Director tripled the program funding over four years. However, he had paid little attention to managing the "business"
functions and felt that he "couldn't afford" to increase the capacity of his financial management function. He simply put
pressure on his bookkeeper about the reporting problems, to no effect.
The consultant found the accounting function woefully understaffed. A major reason was the small allowance the funder
allowed for non-program ("indirect") expenses. Upon the consultant's recommendation, the funder agreed to raise the
indirect cost rate and the organization was able to hire an additional staff member to manage the finances of the
organization.
5. Program outcomes are difficult to assess
Most nonprofit organizations have limited program evaluation capacity. This is partially caused by the absence of
standardized program outcomes in most fields. In child care for example, standards for adult-child ratios exist, but little is
standardized in terms of the quality of care delivered. Similarly, arts groups, advocacy organization, mental health
agencies and community development corporations face substantial challenges in measuring their effectiveness.
Furthermore, most nonprofit organizations do not have the benefit of unambiguous market feedback to let them know how
well they are serving their clients. (Nonprofit organizations exist because neither the market nor government is providing
the service; most are funded in part of completely by sources other than the direct beneficiaries of their work.) Thus,
assessing cost-effectiveness and comparing alternative actions is difficult. Different individuals also may make different
assumptions about the relationship between cost and effectiveness. Some groups essentially ignore the issue assuming
their efforts are as effective as they can be.
Example:
A county-wide agency that provided substance abuse counseling and crisis support to youth had divided its programs into
several smaller units. When faced with a drop in unrestricted funding, the group had to decide how best to cut back its
services. Because the group had little objective data on the outcomes of the carious program initiatives, and because
much of their funding was raised through private contributions, the organization could not decide how to manage the
reduction in funds.
Absent and meaningful outcome-oriented data with which to make these decisions, a consultant worked with the
management team on a short-term plan for across-the-board cuts and a longer term plan to collect outcome data for
strategically selecting programs it would keep.
6. Governing board has both oversight and supporting roles
The governing board of a nonprofit has dual roles: it is responsible for ensuring that the public interest is served by the
organization, and--unlike private sector boards of directors or government boards and commissions--is expected to help
the organization be successful. The first role is analogous to protecting the interest of stockholders or voters. The second
role complicates the distinction between governance and management because, in this role, board members do staff-like
work. As helpers, board members may raise funds, send mailings, paint buildings, or do the bookkeeping. This can lead to
confusion about when, and how, it is appropriate for board members to be involved in initiatives. Furthermore, board
members often are not expert in either nonprofit management or in the organization's field of service. They may either be
unprepared to make decisions, or may give up their authority inappropriately to staff.
Example:
The president of an eighteen-member board of an animal shelter called a consultant to facilitate a planning retreat. The
consultant discovered that a high level of conflict existed between the staff and the board over what the staff considered
"micro-management." The board had fourteen standing committees. Some, like the one for facilities, had been formed
when the organization was quite small. A few old-time board members, literally, still wanted to decide the color of paint for
the walls in the office.
