In the non-profit and arts sector we use the term “capacity-building” a lot but we seldom stop to compare notes about what we mean by the term. To many non-profit staff and volunteers, it is all about the money and certainly more dollars builds our capacity. . . as long as those dollars are not wasted. But there are other considerations in capacity building that can help us do more with what we have and position us to grow.Continue reading
I have been thinking for some time about how we monitor and resolve ethical dilemmas in the non-profit workplace and how we could assure that public money is well-spent.
In the not-for-profit and arts world I believe we set ourselves up to be uniquely vulnerable to the pitfalls of ethical systems based on utilitarianism. This is the ethical system in which the “good of the many” always outweighs the “good of the few”, a system that becomes challenged when the means are not ethical in and of themselves. In not-for-profit workplaces we think about “Ends” all the time. Right on the top of all our literature and websites we spell out the “Mission”. We are focused and passionate about the mission of our organizations, whether it is feeding the hungry, housing the homeless or assuring the survival of a classical orchestra.
Into all this passion and energy for achieving worthy goals comes a number of roadblocks that can make us, as non-profit staff and managers, feel that government funders, sponsors, regulatory bodies, are treating us unfairly, stacking the deck against the success of our organization to achieve our mission. Those challenges include: the preference for funding projects and program costs, over needed support for core operations; shifting priorities and programs from governments and foundation funders; narrow program objectives that don’t match the needs of the communities we serve. And some days we feel like if we hear the word “innovation” one more time, we’ll scream. We twist our programs pretzel shaped to try to qualify for those innovation grants when, really, we think that the way we have always done things is probably pretty soundly based on best practices.
Between the passion to do good and the frustration about roadblocks that seem illogical, unpredictable and insurmountable there sneaks in a philosophy of the “end justifies the means”.
Whether we bend the truth a little bit in our funding application to make our planned activity seem like a better fit, or we move expenses in accounting lines to shift expense from administration to program and marketing, we are embarked on a slippery slope. Tensions mount in organizations when doing whatever it takes to get or keep funding pushes staff members beyond their comfort levels.
These are not victimless crimes. Public dollars, the reputations and health of workers, the continuation of programs and services that the public counts on are jeopardized when organizations foster a culture of unethical expediency. Staff members feel helpless in organizations where they are not just asked but required to do unethical things: back-date mail machines to send in applications after funding deadlines, forge a signature because someone is unavailable, spend all their time working on one project that they are not funded to work on and neglect the work they are funded to do (a common way of shifting funds from one program to the other surreptitiously), directly shift funds from one program to another without the funder’s knowledge, invent statistics, report fundraising costs of a special event fundraiser as a “program” cost, report expenses of one project as the expenses of another, double and triple raise project revenues for one pet project while reporting a reasonable budget in each request, over-spending ridiculously on one area. . . all things that have been sanctioned in organizations I have worked for in the past. Yet there is little over-sight of non-profits and whistle-blowers at the staff level often have their careers ruined while they sometimes see the non-profit manager who forced the questionable or outright disgraceful practices be backed up by non-profit boards and even to be recognized with national awards.
Any solutions have to deal with both the problem and its causes.
Adequate funding of basic operations of non-profits that are operating effectively in the public good will stop the need to fudge program costs to cover operations.
I could say that Boards should stop propping up corrupt leaders but . . . that’s not going to happen. The “friends of X” board is alive and well everywhere. I have come to the conclusion that there needs to be tougher regulatory bodies at the provincial and federal level that will investigate allegations of mismanagement of publicly funded non-profits. Working with very well-managed and ethical non-profits has given me perspective on the insidious harm that unethical non-profits do to workers, funders and programs.
Kaiser says that the quality of art matters, be bold, be brave be revolutionary. Know your Mission and stay on Mission, and spend the money it takes to do it right and market it correctly. You cannot save your way to financial health. He says that the arts are remarkably efficiently run and do not have a spending problem, the arts instead have a revenue problem. Nor can arts organizations win by compromising the art by trying to vie with popular entertainment biz by watering down their season with pop and shlock. Any pickup at the box office will be equalled by loss of donations and funder support.
It makes me tired –as it did Jodi– to hear this touted as new advice. The question in my mind is, “why does arts management common-sense so often fail to be implemented?” And the answer, I believe, is that there is a flaw in a structure which gives governance of our cultural assets to mostly untrained groups of volunteers, with little or no oversight or accountability. I have seen Boards do amazing things from time to time–saving and revitalizing arts organizations. But too often competent arts managers stagger and fail under the weight of dysfunctional boards that– while perhaps composed of well-educated and competent individuals— cannot seem as a group to acquire the knowledge or retain the organizational memory to plan well for their organization’s success, or to carry good plans forward into future years of implementation.
If public funds were invested in building a bridge, and the bridge collapsed, people would ask questions, folks would be held accountable, fault would be found and those at fault would pay real costs. I wonder why we are prepared to invest dollars in arts organizations (and non-profits in general) and yet feel we don’t have the right to hold Boards accountable?
I agree. Arts organizations that depend upon their founding energy and original creative mission as the only continuing energy in their engine will eventually meet the law of entropy and run down, engine sputtering and eventually failing.
What makes for a resilient arts organization that can recover from challenges and find new momentum?
I think of organizations as having some similarities to mechanical engines. They are propelled by the forces of varying numbers of cylinders and work at peak performance when all cylinders are firing with equal force. They can limp along when one weakens, if the opposite/complimentary cylinder is strong. Certain configurations of failures cause the engine to seize up and fail dramatically, while others just cause slow oil leaks that take years to grind the engine to a halt. In no small part I am drawing my analogy from the classic, “Zen and the Art of Motorcycle Maintenance” , a book that talks about how the attention to the small details of systems, ensure that the whole runs trouble-free.
What propels a healthy arts organization?
- Artistic Vision/Leadership–a compelling artistic vision from artist(s) that is at the centre of everything the organization does. The heart of the organization.
- A community that is connected to and responsive to the artistic vision, supporting it as audience, donors and through word of mouth
- A Board of Directors that is engaged through buy-in to the artistic and educational vision of the artistic leadership and provides the direction and resources to realize that vision.
- Management-volunteer or paid that reports to the Board of Directors and carried forward their strategic plan in partnership with artists and community board members
- Staff & volunteers as needed who are selected for the best fit with strategic goals within the living organism of your arts organization.
ARTISTIC LEADERSHIP: It all has to start with the Art.
Artistic Visioning is not something that gets done when the organization has some down time, or as a make-work project funded by OAC’s COMPASS program or Canada Council’s Flying Squad (as is too often the attitude in organizations already in trouble). If there isn’t an Artistic reason for your organization to exist, then quit, get out of the way, give up, fold, you are wasting the audience’s time and scarce resources. There are scores of artists and artists collectives out there filled with creative projects crying out for funding so, “I don’t know, we’ve been presenting concerts for 37 years so we are just trying to keep on doing what we’ve done for those years” just isn’t going to be a compelling battle cry for anyone. If you are parched with thirst for real art, go back to the well, consult with arts visionaries and re-connect with an inspiration to carry you forward again. If your artistic leadership is not inspiring your musicians, your actors, your company, then you have a problem. You are not going to solve that problem by band-aid solutions (programming committees, artistic guidelines, etc.) although those things might help in the short-term. You need to find out what the obstacles (if any) are to the artistic process, help the leader(s) re-charge their batteries, and be prepared to replace the vision or abandon the organization. There is no point to an arts organization without an artistic voice. Does this mean you must be professional? Absolutely not. An arts organization can have at its core a mission to empower and present local amateurs, artistic creation of children and youth.
When do you know when there is a problem in Artistic Leadership?
- Do reasonably informed stakeholders give radically different answers to the question, “What is X arts organization about?
- Do Board members frequently feel that the organization has lost focus, is on the wrong track artistically (because so many discordant visions co-exist)?
- Is programming more often reactive to fundraising, marketing, educational programming rather than being a starting point for those processes.
- Do marketing and fundraising staff often have difficulty in constructing clear, convincing descriptions of artistic programming for brochures and grantwriting
- When Artistic Statements are written for grants & brochures: Do they vary wildly from year to year? Are they so generic that they say nothing about the artistic priorities of the organization?
- Is Artistic vision identified as a problem by major funding bodies?
- Are peer organizations reluctant to collaborate with you because they view your Artistic Leadership as problematic or lacking in vision?
- When you perform formal or informal exit interviews with departing contributing artists/musicians or staff, is lack of artistic vision a recurring theme?
COMMUNITY CONNECTIONS: Art has a purpose and that purpose is how it is transformative in the lives and culture of our practicing artists and the community that the arts organization serves. Finding the balance between artistic vision, serving the community and working transformative magic within the community is the ongoing role of community engagement that the arts organization must undertake as a constant. Communities change constantly and so arts organizations must change also in order to serve new constituency and/or move programs and services to areas craving their programming. A mentor of mine was fond of saying “if people don’t want to come, you can’t stop them”.
Think of two scenarios for a family that has recently arrived in a community. In the first the family gets a brochure for a subscription series to the local orchestra. One child has had an orchestra ensemble visit their school and brought home a study guide. The family saw the orchestra playing in the park during the summer, and mom attended a program at the library on music appreciation led by the orchestra’s artistic director. In the second scenario, the family gets a brochure out of the blue and has never heard of the orchestra. Which brochure will go straight in the re-cycle bin and which one will get a second look?
In two organizations that I worked in during times of economic problems for (respectively) an orchestra and an opera company, their communities were alarmed and outraged at any thought that the organizations would fail. Individuals, corporations, area businesses and civic politicians helped to find ways to restore the organizations to financial health. It is interesting to note that neither communities were terribly wealthy nor noted for culture. But in yet another organization I served in, the organization had decided to pare its programming down to cut all community outreach, made an alienating name change, and disenfranchised community participation … all in the same year. Recovery of community trust was a huge challenge for that organization despite its existence in a privileged community.
ENGAGED BOARD OF DIRECTORS: Without #1 Clear Artistic Vision and #2 Community Engagement, an organization will find it difficult to recruit and motivate a volunteer board.
Boards typically go through a development cycle as organizations grow. Take the example of a community theatre. At first the Board does eve
rything from hanging lights, sewing costumes, selling tickets and holding fundraisers. As staff is hired to take care of production and ticket sales, the Board becomes more engaged in fundraising and community liaison. As the organization is able to afford professional grantwriting and fund-development staff, the Board role will shift to stewardship and making connections to major sponsors and donors for staff to follow-up on.
Board Executive and Nominating Committees have to set clear expectations of Board Members and recruit appropriately. When Board Members expect to be part of a “doer” Board and find that the expectation is mainly fundraising and oversight, they may feel sidelined. When Board Members expect to set policy and direction only and join the Board of a small arts organization, they may be surprised or even offended to be asked to roll up their sleeves and help with the nitty gritty. It is important that Board Members understand that their role is to help fund resources, find resources for the artistic work of the organization and work in ways that support the artistic mission of the organization. I have seen Board Members who behaved as though the arts organization was there to provide opera singers for their private parties, buy services from their clients, and that staff should shelve all artistic production work to assist Board Members with the running of gala balls or golf tournaments. While we all have to work together in arts organizations to raise funds, pulling staffing from accomplishing the core Mission, in order to facillitate Board fundraising initiatives cannibalizes artistic resources and is not sustainable.
MANAGEMENT: The role of the arts manager is to take the artistic program and the resources supplied by Board & funders and to implement the program objectives. Through expert knowledge of the industry, the manager employs best practices, allocating resources as carefully as possible to achieve optimum results.
The manager that is both under-resourced and without a clear and well-ariticulated artistic mission & strong community connections is unlikely to be able to achieve good results. If the organization also is burdened with an unfocused, non-contributing Board, the manager alone will not have the power to turn the engine of the organization single-handedly. In order to write grants, appeal to foundations or seek sponsorships, the manager will need a compelling story to tell about artistic & community arts education plans and the support that exists in the community, demonstrated by results, photos, endorsements. She or he needs the community connections of an engaged Board to gain new funding and connect with local industrial and business leaders. If there is a lack of money for marketing artistic programs, the manager will need the Board’s community connection and legwork to promote artistic programs through grassroots initiatives.
Arts managers are there because they really love the arts and they have a tragic tendency to burn out as they try to prop up failing arts organizations.
WHY DO ORGANIZATIONS FAIL? We always hear of arts organizations failing for lack of money, but I have yet to see an organization fail purely from lack of money. An organization that has less money than is needed to fulfill all it’s programming has to be flexible enough to be responsive to the reality and scale back or make economies to live within its means and simultaneously work on seeking more funds. A healthy arts organization with a clear Mission, valued by the community, with an engaged Board and adequate staffing will survive financial setbacks.
When organizations insist on not changing despite annual deficits, money becomes an issue. When artistic mission is muddy, community connections are lost, fundraising becomes extremely difficult. When Board Members are unclear on their roles, unfocused and non-contributing and sometimes caught up in their own politics, an important driving force in the organization siezes up. When managers and staff are called upon to deliver/sell/find funds programs that have no coherence, artistic energy or community connections, it is no surprise that they fail.
If the recently announced self-governing code of ethics proposed by Imagine Canada is not enough to restore confidence in the transparency of the Canadian charitable sector—and I don’t believe it is–what additional steps could realistically be taken?
Set fair guidelines for administrative and fundraising costs varied by sector and type of charity:
The first step that everyone seems to miss is that we need to establish what is a fair expectation of the percentage of funds needed for administration and fundraising. No non-profit can function without paying the rent, insurance, office supplies and staff salaries. And to be fair, it has to be noted that the percentage of the budget spent on administration and fundraising can vary widely in different charitable sectors. We want to remove any excuse for obfuscation in reporting by allowing adequate costs for legitimate administration and fundraising costs. Consider these two scenarios:
Charity A runs musical after-school activities for children. The charity has one paid staff member who does grant-writing, foundation appeals and writes letters to private donors for donations to support the work of the program. The bulk of the staff members time is spent in organizing the programs, contacting schools, preparing program materials. The charity operates out of donated school space. Less than 20% of the charitable organizations budget is spent on administration and fundraising.
Charity B exists to organize one annual high profile special event to raise money for a health related charitable purpose. Special Event fundraising is the most expensive method of fundraising. All of Charity B’s staff are involved in fundraising and organizing the charitable fundraising event itself. Charity B provides no direct charitable programming but transfers profits to charitable organizations that do. In a good year, the large fundraiser realizes 40% profits on the investment in the event. In a bad year, only 20% may be available for transfer. Arguably it may be money that could not be obtained any other way.
These are extreme examples of the apples and oranges that make up the charitable sector. Too often unrealistic goals of lean administration and fundraising costs are expected by donors, foundations and government programs, without any consideration of sectoral differences or other factors affecting a non-profit corporations real costs. These unrealistic expectations by some funders leads to a certain climate of obfuscation in the charitable sector. If a good organizational leader knows that showing an administration cost low enough to qualify for project support is impossible, she/he will naturally think of ways of funding the extra very real administrative costs from another program. The administrator thinks “it’s all in a good cause”. Volunteer Boards become used to hearing that we have to “rob from Peter to pay Paul” because the portion allocated to be spent on administration and fundraising is just too low. And Boards will be tempted to think “everyone’s doing it”. In such an atmosphere it becomes hard to draw the line and know just what are the real programming expenses and just how high is your fundraising and administrative costs.
Funding bodies, sectoral umbrella/advocacy groups, and non-profit administrators have to come clean with each other and set realistic standards for administrative and fundraising costs in order to set realistic benchmarks that organizations can then measure themselves by going forward.
Introduce standardized accounting systems that are geared to non-profit management
If it is all about the numbers, then how we count and what we count becomes very important.
Current systems of accounting only make donors aware of the hard dollar costs and benefits of non-profits without offering any other tangible cost/benefit analysis. There are some huge misses as a result. One of the most obvious is the benefit to the community when huge groups of volunteers are involved in a charitable activity. The volunteers benefit in training and a sense of well-being. They take skills back to their jobs and communities. Their work gives huge benefits to the charity whom they work for. Conversely what are the costs when a non-profit turns over its full staff almost annually because of poor management? Donors are funding unnecessary staff training and potential law suits when human resources practices are below par. But that’s not on the balance sheet either. A charity that is creating great work in the community with a mainly volunteer force supervised by a few paid workers may look identical on the books with a floundering charity with the same number of staff and little real activity.
We also need standard accounting practices to separate project versus operating expenses because so many of us are paying operating expenses out of portions of project funds. This is a legitimate practice when a number of project budgets have small amounts of administrative costs factored in. Keeping track of what is allowable becomes complicated as number of project streams increases. Having worked in one charity where large sums of project funds were allocated to administrative and fundraising costs, while being posted as program costs, I have seen that it can be done without ringing alarm bells at audit time.
Professor Jack Quarter, at the Ontario Institute of Studies in Education, Social Economy Centre, has been doing some ground-breaking work on Social Accounting that should prove useful in any initiative to restore public trust in our charitable sector.
Once new non-profit accounting standards are adopted it will be necessary to communicate these new standards through professional accounting bodies to assure that accountants, bookkeepers and auditors are aware of the new practices.
Accounting professionals to be held accountable
When things go off the rails in the corporate world, everyone looks to the corporate auditors. How did they miss this? Was there collusion? Should the auditing firm be punished?
But does this happen when it is disclosed that charitable funds have been misallocated to admin and fundraising in charitable institutions? Why not?
In the past I have attempted to make an auditor aware of deceptive practices in an organization I was employed by and was frozen out. I reported the auditor and the Board Treasurer ( a chartered accountant) to their professional regulating organization and got no response. Why? The rationale I received was that they were volunteers or working below the usual fee, doing a good deed, and therefore couldn’t be expected to give the due diligence of a professional accounting job. This didn’t strike me then or now as acceptable.
Should accounting professionals be held accountable when private donations and public charitable funds are misused? That’s a question for the profession and the public to consider.
Sharing of information among charitable funders
Currently in researching information about a charitable institution you can find their charitable return information online which gives you broad categories of where they receive their funding from. You can also access information from some of the big foundations and government programs and discover the size of their program contributions to the char
What you can’t find out and what isn’t shared between funding bodies is what they have actually funded. This results in charities being able to double-fund activities and staff salaries with impunity while channelling the dollars into those administrative costs and fundraising costs that they really don’t want to report.
More information has to be publically available.
Volunteer Board Training and Information
In theory all non-profits and charities are governed by a volunteer Board of Directors who exercise a stewardship function within the organization. In actual practice, the Board is often comprised of very busy people with good hearts who really want to believe that their charity is doing the good job. Most of the time they are right.
Unfortunately, the main source of information and training on Board functions is often a non-profit manager who could have a vested interest in making the charity look more successful than it is. Boards need some measure of independence and Board members really need training and information on charitable standards of business practice that comes at least in part from somewhere outside their organization. As all charities have to provide a list of Directors as part of their annual information return, Revenue Canada could serve as a source to send all Directors a regular update on industry standards and provide the means for Board Members to be alerted to the tell tale signs that something might not be quite right in their organization.
Providing Disincentives for Breaking Ethical Standards
There are currently few mechanisms in place to deal with organizations that break existing ethical standards in raising charitable funds or who misallocate charitable funds. While it may be difficult for the small donor to trace the use of their funds, the same is not true of government programs that make tax dollars available for charities. When a public funder discovers a major breach of ethics, there should be repercussions and disclosure.
It is in the interests of all ethical and hard-working charities to see charitable licenses revoked for those that don’t play by the rules and contribute little or no social good.
Almost everyone who has worked in the charitable and non-profit sector has had at least one horror story about unethical practices. Most never get reported. One simple reason is that there simply is no one to report the situation to outside of the organization’s own Board of Directors. Plus there is a lot of pressure to disregard the accounting irregularities on an “ends justifies the means” argument. Employees who take the step of going to the Board can find themselves jobless and without a reference, often not listened to at all. I know of one instance where a loyal staff member stealed themselves to take a troubling set of facts to a Board Member. The next day the manager came to her office and said, “Everything you tell a Board Member will come back to me in a few hours and if you ever do this again you will be fired and you will never get a job in this sector again.” Even when groups of staff go to Boards of Directors, they are often simply labelled troublemakers. One of the first things a non-profit manager with something to hide does is try to isolate the Board from the Staff and discredit any staff member who might have knowledge of misdeeds. Boards should be highly suspicious of managers who inform them that direct communications between organization staff and Board is “inappropriate”. After seeing this suppression of staff in organizations I’ve worked with in the past, I’ve come to the conclusion that we need a Canadian tip line for charitable and non-profit wrong-doing and whistle-blowers need protection from reprisals in the workplace. We can’t solely depend on over-worked, under-informed volunteer Board members. Imagine Canada has taken the lead in formulating a new ethical standard for charities. They may the be the logical body to administer a tip line on charitable fraud and other unethical practices.
With all these steps in place, we can establish what the standards are, communicate those standards and weed out the few bad apples. The result will be restored public trust, an end to misallocation of charitable dollars, and a better working climate for some of the most idealistic and selfless workers in the Canadian workforce.
In the wake of exposes by the Toronto Star of fundraising practices by some charities that have resulted in as much as 90% of funds raised going to fundraising and administrative costs rather than charitable work, the charitable sector has announced the implementation of a self-policing code, reported in the October 22/07 Toronto Star story, “Charities Launch self-policing code” by Kevin Donovan. (note that link is time sensitive)
Is it enough?
The public is worried about donating wisely and–on the other hand– those of us that work in the non-profit, charitable sector understand that the problem of getting the most bang for the charitable buck is deeper and more complex than the simple solutions suggested as first steps. We have some idea of where the bodies are buried.
The frustrating thing for those of us working in the sector is when we see a great program working very effectively in a sector fail to gain support, while a noisy charity that really does very little beyond generate hoopla and organize fundraising events, gets media attention, celebrity support and commands public dollars.
Through Imagine Canada, charities are being asked to sign a voluntary code. One of the first provisions of the new code is that signators will not use commission fundraisers as this practice can lead to both aggressive marketing and the use of charitable funds to simply pay fundraisers. The information that is missing in this recent announcement is that the Association of Fundraising Professionals has included this rule in their code of ethics originally adopted in 1964! Using commissioned fundraisers has been regarded as both sleazy and ineffective by non-profit managers for at least a decade. So it is shocking to hear large charities like Sick Kids and World Vision only swearing off the practice in 2007.
The next provision of the code mentioned in the October 22/07 article is that charities will adhere to a code of honesty in reporting to their donors. Imagine Canada is said to be cracking down on “wild claims of success by the charitable sector.” Good idea but very vaguely worded.
Nowhere in the report is there a clear criteria how “wild claims” will be detected nor how the sector will amend the practice. While some issues are more complex, there eally there are a number of ways that some charities deceive the public that could be identified, a test of accuracy applied and the practice cleared up fairly easily. One example is the use of self-aggrandizing and confusing titles for organizations and programs. Many organizations have “International”, “World” and “Canada” or “Canadian” in their titles. The public can be expected to presume that an organization with “International” or “World” in the title has directly-administered programs in a number of countries around the world. The sector should/could agree that having directly-administered programs in less than a set number of nations, (7, 5, … 3?) and using “International” or “World” in the charity’s name or program title, is deceptive. By the same token, charities that describe themselves as the X organization of Canada, lead the public to believe that they offer programs and services to Canadians in a number of provinces. Imagine Canada should include benchmarks for the use of these common attributions.
Another way that “wild claims” could be curtailed is by adopting a strictly enforced standard for reporting on statistics for programs. This is straightforward for programs that are solely and directly administered. It becomes more difficult in jointly-run programs. Sometimes charities give small donations to programs and then claim the entire program and its activities as part of the work of the charity. Real collaborations between agencies in the charitable sector is to be encouraged, but the public should be able to tell clearly who is responsible.
Here is an example of the way this numbers dodge can work in the charitable sector. Charity X raises money to run a cross-country literacy program that involves authors in doing readings in remote communities for the purpose of both literacy awareness and also to promote local literacy programs. Then charity X contacts grass-roots organizations and gets them to do all the work, undertake the lion’s share of the work and all the marketing expense in organizing the events. Perhaps a small “how to run your event” manual is written by Charity X from freely available material found on the internet, providing a token organizing effort. Another token support is given to the event in the form of subsidizing author airfare for example—transferring a small amount of funds raised to actual program costs. Meanwhile there is virtually no work or expense by charity X other than the transfer of that small portion of funds raised and yet Charity X takes credit for a national series of literacy awareness events, and furthermore enhance their reputation as a national organization while potentially running no real programs in Canada and keeping the lion’s share of money raised for their administrative and fundraising operations. A staff salary is paid to a “program coordinator” but that person’s daily work assignments relate to fundraising and general administration. A report to donors on the project includes the information that X people attended events in 15 locations across Canada and X dollars were expended on program costs, however the report on program costs includes the salary paid to someone for administration and a pro-rated portion of administrative costs such as photo-copies, office suppliers… even if none of these were used for program materials. About 80 % of funds raised is claimed as being used in “program costs” with a modest 20 % being accorded to administrative support of the program. However a hard forensic accounting look at the program might show that only 10% to 20% of the money donated to the program was transferred to direct program costs in the form of low hassle airfare subsidies to grassroots groups organizing their own events.
This is the complex face of garden-variety “wild claims” in the charitable sector. This type of practice is damaging to the climate of giving in Canada. It also hurts legitimate charitable organizations, and is poisoning the working climate in the non-profit sector– both within “bad apple” organizations and within the good organizations who struggle to compete with the “bad apples” who misreport activities, results and proportion of money spent on administration and fundraising.
While Imagine Canada is to be commended on this first step of a self-governing code of ethics, it is a very, very small step. Much more work is needed and it is not clear that this can be accomplished by the sector itself. In my next article I will attempt to write about what I see as a sickness in the heart of some charities and non-profits and some thoughts on how to tackle those difficulties.
The World Bank has been in the news recently with the focus on the misdeeds of its CEO, President Paul Wolfowitz. As the revelations have come forward in the news, it has been publicized that a whistle-blower brought allegations of conflict-of-interest and other irregular human resources practices to the bank’s Board of Directors who took no action on these allegations. In retrospect, the Board looks pretty foolish and was certainly not fulfilling its stewardship role.
What is your board’s policy on whistle-blowing? What role does your board have in assuring that proper human resource management practices are being followed? If you can’t answer those questions, then this article is for you.
Board responsibility for human resource policy:
Boards do have a responsibility to assure that their organization is following fair and legal human resources policies. Beyond assuring the health of their organization and being good employers, the board’s oversight of human resource policies has fiscal implications and boards generally understand their responsibility for fiscal stewardship. High staff turnover costs money in training new staff and the expectation that new staff will be less effective during the period while they are familiarizing themselves with the job and key tasks. Egregiously inappropriate human resource management puts the organization at financial risk in a variety of ways: human rights complaints, employment standards complaints, wrongful dismissal law-suits, and fines and penalities for late or incorrect employment benefit deductions are obvious financial repercussions of poor human resource management. Less obvious is the loss of sponsorships, donors and grant funding when the “buzz” in the community about your organization is that it is ineffectively managed and a poor employer.
Separation of Board and Management responsibility:
“But what about the separation of management and board responsibilities?” you ask. “Isn’t human resource policy a management role?” The role that board plays in human resource management can vary, but it is an important one.
The role that board plays in human resource policy needs to be clearly defined in the organization. And the personnel policies of the organization also must be clearly defined.
This is one aspect of non-profit governance where Board and Management must work together and where responsibility is shared. Boards can sometimes overstep their bounds and compromise the role of manager by becoming involved in day-to-day supervisory management issues. But washing their hands totally of human resource policy issues—often in a mistaken belief that this is the way to show support for management’s role—is unacceptable. Doing so is to abdicate a key responsibility of the Board for stewardship of the organization’s financial position and reputation in the community.
Defining the Board’s role in human resource policy:
What defined roles can a non-profit board assume in human resource management? The answer depends on the size of the board, the size of the organization, the role of the board and the strengths within the board. Initially in a new organization or an organization without any human resource policies, the board will likely want to develop and assume responsibility for writing a human resource manual of policies, ideally in cooperation with management and department heads. In developing the organization’s first human resource manual the Board should 1) look for resources from national/provincial agencies supporting non-profit organizations, 2) collect manuals from other similar organizations to its own, and finally 3) look for evidence of existing policies within its own organization.
Finding existing policies in your organization:
How do you look for policies within your organization when you don’t yet have a human resource manual? Ask everyone in the organization to send you copies of memos and decisions that have been made on any human resource issue. If employees have been allowed to carry vacation time accrued for a year in your organization, you don’t want to write a policy that allows for no accrual of vacation time. You want to be consistent and fair in your development of policies. You may be pleasantly surprised by the amount of policy that is in place within the organization. By bringing these policies together in a manual, you make them accessible to all and reveal the few places where policy development is needed.
Ongoing Board oversight of human resource policy:
Boards can write policies, approve policies or merely warrant that proper personnel policies are in place. But in all cases they should be aware of the existence of a human policy manual and assure that those policies are appropriate and appropriately followed. Often a committee of the board, made up of individuals with particular expertise in human resource management is charged with the job of writing and oversight of human resource policy. This committee may be mandated to write all policy or take on only key policy areas as articulated by the Board.
Health and Safety policy:
Non-profit boards often forget health and safety issues when writing human resource policy. Don’t make this mistake. Beyond office workplace safety issues such as repetitive strain injury, non-profit organizations often engage in activities that can place employees at risk. You want to be on the record as mandating that employees follow safety precautions when lifting heavy materials, operating machinery or traveling on company business. You want to assure that federal and provincial safety standards are known and followed. If your workplace is large enough to require a Health and Safety Officer, insure that your Personnel Policy Manual articulates the procedure for selecting one. Accidents will happen, but you want to assure that you have policies in place to protect employees from being asked to engage in unsafe practices. Non-profit workers have reported violations such as being asked to work in food bank warehouses without safety boots or hard hats while stacking crates that could crush them if they toppled. Arts workers have been asked to ride unsecured in the backs of trucks carrying exhibition materials weighing tons, and workers have been made sick after being exposed to toxic levels of print fumes from working in unventilated conditions with boxes of thousands of freshly printed brochures.
What is the Board’s role in workplace conflict resolution? Conflict resolution should be a part of the employment policies articulated in the personnel policy manual. The volunteer board understandably does not want to hear day-to-day employee complaints. If they are, this is symptomatic of a flawed system of dealing with complaints in the workplace. But it would equally be a mistake to shut down dialogue with employees. A policy of never listening to
employees would pave the way to a future embarrassment similar to the one facing the World Bank Board this year. They were presented with the evidence of management wrong-doing and they shut down the employee bringing them this evidence. As a result the employee went to the press.
Progressive system of dispute resolution:
Within the personnel policy manual there should be a clearly articulated progressive policy for employee complaint resolution in the same way that there should be a progressive discipline policy for employee violation of company policies and job role expectation.
What does this mean in practice? It should mean that the first step in any employee complaint is that the employee first discusses the matter with their direct supervisor, or where that is inappropriate (for example if the complaint were to involve harassment by that very supervisor) then to go to the next level of authority. Response to the complaint with a suggested plan of action should be delivered to the employee within a reasonable time frame that should be spelled out in the employee manual. Should the employee not be satisfied with the action plan, the organization should provide a vehicle for a final appeal process. It should be clearly stated in the employee policy manual that no punitive action for employee complaints will be tolerated by the organization.
Board role in dispute resolution:
The Board should provide some means for employees to carry complaints forward beyond the management level. By the time employee complaints are heard by the Board, usually two or more attempts to resolve the complaint will have been made at the staff level, departmental and upper management. It should be noted that it could be construed as a violation of the employee’s right to privacy to force the employee to discuss their complaint in front of the whole Board. Instead it is often advised that the Board develop a Personnel Committee to meet with employees in a confidential manner and to share their deliberations with the Board, without violating confidential information about individual employees. Such a committee will usually be comprised of two or three individuals that the Board views as having the best skills for such a committee.
It should be noted that in a unionized setting, the Board’s Personnel Committee will work within agreed upon arbitration processes.
Other duties of the Personnel Committee:
Other duties of the committee will include annual evaluation of the Executive Director or General Manager, periodic reviews of compensation levels in the organization relevant to the sector, reviews of organizational structure/departmental structure, and the important task of exit interviews. Exit interviews provide a series of snapshots of the organization from different vantage points from people who can provide impartial viewpoints as they no longer have a vested interest in protecting their jobs or advancement within the organization. A policy of exit interviews is effective only when conducted with all possible employees. It is less useful when the Board only chooses to interview either positive or very angry exiting employees.
In smaller organizations, one or more representatives of the Personnel Committee may be involved in employee evaluations and in all cases the Board should assure a fair, objective, consistent evaluation process and that evaluations are in a standard written format with opportunity for employee response.
Key indicators of an organization with effective human resource policies:
1. A Board approved consistent and regularly updated employee policy manual that is provided to all employees.
2. Employees are aware of company policies, can articulate them on query, and compliance is high
3. Most complaints are resolved at the departmental or management level without Board intervention. The occasional complaint that comes to the Board level is dealt with according to established policy.
4. Management and Personnel Committees work together on human resource policy and have good lines of communication
5. Annual evaluations of management and staff are consistent, fair and transparent. The results are written and staff response is invited.
6. The organization never or very seldom experiences law suits for wrongful dismissal, complaints to outside bodies regarding employment practices.
7. Staff turn-over is low in comparison to other similar organizations.
If all or most of these key indicators are present in your non-profit, congratulations, your board is doing all it can to promote a healthy, effective organization with high employee productivity and little risk of financial repercussion due to violations of workers rights.
Key indicators of an organization that needs to work on human resource policy.
1. No policy manual exists, or if it exists it is hard to find, inconsistent, has large gaps in policies.
2. Employees are unaware of company policies or employees have conflicting understanding of company policy based on local memos and departmental policies. Confusion leads to disregard of company policy and low compliance.
3. The organization lacks an effective dispute resolution process. There is no “court of last appeal” in the organization. The Board either hears nothing about disputes within the organization or periodically is inundated by employee complaints, deputations by employees. The Board lacks any policy for dealing with these employee complaints and either shuts them down, ignores them or takes on management roles in dealing directly with situations in the workplace.
4. Management and Board have no authentic communication on personnel issues, there is no committee of the Board charged with personnel issues. Board has a “not our business” attitude, shuts down or deals punitively with whistle-blowers, or alternatively, interferes in the daily business of management by instituting decisions on employee policy without consultation with the manager. No exit interviews are conducted. Staff are warned that communication with Board members is inappropriate and will be punitively dealt with.
5. Evaluations are sporadic, inconsistent, verbally conducted without written format or report. There are no objective measures applied nor is there opportunity for employee rebuttal or response. Evaluations seem punitive, only occurring when a manager has negative news to impart. Evaluations are without oversight. Alternatively, evaluations only contain good news and feel-good messages and board involvement is only requested to rubber-stamp good news pronouncements from uniformly positive evaluations.
6. The organization has experienced a high level of wrongful dismissal complaints, status of employment complaints, allegations of human rights violations, employment standards complaints, etc.
7. High staff turn-over is common-place in the organization. The organization has recently experienced a mass exodus of employees fed up with workplace unfairness and management inconsistency.
If your organization has to say “yes” to only one of these 7 points, likely you have one area of human resource management that you need to address in order to assure that you have an effective human resource policy. But if you answered “yes” to two or more points, your Board is leaving the organization open to potential financial loss and/or reputation loss. At the very least you are not doing your best to keep the resources of high-achieving, experienced employees productively employed in your organization. You are le
tting your employees down and compromising the Mission of your organization.
Some resources for the non-profit Board in Human Resource Policy:
A Checklist of Human Resource Policy Indicators for Non-Profit Boards
A Guide to Human Resource Policy for Non-Profit Boards, from Human Resource Council of Canada
Many arts organizations begin their existence with a single artist–an Artistic Director/Founder supported by a volunteer board and perhaps some paid staff members in administrative support roles. Some arts organizations begin and end with this configuration, not living past the lifespan of their founding artist.
Others through growth or succession-planning begin to contemplate hiring their first General Manager or Executive Director . If your organization is at this point then this article is for you.
It’s natural that in the selection process that Boards focus on finding the best candidate for their position and articulating the new role of General Manager or Executive Director in their organization. Most do this well and there is a lot written about finding the right candidate.
However, what most organizations in this position don’t think about doing–and where there is little guidance available–is to take the time to consider how the Artistic Director’s role is going to change, how the Board’s role is going to have to change to accommodate the new manager, and how the day to day life of the organization will change.
Without prior organizational planning and consultation about what responsibilities and authority the Artistic Director wants to surrender or is willing to surrender, the new General Manager or ED is going to be launched on a collision course and the organization will have a rough adjustment process. It will be very difficult for the new manager to be the change-management facilitator. Failure rates for first managers are high.
You know you want your manager’s job description to complement the role of the AD, but, do you really know what your founding Artistic Director does in the organization or are you basing this on assumptions? Don’t just ask him/her. You need to actually observe how time is spent. It may prove to be a different picture than the Board imagined. This observation can be accomplished best by job shadowing on a few days scattered through as long a period as possible. At the very least, much less reliably, ask your AD to keep a time chart for a week to indicate how time is spent.
What excites your Artistic Director? What part of the job do they really love and will they find hard to share or relinquish? Again, don’t just ask them, but observe and reflect on past experience. They may believe that they love artistic planning but if planning is always late and haphazard but grant applications are always masterful and ontime, then the assertion that artistic planning is top priority might be suspect. Our actual priorities are not always the same as what we believe our priorities should be. Ignore this and you may hire an excellent grant writer as a manager but your AD, who it turns out loves the “thrill of the hunt” that grant applications entail, may refuse to surrender the grantwriting. Meanwhile your artistic and production planning may continue to be late and haphazard because no one in the organization is priorizing that work. If you have an AD who is best at some of the administrative roles associated with a manager, maybe you need a different configuration to complement that business savey. Perhaps you need an Artistic Administrator or Producer role.
Once you have done your homework on the strengths, weaknesses and interests of the AD, you are ready to construct a job description for your new manager that complements your Artistic Director. Be aware of clusters of responsibilities so as not to create fragmented roles that are unworkable.
Next consider the authority that must match the responsibilities that you have given each role. Imagine and forsee likely scenarios. For example, if you have given the Artistic Director full power over artistic planning and the new manager the responsibility for maintaining the organization’s positive bottom line, what happens when the Artistic Director proposes a project that is not in the budget? Can the manager veto the project? Does the Board need to amend the AD’s job description to require him/her to seek budget approval? This is a central issue that is the downfall of many AD/ED relationships. It needs to be understood by all members of the Board that vetoing a project because it is too costly or too late in the planning cycle for successful integration in the season, is not artistic interference. If the authority is not given to the manager in this instance then what will the process be? Will the Finance Committee of the Board make the decision?
Who ultimately is in charge? This may seem like a simple question but I have experienced an organization where the Board President on hiring the new manager believed that new role was one of sole organizational leadership, the new manager believed their role was one of joint leadership and the AD believed that he continued to be the overall organizational leader. Spell this out and make sure everyone is on the same page. Does your organizational chart reflect the correct structure? Have you changed the organizational constitution and bylaws if needed to reflect the new management role? Is your salary structure consistent with the organizational chart? For example, do you have someone paid as an outside consultant who is shown as an employee or manager on your org. chart? It is always dangerous and unethical to misrepresent an employee as a contractor but it is particularly inappropriate to have an outside contractor making day to day financial decisions and signing contracts for your company on a permanent basis. Yet some arts organizations don’t consider the implications of having staff report to a contractor. Some board members may be unaware that their ED or AD is paid through a private service contract.
Who supervises junior staff? If you assume it will be the new manager, does your AD appreciate that he/she can no longer ask the nearest person to research something for him/her? Be realistic. There may be need to assign some staff support to the AD but that should be spelled out. What happens when this step is neglected? In all likelihood, the AD will continue to function as they have in the past, directing junior staff as they see fit. Junior staff will have two bosses with conflicting assignments. Good staff will suffer while opportunistic staff will manipulate in various ways. Your new manager will have their authority compromised in a way that will be hard for them to recover from.
Consider the planning/activity cycle for your organization in light of the job description you are giving your new manager and consider where you may need to finetune other job descriptions. If you have asked the new manager to provide a budget by April of Year One for the Year Two starting August 1, then when does your Artistic Director have to provide a completed program? A deadline for artistic planning must be set a month or more before the budget deadline. If you have set a deadline for the development of a season brochure or catalogue then artist decisions and contracting must be completed well before this deadline. Failure to consider these relationships in the planning cycle will leave your organization in the dark as to why things are delayed.
If information is power, what about corporate communications? Is your AD willing to keep a manager in the loop on program planning? Or will the new manager learn first about projects by seeing work junior staff has been asked to perform? The communications requirements that you set in place at the outset will determine the directional flow of communications.
Is your Board ready and able to support the new manager’s role? Do you have a management committee in place? Is your Board stacked with personal friends of the AD, making it difficult for impartiality should conflicts arise? If so, you might want to consider expanding the Board with some new members. It’s great to share t
he AD’s vision as a Board, but you are also going to have to support your new manager. Lastly are there management roles that the board has taken on that now have to be signed over to the new manager. Often finance committee and marketing committee roles become less “hands on” with a new manager and this adjustment has to be foreseen and planned for.
Once you have considered all these questions, you should be in good shape to find a good manager for your organization and not lose time spinning your wheels in change mangement.