Calculating overhead rates and managing overhead expense are important staff roles. Board members are not required to know how do staff accounting work, but we do need to bring an informed perspective to our oversight:
Harvard's indirect cost rate is 68% while Iowa State's is 48%. Should the board members of either institution be concerned? As a alumnus of one or the other, should these numbers affect our donations? As a parent of a high school senior, do these numbers influence where we want our child to go? Should they?
Amid the crosstalk about nonprofit overhead, board members and staff do need to understand what the conversation is really about, and how to interpret "what is overhead" for your own organization. Here are eight key things to know about overhead:
1. Apples, oranges, and alligators: One of the more surprising facts about overhead is that while it seems that everyone is talking about it, everyone is actually talking about the different things. The word "overhead" isn't an accounting term, so different people define it differently.
Some accounting terms which are similar to “overhead” and often confused with it are:
In one study, respondents were asked which of the above was the closest synonym . . .
There is an abundance of advice for nonprofit boards and EDs that speaks to the advantages of "partnership" and "open communications." But sometimes that advice just doesn't feel like enough.
Who's the boss? The board or the executive director/CEO?
The answer: it depends on whether the board is acting as a body, or whether board members are acting as individuals. The key is remembering that the board is different from board members.
It's not the board president who hires the executive director; only the board as a whole can do that. The treasurer doesn't approve the budget; the board as a whole does that. In other words, when the board is acting as a body, it is the boss. The executive is answerable to that body.
On the other hand, when board member act as individuals, they . . .
When Blue Avocado asked for potential interviewees who had followed a founder or a long-time executive, we didn't expect 58 people to respond. We interviewed 18 executive directors who followed founders, and another 10 who followed long-time execs. Last issue's First Person Nonprofit and this article are also ramp-ups to the national survey of nonprofit leaders in similar positions. CompassPoint Nonprofit Services has conducted a study of such executives among grantees of the Packard Foundation, with the data so interesting that we are pleased to partner with them on the expansion of the study to a national audience. Nonprofit executives: please! Click here to take the survey!
If founding a nonprofit takes strong self-confidence and a soaring vision, following such a leader takes hard-headed management skills and just plain hard work, according to 28 "followers" -- let's call them "successors" because they succeeded long-timers. They work at organizations that range from 2 to 300 staff.
Here's a story that combines several themes: "I replaced the founder of 35 years. Plus, she was my mother! I'll have been in this job for 10 years come July, and nine of them have been a financial struggle. I'd be putting on this warrior clothing to go out and battle and find money and keep this vision solid. And then my mother would come in and say . . .
No matter what goes wrong in a nonprofit, somehow the board gets blamed. If the executive director embezzled money, people say, "Where was the board?" Why don't they say: "Executives are always at the root of the problem. Why don't we just stop having them?" In fact, boards and board members don't get credit for some important work they do without even realizing they are doing it. Think about it:
1. Safety net: The confident trapeze artist doesn't really see the point of the expensive safety net. Few people appreciate safety nets -- or boards -- when things are going fine. But when a nonprofit's staff leadership falls off the tightrope, nonprofit boards step up, govern, fix things, and hire a new, better executive.
Think of a nonprofit scandal such as the executive of a halfway house molesting residents, or the executive of a disaster relief nonprofit embezzling money. In virtually all of these cases, the board -- whether previously asleep or lied to -- stepped in and saved things.
In a for-profit small business, such a problem would simply bring the company down. But nonprofit boards know that communities and people are hurt when nonprofits fail. Those silent, unappreciated safety nets do their jobs when called upon.
"I know I got one when I started on the board but . . . "
Here's a new idea: a Bylaws Cheat Sheet. Even if there is a copy of the bylaws handy, it's tedious to have to look over all the legalese when you want an answer to a simple question. So a nice 30 minute Do It Yourself (DIY) project is to create one:
Legal Name of Nonprofit Corporation:
Tax Exempt Determination year:
Maximum and Minimum # of Board Members:
How many years in a term?
Are there term limits? If so, how many terms?
What are the officer positions?
What is the percentage or number for a quorum?
How can the bylaws be changed?
And a Yes/No checklist:
Are board members indemnified?
Is there a procedure for removal of a board member?
Is staffing a committee more like herding cats or like herding turtles? Actually it's more like Dancing with the Stars. An important skill for nonprofit managers is knowing how to support a committee of volunteers, such as an Advisory Committee, a Board Finance Committee, or a coalition:
Staff at many levels support your organization’s volunteer committees. For instance, an administrative assistant may support a committee that is planning the spring fundraiser. Or the CFO may support the board Finance Committee. And, of course, the executive director supports the board.
When supporting a committee, the most seductive trap for a staffperson is . . .
Despite the complaints of executive directors that their boards "need training," often the most effective way to change a board is to change the people who are on it. And sometimes, a board itself realizes it needs to change faster and more dramatically than it can by adding a couple of new folks a year.
"I shouldn't be on this board anymore," commented the board member of a large national organization. "My boss' boss should be on this board."
Your board meeting is Thursday evening. On Wednesday you start getting the calls. One board member is home recuperating from surgery. Another is traveling. Yet another can’t spare the time to drive in for the meeting. Can they call in via conference call? Most everyone who works with a board or serves on a board has pondered this question. In this article, we give you some tips on how to make conference call board meetings as effective as they can be.
First, is it legal to hold board meetings by conference call?
Having 100% of board members make personal donations is a cliché we don't like. It's not a meaningful measure of board member commitment, and typically creates a situation where even the best board members have to be nagged. BUT, if you do have this requirement, here's how to make it as easy as possible.
1. The Annual Basket Pass - At the same board meeting each year (Thanksgiving is easy to remember), pass around a basket or box. The board chair (or fundraising chair) announces: "As this basket goes around, everybody has to put something in it. You can put in a check. You can put in a piece of paper with a pledge amount that you will give by December 15 of this year. Or you can put in a piece of paper that says . . .
When nonprofit executive directors say they want their boards to be more "engaged," they often really mean they want the board to have a lively discussion followed by a vote to agree with the executive director. If you're a CEO and want a weak, compliant board, try these tips:
1. Give board members too much information. One board member we know just received a board packet 1,400 pages long: almost three reams of paper! Bonus: you can complain that they never read the packet and if at any time someone claims they weren't informed of something, you can say in a very tired voice, "It was in the board materials last year."
2. Give board members very nice presents and perks. One new CEO was annoyed by the board's rambunctiousness . . .