure, but it’s a great step towards minimizing discriminatory behavior that negatively impacts the board’s satisfaction.
  • Include others in a diversity strategy.  Diversity means inclusion, so take an inclusive approach, allowing others to be part of a holistic strategy beyond a single person or decision maker.  This can take the form of working closer with cultural centers, community partners, and other reputable nonprofits who specialize in diversity and inclusion.  By working with partners who may be subject matter experts, you can increase immersion into the cultures you’re trying to better understand and serve.

Diversity isn’t the “end all,” it’s just the start

While diversity in and of itself won’t lead to success, this is a great start.  By implementing a selection process, adopting governance policy, and investing in workforce training, you take necessary measures to set up the board for success.  These steps will encourage and foster an environment of inclusion for the organization’s other aspects.  The impact will transcend staff, even increasing diversity in the volunteer corps.  Boards with cultural, ethnic, gender, and professional diversity tend to have a more diverse leadership cadre, resulting in diversified resources.  Just be sure to err on the side of caution, don’t get overzealous and select polar opposites; this may create the perfect environment for conflict.  Doing so could act as a pitfall if not navigated in a thoughtful manner, but when done correctly will increase the likelihood of success from the onset.  Diversity in nonprofit governance will continue to be a sought after “must have,” and not just for the obvious reasons of cultural and societal norms.  Diversity also impacts long term performance of an organization, so get ahead of the curve and plan for the future today.




Tips for Achieving Diversity on Nonprofit Boards

Tips on Developing a Nonprofit BoardI knew that question would arise. My last article was entitled “Diversity on Nonprofit Boards.”

The question I received was “You have convinced me that diversity is important. But how do I go about achieving diversity on my board?” I knew that excellent question would arise.

First, identify the diversity you would like to include on your board. Perhaps you realize the need for young people on your board or African-Americans or program participants.

Then tell your board and staff members about this need. Ask them to send you information about the individuals they are recommending.

If you do not receive sufficient names of applicants this way, check with groups in your community which serve individuals in whichever diversity you are seeking. Ask the local boy scout or girl scout troop for recommendation of young people. Ask the NAACP President to recommend African-Americans. Check with the Hispanic Community Center or the pastor of the Hispanic Church to obtain names of possible Hispanic board members.

If you would like program participants specifically to join your board, send a brief note to all present and past program participants, asking them to volunteer or to recommend others.

Give the board’s Nominating Committee the responsibility of reviewing the various recommendations you have received. Then have a member of the Nominating Committee set up appointments with prospective members. You might want to hold the meetings in the organization’s office and include a tour e.g., day care program, senior citizen center. Holding the meetings at a local coffee shop may work as well.

Make appointments to see several individuals in each category. Leave enough time to set up the appointments and to hold them before board nominations are due. Remember that many individuals you visit may decline an invitation to serve on your board.

Start by telling the prospective board member about the services provided by the organization.
Tell the individual about the board’s role in setting policy. Give the individual a copy of a board member job description. Make sure you emphasize that all new board members will receive an orientation.

If you are going to recommend that the individual be offered a board position, tell them you will
contact them soon. If you decide that you are not going to recommend them for a position, just be positive and thank them for the opportunity to tell them about your program.

One recommendation I have dubbed the “Noah” approach. If your board is not diverse, try to name two African-Americans or Hispanics or young people to the board at the same time. Then the new individual might feel a little more comfortable.

At each new board member’s first meeting, make the new board member welcome. Make sure to have all present board members introduce themselves. It is not necessary to identify their “diversity.” They will know right away that they are the only program participants or African-Americans without you having to announce it to the entire board.

After the meeting, make sure the Nominating Committee member who met with the individual, now a board member, calls that individual on the telephone. Answer any questions the individual might have. Thank them again for attending. Remind them of the date of the next board meeting.

You will find that diversities disappear. The new board member who may have seemed “different” now is just a board colleague who has an interest in promoting your organization or program.

A How-to Publicity Primer

Nonprofit Public RelationsThe good news for nonprofits feeling a bit perplexed about publicity-seeking is that the media is indeed always hungry for content. So whether your nonprofit is local, regional, or national in its scope, the key is to reverse-engineer what they’re seeking and provide compelling information to them in a timely manner.

Events and anniversaries present prime opportunities as the two key questions an editor or producer typically asks when being presented with a pitch is “why you?” and “why now?” So if you have a milestone coming up, planning your media outreach to fully leverage the opportunity is key as you may not have a similar opportunity for some time thereafter. For those needing to manufacture a newsworthy “event,” you might try camping onto one of the even zany holidays which can be unearthed by researching sites like www.HolidayInsights.com or www.NationalDayCalendar.com.

Timing and targeting

In getting underway with your media outreach, if you have the latitude, try to do some diligent advance work in terms of sussing out any competing events being held at approximately the same time – if needed, you might consider rescheduling to achieve a clearer window of exposure. A nonprofit whose 25th anniversary I oversaw publicity for last year chose Memorial Day weekend for their mega event which was helpful for those attending (namely 500 volunteers who traveled from near and far to construct 25 homes for poor families over the course of two days), but nevertheless timing which ultimately proved a challenge in courting the media — especially given this particular event was also held across the border in Mexico and had no relevant tie-in with our American holiday of honoring our veterans. In this example, you can well imagine how many events were happening nationwide over that same high profile 3-day weekend.

Once you’ve done your best to ensure you’ve created the optimal timing for raising your organization’s profile, the next critical aspect is correctly targeting the media as well as utilizing appropriate lead times. If you’re seeking coverage in a monthly publication, you need to contact them a solid three months advance. For daily newspapers and radio, three to four weeks is typically sufficient. It might SEEM that contacting a given media outlet sooner yet would somehow give you an advantage, but you would be wrong in most instances. So, while a bit on the nerve-wracking side to pitch closer to an event, that’s nevertheless a matter of respecting the media’s own internal timetables.

Do your homework to ensure you’re reaching out to the most appropriate media in terms of the audience they serve and ensuring your message is of appeal to them. You may want a given media, but it’s instead all about why they should want you(r story). I also cringed when a well-meaning client suggested offering pay to a journalist – that’s completely unethical and would be a total nonstarter. That whiff of desperation also won’t endear you to a media professional.

Particularly important is thinking about which medium will be best to tell your story. Is it something that needs to be explained or discussed? Perhaps radio interviews would be ideal if so. If you want TV coverage, is the story “visual?” — showing will be the determining factor here, and having video footage to incorporate is typically essential for television. Also be aware that competition for coverage in physical print publications is stiffer than ever due to their lamentably waning ranks. So you can also research relevant high traffic websites and/or bloggers for exposure (use the same lead time referenced above for daily newspapers). Some first tier media publications also have separate online divisions and it is somewhat “easier” to get coverage with them as they are unrestricted by the economics of ink, paper, and postal costs.

Public Relations Tips for NonprofitsDo’s & don’ts of pitching

What is most helpful as you commence pitching is, again, to focus on what’s in their best interest. So timing a well-crafted and compelling summation of your upcoming event (or anniversary, etc.), and using the proper lead time for contacting them is vital. But given the relentless time pressures in this industry, DO keep it on the lean side initially. In fact, a key strategy I employ is laying out the salient points and then asking permission to send additional information – especially re: a press kit. Contacting someone for the first time and inundating them with attachments is generally received very unfavorably by the media.

When you do supply them with additional information, keep that on the lean side too as they simply don’t have time to wade through lengthy manifestos and mission statements, wordy bios, etc. Bullet points work well and keeping key information organized onto a single sheet of paper per component if possible is very well-received, e.g. a fact sheet, event flyer, roster of executives/staff, etc. Another helpful tool if an event/story is highly visual is to setup an online Press Room to organize and house various documents (.pdfs) as well as both high resolution and low resolution images and/or a collection of video clips with running times notated. If you’re interested in having ongoing media coverage, the investment of time to setup this resource initially will serve your organization well over time as it telegraphs a welcome level of professionalism to the media. Be sure to label everything clearly and make the Press Room easily navigable.

If event-oriented approaches don’t dovetail with the nature of your nonprofit or its current focus, stay sharp in turning around quick responses to news stories which relate specifically to your mission or goals. Once more, research is critical in terms of making contact with a journalist who covers that specific topic/beat or news director, etc. The media is continually needing to cite expert opinions – so be one for them. Again, keep your initial outreach lean in commenting on a developing news story is recommended; for example one that brings up a moral issue which relates to your work, proposed legislation, etc. Each individual pitch should always include your full contact information including all phone numbers, etc. Be prepared for the need to respond to follow-ups of theirs after-hours and DO reply quickly if this occurs. When an editor or producer wants more information, they’ll ask for it — and by pitching leanly you’re more apt to garner their attention, especially having not bogged them down by sending too much extraneous information on the front end.

If possible, snag a celebrity…or two, or seven

A significant game changer for any nonprofit is the acquisition of a celebrity endorser or participant – this was the tipping point for securing significant media coverage for the mega homebuilding event in Baja referenced earlier as nearly 20 Olympic athletes (the majority of whom were medalists) joined the build that weekend. The key in partnering with a celebrity is ensuring something about them resonates directly with your nonprofit’s work and/or the nature of the event itself ideally. For a nonprofit in Sonoma County who works with struggling families, I lined up the top-rated local radio personality to emcee the event along with the guest speaker who was a highly popular local Congresswoman, formerly a single mom on Welfare. “Celebrity” is anyone recognizable who will resonate with and help expand your story – both to your donors as well as the media, and keep in mind their sensibilities are likely shared, especially if you’re operating on the local community level.

While these are just a few elementary but hopefully helpful tips vs. a comprehensive guide, an overarching principle to keep in mind is that “the media are people too.” So be friendly, warm, (although not chatty), professional, don’t bug them with too-frequent follow-ups, and for heaven’s sake, no whining (!) or acting entitled to coverage. Highlight instead why sharing your news will be of interest to their audience of readers, listeners, etc. vs. emphasizing what’s in it for you—alas, that’s simply not a selling point on their side of the equation. Be respectful which includes checking spellings and pronunciations, even gender, to ensure your greeting is accurate. Our names are ours alone and nothing gets an exchange off to a more awkward start than having to apologize for having made a blunder of theirs. For example, I have a nickname which is commonly a man’s name, Sam, but I’m female. So I’m not keen on calls that begin with someone asking for Mr. Jernigan. Similarly, the editor who oversaw a story on a client of mine in Elle Magazine was herself named Alex. And since S.A.M was an acronym born when I had a different last name, so I also don’t appreciate being addressed as Samantha.

Nonprofit Public Relations TipsAt this point in our culture, I do just use the informality of first names for media outreaches and this is pretty universally accepted, and I then respond with however they sign off in their email reply. The People editor who assigned a writer for our mega Memorial Day nonprofit event is named Elizabeth, but when she wrote back she signed off as Liz, so that’s also how I addressed her from then on, but let them greenlight their own nickname — we all remember the lil’ ditty about what happens when we assume.

Lastly but definitely not leastly, regardless of whether you’re courting the notion of follow-up exposure with a given media after landing an interview booking/coverage by them, be gracious and DO send a handwritten thank you note in the mail to the producer/editor after the fact. You’ll not only brighten his or her day when it’s received (remember, they’re a fellow human!), but you’ll have left a positive impression on behalf of your nonprofit. And, after all, that’s the whole point of pursuing publicity in the first place, right? It’s also fine to send them any newsy tidbit a month or two down the road – you never know, and cultivating a potentially ongoing relationship as an expert source of theirs is a possibility. Just don’t add them to your roster for donor appeals or regular ezine updates, etc. as the last thing a busy media pro needs is more clutter in their in-box. Cheers and g’luck…!

Technology Creates a New Giving Economy

Crowdfunding for NonprofitsTechnology can be very good for the nonprofit world. While technology has fundamentally changed the way we do business, the world outside of the for-profit sector has just recently caught on to its benefits. Some tech phenomena have already successfully infiltrated the nonprofit sphere, including the use of Software-as-a-Service (SaaS) to improve donor relations and other daily business functions, or crowdfunding for fundraising purposes. While existing technologies remain useful for many, the next wave of using technology for good will be in the peer-to-peer giving model.

Becoming prime time in the corporate world in the early 2000s, SaaS took hold in the nonprofit space in the last 8-10 years. The very nature of SaaS made it ideal for the nonprofit sector: It’s easy to use, low cost, and avoids integration challenges that often come with on-premise databases. It was also readily adopted because of its ability to help groups manage donations and track individual donors.

For example, Room to Read, a global organization transforming the lives of millions of children in low-income countries by focusing on literacy and gender equality in education, relies on SaaS application Salesforce for project allocation, reporting and tracking. It helps their global teams track at scale for both the project and donor side, enabling them to make more meaningful connections and retain existing donors.

The next wave of technology modeled perfectly for nonprofit use was crowdfunding. Making its first appearance in the late 2000s, nonprofits quickly turned to Indiegogo and KickStarter to help fund their initiatives and programs. Crowdfunding caught on in the nonprofit world because it was an easy platform for anyone to access and donate to. With online payments becoming standard, it took the hassle out of mailing a check or donating in-person. Also, the collective community aspect allowed hundreds of people to work together to reach a common goal.

In 2014, Code.org launched its ‘Hour of Code’ program, with a goal of raising $5 million on Indiegogo to train 100 million students to code. They also created a viral video starring Mark Zuckerberg and Bill Gates for the campaign. It was the most successful Indiegogo crowdfunding campaign of its time, quickly surpassing its goal and showcasing the power of collective online donations.

While SaaS and crowdfunding have clearly made their mark on the nonprofit sector, the next technology that will be adopted in the nonprofit sector is peer-to-peer sharing. First emerging in the late 2000s and becoming mainstream in the last three years, the for-profit sector has already seen runaway hits in the peer-to-peer economy with startups like Airbnb, Uber and Zaarly. So what if this model was applied towards social good?

Elevating the sharing economy to the giving economy, nonprofits can tap this concept to allow donors to connect directly to those in need. Users are already familiar with peer-to-peer giving technology and it is easy to use and implement at a broad scale. Also, it is appealing to a millennial’s mindset who wants to help or receive help at the touch of a button.

Additionally, this model takes crowdfunding one step further by creating a meaningful one-to-one connection. Instead of being one of many, a donor can foster a direct relationship with someone in need and feel more satisfying for the donor. Donors who give in this way often receive immediate and direct feedback from someone they have helped, bringing a rush of emotions knowing they have impacted someone’s life. This is what turns random acts of kindness into a normal habit.

Out of all the nonprofit sectors, social services can benefit the most from peer-to-peer giving since it fosters a more dignified way for people to seek help. Because peer-to-peer giving is non-conditional and not predicated on paperwork, rules about sobriety, lifestyle, or impersonal prioritizations by well-meaning social agencies, those who need help can simply receive it from another community member. For instance, if a homeless person requesting a tent has to wait six months for social services paperwork to go through, it can mean they have to sleep outdoors, in the rain, in fear for personal safety, for another half a year. Peer-to-peer giving can drastically shorten the time to receive something critically needed for survival from months to days or even just hours.

The tech world isn’t just in a Silicon Valley bubble anymore. Technology has helped nearly every industry around the globe develop new product or services. With an ever-expanding influence, we have the opportunity to capitalize now on these innovations and benefit the greater good. Next time you spend 10 seconds requesting an Uber, imagine spending the same amount of time to help someone in need. Donating money, supplies or services to anyone, anywhere, with a single click.

How Will the New Guidance for Financial Statements Impact Nonprofits?

Nonprofit Financial Statements After almost four years of research, analysis, and debate, the Financial Accounting Standards Board (FASB) released its highly anticipated update on financial reporting for nonprofits. The update, which was officially released on August 18, 2016, has been designed to “help not-for-profits tell their story through their financial statements.”

The existing guidance has been in effect since 1993, and while it has held up well over that time, “stakeholders expressed concerns about the complexity, insufficient transparency, and limited usefulness of certain aspects of the model,” said FASB Chairman Russell Golden. “The new guidance simplifies and improves the face of the financial statements and enhances the disclosures in the notes,” he added.

Basically, the Accounting Standards Update, designated ASU No. 2016-14, decreases the number of net asset classes from three to two. The new classes will be:

  • Net assets with donor restrictions
  • Net assets without donor restrictions

The update will change the way all not-for-profits (NFPs) classify net assets and prepare their financial statements.

Different Classifications of NFPs

All nonprofits, from the local soup kitchen, to major colleges and universities, have been using the same financial statements for the last 20 years. While good, at the behest of stakeholders, the FASB saw the need to make improvements to the existing model.

The new guidance applies to all NFPs, including: 501c3, 501c4 and 501c6 entities.

  • 501c3 – This is the most common classification of nonprofits. To qualify as a 501c3, an organization must fit into an “exempt” purpose as defined by the IRS. These include charitable, religious, educational, scientific, literary, testing for public safety, fostering national or international amateur sports competitions and preventing cruelty to children or animals.
  • 501c4 – There are only two types of organizations that will qualify as a 501c4 organization: social welfare organizations and local associations of employees. Social welfare organizations can include homeowner associations and volunteer fire companies if they fit the exemptions.
  • 501c6 – The 501c6 designation is for qualifying business leagues, chambers of commerce, real estate boards, boards of trade and any professional football leagues, that are not organized for a profit.

There are actually 29 different types of NFPs identified by the tax codes, but these are the three most common entities. Regardless of the classification, all nonprofits will be required to follow the new financial statement requirements.

The FASB has produced a video, explaining why the standard needed to receive a makeover.

Details of the New Guidance for Nonprofits’ Financial Statements

The update was designed to help not-for-profits provide more relevant information about their resources, and any changes in those resources to donors, grantors, creditors, and other users, in effect to “better tell their stories.”

The FASB believes that the update, not only simplifies and improves communications with stakeholders, it should also reduce certain costs, related to the complexities in preparing their financial statements.

Specifically the new standard:

  • Will allow “underwater endowments,” those that are now worth less than when they were originally gifted, to be classified in net assets with donor restrictions.
  • Continues to allow preparers to choose between the direct method and indirect method for presenting operating cash flows. However, if the direct method is used, it is no longer mandatory to present the indirect method reconciliation.
  • Requires NFPs to be more transparent regarding providing information on how it manages its liquid resources and liquidity risks. A classified statement of financial position may be an effective way for organizations to comply with many of the new disclosure requirements.
  • Requires reporting of expenses by function and nature, as well as an analysis of expenses by both function and nature.
  • Requires that a net presentation of investment expenses against investment return appear on the face of the statement of activities.

When Do the Changes Take Effect?

The changes will take effect for annual financial statements issued for fiscal years beginning after Dec. 15, 2017, and for interim periods within fiscal years beginning after Dec. 15, 2018.

This is just “Phase 1,” of the FASBs project to revamp financial statements for nonprofits. The organization says there will be a “Phase 2.” Phase 2 is slated to address ways to improve operating measures and provide enhanced alignment between the statement of activities and statement of cash flows. The FASB has not indicated any timeframe for the completion of the second phase.

Certainly, these new regulations will have a significant impact on all nonprofit organizations and those stakeholders who rely on their financial statements. While the changes were designed to simplify financial reporting for NFPs – and in the long run, they will – getting used to the new requirements could still be complex. The earlier you begin working with your tax professional, the easier it will be to implement the necessary changes to ensure your financial statements will be in compliance with the new standards when they take effect.

 

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