Nonprofit board members are often puzzled when it comes to setting the salary of the executive director. On one hand, we want to keep our talented staff; on the other hand, we know the budget is tight. Some legal and practical guidelines:
It's maddening and ironic that the press focuses on the extremely rare cases of high salaries for nonprofit executives, when salaries in nonprofits are typically 20% - 40% less than their counterparts in foundations, local government, and the business sector. Mistaken public perception that nonprofit salaries are high has even led to New Jersey now limiting the amount of state funds that can be spent on nonprofit executive salaries.
But despite the press, community nonprofit boards are more frequently worried that they are paying their executives too little, a feeling shared by many executive directors themselves.
Unfortunately, survey data is often of little use, because of small sample sizes, samples weighted towards universities, and the reality that all surveys show enormous variation in salaries for nonprofits of the same fields and sizes. An example of the inconsistency of data: one recent national survey showed average executive director salary to be $60,000 while another reported $158,000.
"Under $50,000, people aren't going to move," says...
Proof of life: In a few months, this term could have important implications for small organizations (less than $25,000 in expenses) and their nonprofit status; so read on and prepare. It used to be that a nonprofit could lie dormant (or forget to file its 990) for years -- decades even -- without being de-registered by the IRS. But now small groups must file their Form 990N before October 15, 2010 in order to show they are still alive; otherwise they will automatically lose their tax exempt status.
Click here for the IRS web page where you can get the information and complete the form. Note that the October 15 deadline is an extension from the date stated on the site.
The good news about this new regulation requiring nonprofits to file once a year is that it will help correct the falsely inflated number of nonprofits on the books. The bad news is that some great organizations with less than $25,000 in expenses likely won't realize they need to file. If you're on the board of a small nonprofit: make sure you check this out. Better to complete the eight questions now (even if you aren't completely sure of the answers) than to have to re-apply for nonprofit status.
Sometimes you need to raise funds in a hurry. It's easy to think, "We should have established a fundraising plan earlier!" That may be true, but it doesn't help now. Here are some ways to raise modest funds in a pinch. Because institutions like foundations, government, and service clubs typically take more than a month to make funding decisions, your best bet to raise money in 30 days usually involves asking individuals for donations.
Each of these techniques can raise a lot or a little depending on who is doing the organizing. For example, a house party in one organization can raise $500 in one evening, while in another it can raise $100,000. In either case, the amount raised is . . .
Most nonprofit discussions about conflicts of interest are similar to those in the for-profit sector: they focus on financial benefit to board members or staff to the detriment of the nonprofit organization. The classic examples: the nonprofit buys something unnecessary or overpriced from a board member's business, or the nonprofit hires an unqualified, overpaid family member of the executive director.
But nonprofit conflicts of interest are often more subtle, more multi-dimensional, and more unexpected than these classic examples. For instance, what about the board member who also sits on the board of a competitor? Is this a good idea that facilitates collaboration or does it pull that person in two different directions? What about relatives of the executive director who hold important staff positions . . . but as volunteers? And perhaps least talked about: what about the potential benefit/conflict for a board member who is also a parent/client/beneficiary?
At some point you may resign from a nonprofit board before your term is up. You might be angry, disappointed, or just too busy. Don't botch your resignation: do it right.
Most often as a board member we stick out our term limits and leave the board feeling good about what we've've contributed. But there are also times when you resign before your term is up. Maybe you've missed a lot of meetings or maybe you're moving to another city. Maybe you're uneasy with the direction the organization is taking, or maybe you feel that as a board member you are treated like a "mushroom": kept in the dark and fed manure (!).
Regardless of your reason, you can just walk away quietly, or make a weak excuse, or you can use the moment to give meaning to your resignation, both to you and to the board.
Following are some ways to make significance out of your resignation:
• If you have concerns about the organization or the executive director but haven't voiced them, consider . . .
The very mention of bylaws at a board meeting is usually met with dread. It typically means either that a conflict has risen to the point where the bylaws must be consulted, or it means that someone is pointing out an area of noncompliance that has gone unnoticed for years. This Checklist points out the necessary elements in bylaws.
Because regulations about nonprofit bylaws are done individually by state (rather than the federal government) there is quite a bit of variation. For example, in Ohio and New York, nonprofit boards must have a minimum of three members, but in California the minimum is one. It's important to obtain the applicable state laws and make sure that the bylaws are in compliance. In addition, some cities have further regulations for nonprofits. Ask your city attorney's office for guidance. For example, some states and cities have different rules for nonprofit organizations for which the board automatically includes an elected official or government employee as a result of that individual's election or employment.
Three overall guiding principles for nonprofit bylaws:
A. Don't put too much in the bylaws. If you specify the . .
Several Blue Avocado readers responded to our query about unusual board terms, and we were intrigued by comments from Jeanetta Issa, CEO of Child Abuse Prevention in Kansas City; we talk with her here:
Q: What are the board terms in your organization?
Jeanetta Issa: The initial term of office is for one year. Then based on the activity level and commitment to the organization, they can be asked for a second term of three years. After that they can be asked for a third term, for a total of six years of service. So it's 1 - 3 - 2.
Originally, in a past organization, the board wanted to make it easier to turn over non-productive or even destructive board members. One time we had such a destructive board member, totally attempting to draw our organization into her own agenda, that . . .
Although every nonprofit has a mission statement that defines the organization's core purpose and work, many are unaware of its useful companion, the business model statement: a brief summary that spells out the organization's economic drivers. Like a mission statement, a business model statement acts as a touchstone: a reminder and a guide for the organization's focus and strategies.
Nonprofit executives and board members usually have a good sense of the various types of funding that support the organization, but they may have a harder time explaining the organization's business model. Let's imagine a childcare center with the following mission statement: "We provide high quality child care in a cross-cultural setting." A first draft of their business model statement . . .
Despite the importance of the nonprofit board, there's strikingly little clarity about who is responsible for its performance. The answer in this Board Cafe article might surprise you:
Who is responsible for the board's doing its job? And a related question: who's responsible for improving a board that's asleep, weak, or gone amok? One answer might be: the board is responsible for the board! Or possibly, it's the board chair who is responsible for the board. Or sometimes: it's both.
We agree with Peter Drucker: The responsibility for the board's effective work -- both governance and support -- is ultimately the responsibility of the executive director.
This can sound paradoxical (or even depressing) at first, but veteran successful executives know the truth of this statement. Executives take on their shoulders the responsibility for the success or failure of the organization -- every part of it. If there were any other part of the organization that was under-performing, no executive would shrug, do nothing, and . . .
Most of the time, nonprofit boards work through consensus. But what if you think a serious mistake is being made? Sometimes knowing what to do in advance if such a situation arises can help you understand the situation more clearly as it unfolds:
Have you ever been in a situation where the board has made a decision that you think is very wrong and will have severe negative consequences for the organization? Or where you think an important decision has been railroaded through?
As a board member myself and something of a contrarian, I've found myself in these circumstances from time to time over the years. For example, on the board of an organization with a sizable financial deficit, I found myself and one other board member losing a seventeen-to-two vote to take funds from the organization's endowment for current operating expenses. As a member of CompassPoint's consulting group for many years, I saw more serious cases, too, such as ones where board members suspected illegal activity or a takeover of the organization by a few aggressive (and often new) board members.
It's important to remember that reasonable people can disagree in good faith on important issues. The following situations may give you some food for thought if a case that goes beyond reasonable disagreement were to arise for you.
Question: The board I'm on is about to make a bad decision. Although . . .