The nonprofit sector of our economy, often referred to as the “third sector,” serves a critical role in all our lives whether we are aware of it or not. The third sector most often takes the role of providing services that the private sector has not worked out a profit model for, the government sector rather perform as a pass-through to nonprofit organizations or ignore all together or for which the beneficiaries are considered superfluous to the economic and democratic process but it also includes foundations. Now, admittedly, there are growing exceptions to this characterization, i.e., the arts, chambers of commerce, the environment, civic life and healthcare. However, what is not generally known or accepted is the critical role that this sector plays in employment and contribution to the GDP in addition to improving the lives of countless people--rich and poor.
According to the 2007 update on the nonprofit sector conducted by the Third Sector, a highly respected, Boston-based think tank devoted to research on the nonprofit sector, there are more than 1.4 million such organizations in the U.S. They account for 5.2 percent of the Gross Domestic Product and account for over 8 percent of the salaries and wages paid in the nation. This does not include the more than 350,000 churches that are also nonprofit organizations.
Moreover private sources invested over $250 billion in nonprofits in 2006. Individuals nearly $200 billion and volunteers over 65 billion in services. Why then, do we continue to experience the chronic, epidemic mismanagement of this sector? I have been a nonprofit professional for over 35 years and the sector seems to be learning disabled or somehow impaired as a viable industry inasmuch as the same mistakes and failures happen over and over again.
Why are most nonprofits started? It is because someone or some group of people have passion around an issue, interest or problem and feel compelled to do something about it. Passion drives them to learn about it. Passion drives them to exhort others to join them. Passion drives them to jump through the many legal hoops to become a 501(c)(3) (the IRS designation for tax-exempt organizations). It is no mean feat and that kind of passion can be commendable when directed in the right way. But, dear readers, passion is not enough. There are also crimes of passion. Crimes of passion or the loss thereof that lead to failure, disappointment and, in fact crime. Why does this happen?
Well, generally speaking it comes down to failure in leadership. In the first instance, there is often a passionate, charismatic person who drives the movement to form the organization. They work tirelessly for years to create, guide and manage the organization. However, just as “founders syndrome” affects growing small businesses so it does nonprofits. Simply put, the founder holds on to everything so tight, despite the growth and need for change in the business, its systems, its people or processes that he/she strangles the business to death). That’s a form of passion blindness.
Few people are aware, including boards of directors of nonprofits, that it is the board that legally constitutes the nonprofit--not the executive director, not the founder, not the staff--the board. This brings me to my next observation--nonprofit boards, no matter whether they are good-hearted, well-intentioned neighborhood leaders, CEOs of major corporations or somewhere in-between seem to loose all of their common and business sense when they walk through the doors of a nonprofit to attend a board meeting (if they show up at all). Further, it does not seem to dawn on them that they have legal and fiduciary responsibility for the well being of the organization and it is they who are responsible for ensuring that the organization carries out its mission in an ethical and responsible way.
In my 30-plus years I have seen organizations who are serving critical, valuable functions endure crisis after crisis, operate at the height of inefficiency, be stolen from (by board and staff members), suffer debilitating inertia and flat-out go belly-up. It happens time and time again.
My own personal theory is that this occurs with such regularity because: 1) People do not understand that running a nonprofit is very little different than running a small (or large) business. Just because you are nonprofit does not mean you are not in business. It is a business.
There is a virtual litany of reasons why this occurs:
Boards of directors do not understand their legal and moral responsibilities. They think they are doing “charity” work and somehow that justifies their bringing less than their best game to the table. They would never allow the management and financial behavior that takes place in the nonprofits in which they are responsible for governance to take place in their own places of work or own household for that matter.
Executives do not take responsibility for doing the hard and sometimes unpleasant work of ensuring that their board and its president are up to the challenge. Nor do they set out rational, expectations and do the work to make sure that these expectations are embraced by their board chair and executed. (Yes, I know, it’s easier said than done and you’ve heard this all before but it can be done. If not, leave!) Executives fail to recognize and take responsibility for their own actions and overstay their ability to be effective. Executives view the nonprofit as their own personal domain and ignore the fact that they serve at the pleasure of the board. Egomania lives in nonprofit world, too.
The examples are countless from the scandals that rocked the United Way of America and the American Red Cross to innumerable local organizations; the story is the same. Those responsible for governance and leadership took their eye off the ball and did not take their roles seriously enough to insist on competence, rigor and accountability.
Now, mind you, I am not advocating the wholesale application of business practices or principles to the governance and management of nonprofit organizations. There are many reasons that this approach is untenable. On the other hand, common sense and personal responsibility for what you signed up for cannot be rationalized away just because laxness and poverty mentality have come to characterize these organizations (especially at the local service level) and you’re are not getting paid!
I’ve wanted to get this off my chest for some time now and of course, there is no time like the present (35 years later). I’ve boiled this down to seven things, “Seven Deadly Sins,” if you will. Mind you, these are known in theology as “Cardinal or Capital Sins.” In other words--they are not minor. They are mortal and the commission of them affects the mortality rate of the organizations against which they are committed. I’ve shared these thoughts with scores of nonprofit executives and nearly all agree. They are as follows:
Pride - All of us in the sector understand that many of those who deign to join our board are doing it out of the desire to have their name listed on the letterhead and adding it to their resume to prove how involved in the community they are. They are, in a word, worthless. They have their butt in a seat that could be taken by someone who is willing to offer something of value--talent, time or treasure to the organization. According to theological sources, the opposite of pride is humility. Service to the community--no matter what it is--should evoke a sense of responsibility that is humble. This is particularly so when the people the organization serves are looking to you for help. Don’t they deserve the best help the organization can give them? If they could help themselves, they wouldn’t be looking to you for help. This applies to the lowliest file clerk to the chairman of the board.
Sloth - Laziness is one of my personal pet peeves. There is nothing worse for a nonprofit executive than to have a lazy board, lazy staff or to be lazy themselves. Board members, who don’t want to be on a committee, don’t come to organization events or meetings, and, worse, they don’t understand their obligation to contribute financially or raise money for the organization fall into this category. By definition this is their duty. The corresponding virtue is diligence. Boards must demand diligence from executives and the executives from their boards (I know this, too, is much easier said than done since boards hire and fire the executive.) Another expression of this virtue is zeal or integrity. Staff members cannot be left out either. Some people want to do as little as possible--you know who you are--but claim to be passionate about the cause. Passion is no substitute for integrity and your name on the letterhead and the payroll puts your integrity on the line!
Lust- I know this must sound strange in this context; however, the opposite of lust is purity of soul and motive. If the motive is the mission then this sin can easily be avoided. (Mission is a whole different discussion.) Suffice to say that if everyone is mission-focused and mindful of the business of the organization, lusting after something other than carrying out the mission can be avoided or at least mitigated. People may lust over positions, money or recognition, but good leadership that is pure in its motivation is the antidote.
Gluttony - Over-indulgence in anything usually leads to illness. Taking on more clients than you can handle, accepting donations with strings just to pump up the budget, or seeking recognition at all costs can lead to no good. Gluttony is balanced by temperance or “self-restraint.” Gains born of competition, hubris or avarice almost inevitably lead to failure. Focus on mission is essential along with the honest assessment of organizational capacity. Greed is not good.
Greed - Lusting for being bigger and better than the other guy, i.e., gluttony and lust combine (whew!) is probably one of the worst and most common sins. Nonprofits desperate for operating capital (Let’s talk about that later, too.) Often make “deals with the devil” in order to get a grant or satisfy a donor who wants them to veer away from their core business or mission or take on something totally beyond their actual capacity. Obviously, this sin is closely related to gluttony but its opposing force is different. It is “charity.” Remaining true to the organization’s charitable purpose or mission with steadfast discipline and diligence will often effectively steer an organization away from the path of greed. Giving time, energy, thought, treasure and hard work to the cause is charity of the kind that can trump greed.
Wrath - In my experience, wrath or anger most often occurs when personalities and egos clash in the context of the organization. Whether it is among board members, the board and executive or among the staff, anger destroys. It eats away the energy that should be focused on the work. I’ve heard and personally experienced some of the most vitriolic and vicious battles in the staff and/or board meetings of nonprofit organizations I’ve every witnessed. People seem to forget that there is no ownership here. The point is to carry out the mission. You may disagree but the collective responsibility is to get the job done. It is here where board leadership is most important. The chair of a board of directors has the responsibility to ensure that anger among board members does not escalate to the point of inaction, wrong action and damage to the organization. The executive has the same responsibility at the staff level. The balancing characteristic is composure. It is incumbent upon and the duty of the board and staff leadership to maintain their own and work to ensure the composure of the board and staff so that they may do the work they are charged to do. Composure on the part of leadership is essential.
Envy - Last, but certainly not least is envy or jealously. Now, if you vote for someone to be chair of the board, then you are accepting the role of follower. I have often seen and heard board members who, having been given the opportunity to serve, decline in favor of another then turn right around and talk about how much better a job they could have done. Huh? The same is true among staff members. They don’t work hard but get jealous when someone who does is rewarded. Jealously in any context is destructive. Its opposing force is kindness and/or admiration. People who take on the challenging work, who do the hard part with integrity, commitment and results deserve both.
What do you think? I’d love to hear from you.
Peace,
Yvonne
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