Nonprofit Accountability: Taking the Responsibility to Deliver the Goods
In the for-profit world, the principle of accountability is fundamental and widespread. The business mantra is to grow sales, trim expenses, and improve efficiencies, all to increase earnings and profitability. Employees and board members understand if they don’t do an effective job running their businesses and managing the bottom line, competitors are standing close by happily willing to take their market share.
In contrast, accountability is largely a murky word in the nonprofit world. The term conjures up images of stoic corporate cultures where employees punch clocks, work for autocratic bosses, and step on each other to meet quotas and climb corporate ladders.
Nonprofit cultures may be grounded in selfless service and compassionate management, but they are corporations and function like their for-profit equivalents in more ways than you might imagine. Nonprofits have boards and staff, own assets, raise money, and offer programs, products, and services. They pay taxes, report to the IRS, and follow local, state, and government regulations.
Of course, there are differences. The biggest is how a nonprofit uses its assets, including the money it raises. Government regulations state a nonprofit must use its assets to advance the cause or provide the service (the mission) for which the nonprofit business was created as determined by its board of directors. In a for-profit business, money raised, revenue generated, or profits earned go to the owners of the corporation.
The public “invests” money in nonprofits expecting “social returns” on their investments, so why shouldn’t nonprofits be held accountable to deliver on their promises like for-profit corporations?
Why shouldn’t the public expect nonprofits to have measurements of success to track outcomes and measure effectiveness? Why shouldn’t staff and board members of nonprofits have performance objectives? Why shouldn’t donors receive statements showing the types of returns they’re getting on their social investments?
I’ve read a lot of nonprofit literature over the years and I’ve never read anything suggesting leaders of nonprofits have the right to run their organizations without structure, accountability, or responsibility because they are doing noble work. I’ve also never read anything stating that board members and staff should receive passes for work performance and accountability as long as they’re passionate about changing the world.
Yet, many nonprofits are afraid to adopt policies and structures to hold their board, staff, and organization accountable for goals, objectives, and missions they set out to achieve, and work they promise to deliver.
The truth is many nonprofits live in a world of double standards. They want their flextime, eco-friendly offices, and casual dress policies. They also want equal opportunity and equal access as their for-profit equivalents when it comes to funding, political clout, wages, benefits, perks, and publicity.
These nonprofits cry for equality, but they are often unwilling to be held accountable to show they deserve equality. It’s as if they feel entitled to equality simply because they are selfless “charities” doing good work to save the world. Meaning, since they believe they have the hearts and passion of a Mother Theresa, why would anyone question their integrity or intentions?
Nonprofits with this mindset are in for a big surprise. Donors and foundations are more sophisticated than ever. Compassion and mission are still central to their motivation for giving, but donors are less and less willing to write checks simply for “good intentions.” More and more, donors and foundations view their gifts as social investments and the nonprofits that provide the greatest returns will win the lion’s share of their generosity.
Why is accountability important?
Accountability is a First Things First principle because every nonprofit, by law and moral obligation, is accountable to the public to deliver the social benefits and obligations they’ve promised to deliver.
When accountability becomes a cultural norm, a nonprofit begins to think in terms of quality, performance, outcomes, and impact. Concepts such as job performance, financial sustainability, ethical standards, operational efficiency, and program effectiveness are no longer ethereal goals. They become primary objectives and directives of a nonprofit and people’s feet are put to the fire to ensure they get accomplished.
To be a gold standard nonprofit, make the principle of accountability a core value and cultural priority as early in your lifecycle as possible. First things first! If you do, you will spring past your competition to win the hearts, minds, and pocketbooks of supporters. Most importantly, you will build a community of trust and credibility, and feel confident you are fulfilling your mission with integrity in the most efficient and effective manner possible.
Case Study: Entitlement leads to complacency
When I left Sun Valley Adaptive Sports in the fall of 2010, we had 20 smart and passionate staff working to fulfill our mission. Everyone knew what to do, how to do it, and what was expected. Managers empowered their teams to do their jobs and manage themselves with little oversight. Our business rhythm was smooth, our programs were effective, and staff was happy.
Five years earlier, our business rhythm resembled a gyrating spool of constant change and chaos. We had three staff doing the work of six. Everyone wore multiple hats and worked around the clock to rebuild programs, raise money, acquire volunteers, and develop partnerships. The work was motivating and inspiring, but it was also exhausting and stressful.
Much of our effort at that time went to cleaning up the mess the former administration and board left behind. To get us back on track quickly, I set high expectations for our young staff and myself. As we started passing major milestones, I wanted to acknowledge and reward staff for their hard work and dedication, so I granted juicy perks and benefits.
I started by establishing a flextime policy so staff could set their own work schedules as long as they worked 40 hours a week. Next, I extended the number of paid holidays off from 8 to 14 and granted a paid day off for anyone who worked more than 50 hours a week. I also modified our maternity policy so staff with newborns could work from home.
By 2007, we had a staff of 10 doing the work of 15. Everyone was having fun, but working as hard as ever. The hard work paid off. Our wounded veteran program, Higher Ground, had become a national brand, capturing the attention of Pentagon officials, industry leaders, legislators, and national media.
To reward this incredible progress and success, I granted every staff an additional week of paid vacation and gave everyone a bonus equal to 10 percent of their salary. Also, any staff that was willing to work weekends to help run our wounded veteran therapeutic camps earned three days of paid time off per camp.
By the start of 2010, SVAS had a staff of 20. We worked hard and fell into a business rhythm that kept everyone busy, but not overworked. Staff was happy and job satisfaction was at an all-time high.
Then an unexpected opportunity changed everything. I was out to dinner one evening when a local real estate agent told me a small luxury hotel had just been listed for sale in Sun Valley. This was very exciting news because SVAS had been mulling over the idea of building a hotel-like retreat center to rehabilitate wounded veterans with traumatic brain injuries and post-traumatic stress.
The hotel was perfect. It was centrally located and had the tranquil and homey ambience of a classic Austrian chalet. It wasn’t too big or too small. It had 29 rooms, three dining areas, a pool, Jacuzzi, sauna, weight room, conference center, and large, wheelchair accessible bedrooms.
The price was right, too. The owners were asking $7.2 million, almost half the price it was worth before the economy tanked. We figured the land alone was worth $7.2 million, but now we’d be getting the land, plus a beautiful, 30,000-square-foot boutique hotel with breathtaking mountain views.
The catch? The owners established a financing contingency requiring us to raise the funds in 90 days. The second catch? We needed to raise an additional $2.8 million for improvements and operating costs. The third catch? The board elected to absolve itself of any fundraising responsibilities related to the hotel and appointed me to raise all the funds and conduct a feasibility study. Lucky me!
It was a Titanic goal. The economy was in the throes of the worst recession since the 1930s and donors were closing their checkbooks as tight as clams in ice water. Actually, there was some good in all this. I had almost six months, not three, to raise the money because it took an additional 90 days to negotiate the purchase agreement that included price, building contingencies, and terms of acquisition.
To raise $10 million in such extraordinary circumstances required me to commit all my time and energy to raising money. This meant I had to disconnect myself from many other responsibilities, including oversight of staff and operations; not that I felt staff needed much oversight. I was running a culture steeped in entrepreneurialism and felt confident that the staff understood their responsibilities and was empowered with the tools and opportunities they needed to accomplish the work at hand.
About five months into the six-month fundraising window, a series of strange and startling events came to my attention. A parent called with a complaint about a volunteer neglecting her child at our kids’ camp. A camp counselor called to express her concern about the lack of oversight and management at one of our adult programs, and one of our wounded veteran participants called and said he missed his flight because one of our staff forgot to take him to the airport.
These events were alarming enough, but other uncharacteristic events came to my attention. A foundation called to say one of the staff had missed a grant submission deadline. A major donor asked to volunteer, but no one returned his call. An intern came into my office to express her discontent with her internship experience. The bank called to say one of the staff, who was not supposed to be making bank deposits, was making deposits, and some of the staff had been taking unlogged time off.
All nonprofits make their share of mistakes, but when I noticed a spike in the number and severity of problems and complaints, I immediately took a couple of days off from my fundraising efforts to conduct an investigation.
Much to my chagrin, I discovered the staff I’d put in charge had simply checked out. For nearly two months, there had been little oversight of staff, programming, and operations. Accountability had morphed into irresponsibility and the old adage rang louder than ever, “When the cat’s away, the mice will play.”
The whole ordeal was embarrassing to say the least. I prided myself on hiring and training skilled and trustworthy staff, and the thought of something like this happening never entered my mind. But it did happen and I learned even the best staff can drift toward a culture of complacency when strong leadership and a culture of accountability are absent.
Fortunately, we ceased fundraising efforts for the hotel 20 days before the fundraising contingency deadline. Although I had pledges for nearly half the funds, the results of the feasibility study clearly showed the hotel was a bad investment, so we voted to terminate our efforts to buy the hotel.
It was a sad moment, but we put the hotel behind us and the staff and board turned its attention back to programming and operations, keeping the hope alive that one day we might be able to open a rehabilitation center for wounded veterans.
I quickly dialed back into my role as chief executive. My first order of business was discovering why things had gone awry during my time away and why some of the staff strayed so far from the standards of excellence they once esteemed.
I held one-on-one meetings with managers and three all-staff meetings. After a lot of candid discussion and some emotional moments, staff said it was their freedom that sent them wayward.
Without strong management to hold them accountable, it appeared some of the staff felt a sense of entitlement. As a result, they elected to swim in their perks and benefits while leaving their work, responsibilities, and commitment to the mission on the beach.
After everyone shared their feelings, thoughts, and apologies, I asked staff what they thought should be done to get us back on the gold standard track we had been following. They unanimously agreed on two things: managers should be held accountable to hold staff accountable for their work, and staff must achieve specific goals and objectives to earn luxury perks such as flextime and bonus days off.
Needless to say, our great team sprang into action. Everyone, including me, focused on the work at hand and the strategic objectives we set out to achieve. After a few months, we glided back into a smooth rhythm doing innovative programming that was capturing the attention of the nation. Once again, I was proud and happy, and the staff quickly earned back the perks they enjoyed so much.
The lesson of this experience is clear: if people are not held to standards of accountability, they may slip into a mode of entitlement and complacency and the quality of their work and the level of their commitment may diminish. It’s an unfortunate truth, but people, by nature, tend to do what’s convenient and feels good, not what’s right and takes effort.
If you want to be a high-performance nonprofit, it’s important to realize and establish structures of accountability in all areas of your business. This will keep you on track and true to your mission, and prevent complacency from taking a foothold.
Tactics and Tips
Create a culture of accountability
If you’re in the startup phase, one of the first things you’ll want to do is establish a culture of accountability. The best way to do this is for your founding board members to commit to the principle of accountability and make it a core value and a central governing component to all that is said and done to fulfill your mission. They should add the principle as a facet of your overall culture and then create policies and operational structures to manage and enforce accountability.
The earlier in your lifecycle your board can initiate this process the better. It can start by stating your organization’s commitment to accountability and mindfulness in your bylaws and other governing policies. The board will also want to make sure it hires a chief executive and elects board members who believe in the principle of accountability, have track records exemplifying it, and are willing to enforce it.
Once adopted, the chief executive and managers will want to hire people with track records of accountability. They will also want to regularly remind staff and volunteers that your nonprofit believes in the principle of accountability and takes seriously the responsibilities it has to donors, beneficiaries, and constituents to deliver on the promises it makes.
If your nonprofit is two, three or 10 years old and the principle of accountability is not central to your culture, prepare for an uphill battle. Personal dynamics, organizational structures, and general resistance to change can cripple the process of adopting the principle of accountability, even if people believe the principle would improve effectiveness, funding, and image.
If you find yourself in this position, there is hope. Ask one or two influential and well-liked board members and the chief executive to help champion an accountability initiative. If they embrace the initiative, you’ll be in good shape.
If they oppose it, start looking for a mediator with good rates, because you’ll need one to manage the dogfight that will ensue as the demands for accountability by funders, board members, and quality staff mount.
Define the structure of accountability
Once you integrate accountability into your culture, you need to define how accountability will manifest itself in day-to-day operations. Start by sectioning major areas of accountability: board, staff, volunteers, programming, operations, and fundraising. Determine what responsibilities, tasks, and outcomes are important. Decide who (or what team or committee) should be held responsible for what.
You’ll also want to define performance measures or measurements of success for each area of accountability you decide to track. Finally, you’ll need to determine what consequences to enforce when people neglect their work, ignore their responsibilities, or fail to live up to an established set of behaviors or ethics.
Everything is fair game. For example, when addressing legal accountability, you’ll want to consider a conflict of interest policy. When addressing bookkeeping accountability, you’ll want to consider a check handling policy. When addressing fundraising accountability, you’ll want to consider how much money board members will be responsible for raising.
Other areas of accountability include risk management, board member involvement, insurance protection, operational effectiveness, program growth, staff performance, and marketing efficiency.
If all this sounds like too many details and too much work, start with more general topics. Ask broad accountability questions such as, “Are we spending money wisely?” “Do we have safe operating procedures?” “Can we substantiate our claims about program effectiveness?”
What’s most important when defining the structure of accountability is getting everyone thinking and acting in a framework of accountability. Once your nonprofit adopts a framework of accountability and applies it to people, procedures, policies, obligations, responsibilities, tasks, and outcomes, there is no limit to the success your nonprofit can achieve because you’ll have a structure and a mindset in place to ensure that people deliver the goods they promised to deliver.
Board members are known for their eagerness to adopt the principle of accountability, but then failing terribly in their efforts to apply and enforce it. For example, most board members acknowledge they have a legal responsibility for the financial sustainability of their nonprofit, but few boards have accountability measures in place to ensure board members raise money, make financial contributions, and support the general fundraising efforts of their nonprofit.
A board may be able to neglect its fundraising responsibilities, but in other areas of business, neglect may result in an incident of “gross negligence” and lead to damaging publicity or a lawsuit. Boards have many serious obligations they are accountable to uphold, and it’s the responsibility of the board to uphold them.
Do you have a conflict of interest policy? Has the board read it? Do they understand it? Do you have Directors and Officers insurance? Does the board understand what it covers and doesn’t cover? Do you require each board member to read your IRS 990 each year? Do you have accounting measures in place to minimize the risk of embezzlement and misuse of funds?
Board accountability starts with the board chair. The board chair needs to actively and publicly fill his roles and responsibilities. He needs to walk the walk and deliver the goods. He should be a role model of accountability and encourage all board members to exemplify a culture of accountability in all the board says and does.
You should apply the same level of scrutiny when nominating board members as you would when electing a board chair or hiring a chief executive. As I said earlier, potential board members may be wealthy, connected, brilliant, and charismatic, but if they are unwilling to be held accountable for the responsibilities they take on, you’re going to wind up with a sunken ship full of rusty treasure.
Be wise. Think of the long-term consequences of electing a set of board members unwilling to adopt a culture of accountability. Do you really want to face a multi-year, uphill battle resulting in personal confrontations, lost productivity, and missed opportunities?
Your board members are called nonprofit “trustees” for a reason; they hold “in trust” the trust of the public—those who support your nonprofit and those your nonprofit serves. Neglecting or dismissing fundamental board responsibilities, like accountability, puts your nonprofit at risk and does a moral disservice to the public.
However, if your board members—all of them—willingly adopt a culture of accountability and mindfulness early on and everyone remains enthusiastic and committed to fulfilling their roles and responsibilities, then you are in store for productivity and opportunity beyond anyone’s expectations.
Board accountability questionnaire
Board members, as chief ambassadors of your nonprofit, should be accountable for fulfilling their responsibilities and knowing what your organization does. If you want to gain some insight into how much your board understands your nonprofit, pass out a short questionnaire like this one at your next board meeting:
1. How many board meetings did we hold last year? How many did you attend?
2. List each of our programs. How many did you observe in person last year?
3. Write a few sentences describing each of our programs and their purpose.
4. What is our mission statement? What is our vision? List as many of our core values as you can.
5. How many people did our programs serve last year?
6. How many volunteers do we have?
7. What is our budget for this year?
8. List our top 10 donors. List our top five business partners.
9. When was the last time you read our bylaws? Our 990?
10. When was the last time you read our conflict of interest policy?
11. How many public speaking engagements did you do last year?
12. Briefly summarize the history of the organization.
13. Briefly make a case for support why someone should donate to us, and why someone should volunteer to help.
14. List three responsibilities each board member must uphold. Did you fulfill these last year?
15. Apart from board meetings, how many hours did you volunteer for the organization last year?
The intention of this exercise is not to embarrass board members, though it will in some cases. It’s designed to help board members realize how little they understand the nonprofit they “care so much about.” Do not ask board members to hand in their answers or share them out loud. Rather, extend some grace and provide each board member with a set of answers.