Wednesday, June 29, 2016

Inquiring nonprofit boards: Addressing organizational financial vulnerabilities

"What are our major financial vulnerabilities?"
"What are we doing as an organization and as a board to address them?"

We all have financial vulnerabilities. What are yours? How persistent are they? What can you do to reduce their potential impact?

Your answers to those questions will differ from the next reader's - or mine. On the income side, we might find some common themes, such as:

  • Lack of funding diversity
  • Inadequate donor base
  • Lack of major donor prospecting/planning
  • Volatility of governmental sources
  • Changing/shrinking client base
  • Inadequate reserves

Vulnerabilities may be on the expense or systems sides as well, for example:

  • Billing system challenges
  • Aging buildings and equipment
  • Inability to maintain staffing needs
  • Inadequate reporting/monitoring mechanisms
  • Missing or inadequate donor stewardship program

Some of those examples may ring familiar, or your organization may have a completely different set of challenges. The point is that tending to the larger view is part of the board's fiduciary function. It's important that members resist wading too deeply into the here-and-now weeds (a challenge, I know). When they do, they risk missing the bigger picture issues - for example, obsessing so much over cutting expenses to match shrinking income that they miss the fact that their billing system is broken and leading to that income decline.

For some boards, this requires a fairly major shift in focus and thinking. By necessity or habit, they are used to - and perhaps more comfortable with - tending to the broken hard drive on the CEO's computer when the entire agency's system is being held together with tape and glue. Or they fret over shrinking donations or lower participation in this year's fundraising event when they should be exploring ways to expand stewardship to those who have been contributing over time and may be inspired to increase their annual gift.

What are your financial vulnerabilities? How do they challenge your ability to move toward fulfilling  your mission? What are real vulnerabilities vs. potential problems? What additional information and support do you require to change your situation?

What can your board do, today, to begin leading you toward a less-vulnerable and more sustainable future? How will members maintain the broader, systemic view required of a governing body?

NOTE: This post is part of a series highlighting questions designed to promote inquiry in the boardroom. For others in the series, and a more general pool of resources on the topic visit my "Inquiring Nonprofit Boards" collection on Pinterest.

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