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Nonprofit Radio for September 16, 2024: Board Members Are People Too

 

Judy Levine: Board Members Are People Too

One size fits all rules may not make sense for your board, especially if you’re embracing diversity and equity in board membership. Judy Levine is a longtime board coach, trainer and consultant, and she led Cause Effective for 17 years. She’s now an independent consultant. This originally aired August 15, 2022.

 

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And welcome to Tony Martignetti nonprofit Radio. Big nonprofit ideas for the other 95%. I’m your aptly named host and the pod father of your favorite abdominal podcast. Oh, I’m glad you’re with us. I’d suffer the embarrassment of pseudo cholesteatoma if I had to hear that you missed this week’s show. Here’s our associate producer, Kate with what’s up this week? Hey, Tony, we have board members are people too. One size fits all. Rules may not make sense for your board, especially if you’re embracing diversity and equity in board membership. Judy Levine is a longtime board coach trainer and consultant and she led cause effective for 17 years. She is now an independent consultant. This originally aired August 15th, 2022 on Tonys take two tariffs, 101 were sponsored by donor box, outdated donation forms blocking your supporters, generosity, donor box. Fast, flexible and friendly fundraising forms for your nonprofit donor. Box.org here is board members are people too. It’s a pleasure to welcome to nonprofit radio, Judy Levine. She has been executive director of cause effective since 2006 and she has over 30 years experience as a nonprofit management advisor at cause effective since 1993. And as an independent consultant, she has trained and consulted with well over 1000 nonprofits on issues in fund diversification, donor engagement and board and organizational development. Cause effective. Is that cause effective.org Judy? Welcome to nonprofit radio. Thank you. I’m pleased to be here. Pleasure to have you. Uh I’ve had your colleagues through the years. Uh Greg Cohen and Susan Comfort, who I know Susan is completely retired now and Greg is mostly retired now. They’ve been sort of stepping stones to the top now. We have the executive director. Ok. All right. Yeah. Yeah. Here I am. I’m good. My, my apologies, Susan Comfort is someone else. Susan Gabriel is who used to be at uh at cause effective long time and, and Greg Cohen, you’re concerned about uh equity on boards. Uh But at the same time, you know, we’re trying to maintain standards, but we want, we want a diverse board standards, don’t always apply to all the, all the different cultures we’re inviting in, help me, uh set this up. Well, there’s always a fear of the difference, the difference and uh then also a fear of um acting inappropriately around the different and those two fears, um sometimes stop a board from real honest, um, an accurate reflection on what’s at the table and what’s the most appropriate way to support the organization’s mission. Um And especially, you know, ever since the racial reckoning of 2020 the understanding on nonprofits parts that they needed to reckon with their own d eib diversity, equity, inclusion and belonging. Um My sense is that, that, that ha that, that reckoning has happened on a staff level at a different, different pace than it’s happened on the board level. And some of that has to do with fundraising and people’s fear that if they rock the boat, they will not have the fundraising return that they have now. Um And I’m here to say two things. One is that there is plenty of uh salaried capacity in this country for people of color, although not as much, uh not as much wealth accumulation, certainly generational wealth accumulation. And that’s a very real factor. Um So to think that you need to diversify your board, that you need to reach into the client base, which may be true, but is not the only way to diversify your board from the uh the group. It has always been ok. Are those the two? That’s, that’s number one. The other is that yes, you may have to rethink the one size fits all package. And that’s been a mantra in our boards is that everybody has to hold the same standard and that we know that everybody is the same standard and we don’t want double standards or triple standards. Um I’m here to re help people rethink the idea of universal standards versus standards that make sense for where that person is coming from and what they can, what they can actually bring to the table if they do their best. Ok, le let’s take the first of those because there’s, there’s an imp, there’s an assumption there that people of color are not gonna be able to meet our fundraising expectation. So we’re gonna have to, we have to reduce our board giving to invite folks of color in. But that, that, that’s, that’s just unfair and unfair and racist. Um You, you’re not, if you’re not finding these folks and you’re not looking hard enough for people who do have the means uh to, to meet your, to meet your, your board expectation or your board fundraising expectation and, or you’re not looking um at the right messengers and, or you’re not understanding why your cause is going to be a deep personal interest just to a person of color. Um All of those factors have to be there. Um You can’t, you don’t ask anybody on the board, you don’t ask somebody on the board uh of an animal shelter. If they have no connection to animals, they don’t care about animals, you gotta look. Uh So in the same way, you have to understand, let’s put it this way. There are, there are legacy charities, um the Urban League. Um You know, it’s very that, that there are huge fundraising machines, there are people of color that um there’s a sense of the ownership that this is ours. Yeah, that may not be in your board as currently constituted. That needs to be opened up. Yeah, that’s a, that’s a holding on to, that’s a holding on to power and structures and not allowing someone who looks different comes from a different background into our, uh, our playground. Well, and it’s more than not allowing, it’s actually, um, it’s more than just a not doing, it’s something that you have to actually do do, um, is to understand, um, how, who makes decisions? Is there an in group and an out group? Is there a biting one’s time, uh, ethos, um, which doesn’t work well when you invite people of color on and then they have to buy their time and they’re the only ones that are biting their time. And yes, it might be historical that everybody else made their time years back but people are gonna lose, lose, you know, they lose patience. So it means that you have to do much more rapid, um, leadership development on boarding and power sharing. Then your board may be used to. Yeah. All right. II, I don’t, I don’t want to derail what, what, uh, what we were intending to talk about, but I just, I think it’s all of the, well, I mean, I think it’s important to point out the, the, the implicit bias that goes along with this, assuming that you’re gonna have to lower your standards basically. Just assuming you got to lower your standards if you left people of color in and I, I think it’s all of a piece and it’s about who is and who was a guest at the table and board members, all board members need to be owners, not guests. Yeah. Yeah. Right. And yes and not treated like guests. All right. All right. So, one of the things you said is that, um, one size fits all is not, uh, is not gonna be the right model. Not necessarily. So what, what’s, what’s an alternative? So if we’ve got a, we’ve got a, uh, $15,000 annual give, get board requirement. Uh, and, and two thirds of it has to, has to be from your personal, well, your, your personal asset. So $10,000 from you and if you want to either give or get the other 5000, you have an option there, but you have to give at least $10,000 a year. One of the things that I talk about that took me, you know, frankly, you know, a while to understand is the role of generational wealth transfer in people’s capacity to have disposable income. So that, um, you know, uh, oftentimes white people come from, they’re, they’re not necessarily coming from money, money, but they’re coming from a position of, um, comfort. Um, and so they’re not necessarily carrying family members, they’re not, they’re not pulling their family out of poverty along with them. Oftentimes certainly black people who are in a um may make the same salary, but they are carrying people in their family. And so you can’t say, oh, this person makes X salary and that person makes X salary. Therefore, they have the same capacity. You only find this out by talking to and listening to someone and I a universal give assumes universal capacity. And yes, we say, ok, just give us a floor and everybody should go over the floor. We all know that people rise to the floor. So the question is, is there a way to help this person get and to change that relationship and or is there what are we, what are, what we are after on the board? Someone who is using their connections for the to the extent for the organization’s behalf and what comes in is relative to those connections and the capacity. It’s time for a break. Imagine a fundraising partner that not only helps you raise more money but also supports you in retaining your donors, a partner that helps you raise funds both online and on location. So you can grow your impact faster. That’s donor box, a comprehensive suite of tools, services and resources that gives fundraisers. Just like you a custom solution to tackle your unique challenges, helping you achieve the growth and sustainability, your organization needs, helping you help others visit donor box.org to learn more. Now, back to board members are people too. All right. So we need to, we need to get to know our board members. Uh And, you know, uh I, I understand your point. You know, some folks may very well be supporting, helping other family members, not necessarily out of poverty, but uh I mean, it could be, but not necessarily out of poverty, but they’re, they’re, they’re helping other family members that aren’t doing as well as they are. And, and a lot of that can, a lot of that can very well come from the lack of intergenerational wealth through the generations that, that, uh, folks of color got screwed out of essentially. All right. And I still want to go back to the fact that, you know, this, I don’t want to operate under the assumption that you have to lower standards just to invite folks of color lowering standards onto, onto your, onto your board. Well, lowering fundraising, fundraising standards, but it’s not lowering, it’s broadening. Right. Well, I don’t wanna work, right. I don’t wanna operate on the assumption that you, that you have to lower standards. Right? That’s what I’m trying to defeat that assumption. Yeah. Ok. Ok. Um, all right. So what about the, uh, what about the push back the, well, before we get to the pushback that you might hear from your white board members about how we’ve been doing this for so long and it’s been fine for us. So why can’t it be ok for them before we get to that? What might, what might some of this look like? What, what kinds of, what kinds of, uh, activities can, can folks do if they, if they can’t meet the, they’re not able to meet the, the give get requirement? Are you, are you suggesting rewriting? Do we rewrite the, the expectations for all board members or I’m guessing using that as a starting point? Not an ending point? Ok. So that’s a starting point with each board member um about their, how it relates to them, to their assets, to their relationships, to their circumstances. Um And where, which areas they can go above and beyond it and which areas they need to, to uh pull back from and everybody’s gonna have a different answer to that those equations. The fact is that they are, you know, I’ve been on boards with very mixed income levels and the people who had the higher incomes understood that in order to have a board with mixed demographics, they had to do more weight pulling in the fund gathering. Mhm. That, that was part of the value system was that it was not. If they wanted everybody equal, they would have everybody just like them. If the value system was to have different voices at the table, then the value system had to be that some people did more direct fundraising and direct giving and some people did more outreach and some people did more political convers, you know, conversations et cetera. Ok. I wanna make sure we wanna be having these conversations with uh these individual conversations with potential board members. Right. We’re before we’re in the recruitment process, before we invite someone to be on a board or before we accept someone to be on a board, we want to be investigating these things. Yeah, so that they know what to expect so that they know what the expectations are and we know what we can expect. II I, you know, having done a lot of board recruitment uh with nonprofits through the years, I would say two things. I, I think you have a co before as a recruiting, you say, here’s the kinds of things that board members are expected to do. Um and um you know how these rest with you um and you’ll find out some of them are scary. Some of them are, you know, oh, I couldn’t do that. Some of them are like, oh, this, I could definitely do that. I don’t know that I would pin someone down to an exact um prescription you trying to get their temperature. Yeah. But you know, it’s a courtship process and so people go above and beyond what they thought they could do when they’re really excited by the mission and they’re given the tools they didn’t know they needed. So uh in the courtship process, I would put this menu out and say, you know, how does this look to you? How could you see yourself in this. Um, but I wouldn’t take that as the last word because the board service should be, uh, people should be going into places that are not comfortable for them. And that’s partly the role of the board chair is to, is to live that by example, it’s not just to be good at what they do, but to live by example, I tried this and this was, you know, I thought I was going to throw up, but actually I didn’t throw up. I did really well at it and then I tried that and I did throw up. So I, you know, somebody else will do that one from now on. Um And so I want to be honest with people, but I don’t want to pin them down to something they’re not being ready, ready to be pinned to. OK? But you, you make a good point about board bird service being uh a challenge. You do want, you do want folks, I mean, you’re, you’re, you’re leveraging the fact that they love your mission, your work, your values. They stand beside you with that in, in those ways. Um You want them to, to be challenged, you want board service to be meaningful. Yes. And you, you want them to learn something from it because that’s part of what they get out of it. Isn’t that just a happy club? But that they’re gaining a different kind of sense of themselves of what they’re capable of. Interesting, different sense of themselves, what they’re capable of. Yes, challenge. That’s the challenge. That’s the challenge. Go beyond comfort zone. Try this and see whether you throw up or not. Right, kind of. But, I mean, you need to try it with a lot of, um, support and, and with the tools, throw somebody into the lion’s den. All right. What about the, uh, the pushback from white board members that, you know, we’ve, we’ve been, this has always worked well for us. We’ve always had this very rigid, uh, uniform giving everybody’s given the same through these years. What, why, why do we have to now? Wwwww. What, what’s the advantage? Why, why should we change now? Ok. So I need to be polite here. Um, no, you can be firm, you can be firm and realistic. You don’t have to be a lot of counseling of white folks. And I think it’s part of our, um, job as white folks to help other white folks to a different place. All right. So don’t be, don’t be soft on nonprofit radio listeners. I’ll, I’ll, I’ll admonish you don’t do that. Um, it’s 2022. We know stuff now as white folks that we didn’t, that we were able to be blind to for hundreds of years. Sort of the comfort of being blind to. Yes. And, um, we don’t anymore. So there’s a moral obligation to act differently. Our nonprofit is, is, is here for the public. Good. And it, it, we believe that to do that, we need to reflect the full spectrum of voices that is that public and or should be concerned with our mission. That means that we need to have a table that is really welcoming to all those voices that they’re not just here, but they’re actually, we’re gonna share the ownership of this mission. And that does mean that we need to pull apart the stuff that we’re comfortable with. And that’s unspoken because it’s gonna be a mystery to somebody who doesn’t come from our background and it was already part of this. And what’s the advantage to the organization? Let’s make it explicit to doing this. We are living our values in our governance and if we’re not, that’s pretty um compromised. Um So one is congruence with organizational values and what we’re here to try and carry out. Um The second is sort of more robust conversation and decision making because there are different points of view at the table because it’s not people with UN, it’s not an entire crew with the same assumptions. And frankly, you’ll have more interesting conversations and it’ll be a more interesting club to be part of. That’s not why to do it, but it’s a side product. It’s time for Tony’s take two. Thank you, Kate going a little different this week. Uh Because a subject I know about is in the news, a lot tariffs uh, I know about it because it’s one of the few things that I remember from my economics degree at Carnegie Mellon University in 1984. So I’ve forgotten a ton of micro and macroeconomics. But, uh, tariffs stayed with me and they’re in the news a lot that, uh, and the media doesn’t seem to explain them fully. So I would like to take a minute to do that. Uh, tariffs, what’s a tariff? A tariff is a tax on goods that the United States imposes on goods that are imported into our country. And of course, you know, other countries impose tariffs on uh goods that are imported into their countries. But, you know, we’re talking about it from our perspective, but our, our government might do this to help an industry, like suppose you wanted to help the wine industry in the United States. You might put a tariff on wines that come from maybe France and Italy and Spain or something like that. Or if we want to help the washing machine industry or the auto industry, we might put tariffs on washing machines that come from maybe China or Mexico or wherever they might come from. Same with cars could be just certain countries or we could say putting a tariff on all of the cars that come into the country from whatever country they come from. We might not pick individual countries. We might just say all the, all the cars that come into the United States are getting an additional tax, a tariff because we want to help our US uh, auto industry. Right. So it’s kind of protecting industries. That’s why they’re used and they’re also sometimes used for punishment. If we’re angry at another country, we might impose a tariff on that country’s goods. What that does is whatever the reason that we impose them, it raises the cost of these goods because there’s an extra tax added to them. And so that hurts the, that hurts the goods that hurts the companies that are bringing the goods into the country, right? So these tariffs are imposed on the companies, right? I mean, we might pick a country but the tariff really is paid by the uh by the, by the company that makes the good and ships it into the, into the United States and who pays the tara. This is the part that I don’t see explained adequately in the media. We pay the tariff, we, the consumers pay the tariff. It’s a tax, it’s added to goods and companies routinely increase the cost of their goods that are imported into the US to reflect the cost uh the increased cost to them because the the tariff is now gonna cost them more money. So they pass that cost on that additional tax on to us, the people who pay to buy the goods, the washing machines or the wine or the car. A tariff is not paid by the foreign government, whether whatever government, Italy Spain France, China, wherever, wherever we’re imposing a tariff on imports from that government is not paying the tariff, we’re paying the tariff and then the money gets paid back to the United States government from the companies that make the goods that are tariff and that are imported into the US. Ok. So the US government does get money, that’s the tariff, but we’re the ones paying it. We pay it to the company that make, made the goods and then they pay the tariff to the United States. So like lots of things, the ultimate cost of these gets passed down to us, the consumers and of course, we have nowhere to pass it on to do. We, we, we can’t pass it on. There’s no passing the buck beyond the consumer. So I just want everybody to understand who is paying tariffs when the United States government gets tariff money. Where’s it coming from? It’s coming from us, the consumers and that to take two K, that was tariff 101 with Professor Tony Martignetti. Uh I don’t know about professor like uh adjunct adjunct lecturer, adjunct lecturer for a half a ha uh for like 20 minutes on tariffs. Maybe I could, maybe I could expand a little bit. So like one third of one lecture, Adjunct lecturer, Tony Martin. I I wish all my lectures were that short in school? That insightful is what you mean? Insightful. Well, you put a lot of information in a short amount of time and I think a lot of professors could learn how to do that as well. That may be. Yeah, I, I, right. I’m not, uh, particularly verbose unless I’m having some fun with, uh, verbosity and, and, uh, word smithing. But, uh, otherwise, yeah, I’m, I think I’m pretty, pretty to the point. Yeah. Well, we’ve got VU, but loads more time, here’s the rest of board members are people too with Judy Levine. All right. So that sort of answers. Uh, dumbing down, you know, we’re not, we’re not, we’re broadening. Yeah, we’re broadening. And there are advantages. What would you say to folks that are the advantages to them personally learning, learning, learning about, uh, uh, learning from folks with different backgrounds? There is an incredible gift to be, had to be able to listen. I’ll say this personally as a white person working in a diverse environment. Um, it is humbling and awe inspiring to be in a place where you can really hear from people who didn’t, who are just like you and have them change your mind and open your mind. That’s what you gain by being in a diverse environment. And not only will you make better decisions for your nonprofit, but you will learn more and be a kinder person who in and of itself understands the way you interact with the rest of the world in a different way folks, if you want to see a diverse team, then, uh, pause the podcast and go to Cause effective.org, go to their team, uh, team or staff page and look at the, look at the pictures of the, the, the, the, the staff at Cause effective.org and then of course, come right back and press play again. Don’t, don’t, don’t, don’t start browsing, you know, don’t go to amazon.com too. Just look at Cause effective.org and you’ll see uh enormously diverse team there. Um All right. So, you know, that that’s anything more you want to say about wh why this is worth it for the organization or for the people. Um We live in a diverse world. I mean, you know, no matter where you are, um we, we live in a world in a country certainly. And in a world with lots of different kinds of people from lots of different kinds of backgrounds. They bring a lot of different things to the table and that are really interesting to interact with um what better way to interact with them than in the support of a cause you love so that there’s, you know, you’re all putting your, you know, shoulder to the wheel together. Um It, it gives you your life spice to be doing this in a way that’s not ho homogeneous and your organization itself will be stronger. Yeah. In the ways you just, you, you talked about a few minutes ago. Yeah, you you have some ideas about, uh, how to do this. Uh, it, it sort of efficiently shave, shave some, some time off. What? Well, one of the things that, you know, we all know that executive directors, well run boards, executive directors are behind them kind of every step of the way. Um, but in boards that really take off, there’s board to board conversation that the executive director kind of monitors but is not board of every conversation. And so, and when that happens, it’s because there are, there’s not just a board cheerleader, but there are many leaders. So there are leaders of governance or there might be a leader of on boarding or there might be a leader of uh you know, there, there’s different ways to chunk it up so that it, there’s leadership at the uh which leadership leads to ownership. Um And so part of your job as the board liaison, whether uh is to understand what that web of relationships could is and could be and then to do in essence what we call, you know, hr staff development, but with board members, so you ask them to take on certain things and then your job is, is being a coach, not being a doer. We, we’re talking about the, the CEO executive director now. Yes, sir. Yeah. And, and the development director also development and, and working closely with the board chair means it, it’s gonna help enormously to have a AAA culturally sensitive board chair. Yes. Um I send board members, especially white board members to trainings and not just what is de I but to real immersive, you know, one or two day trainings about the, how this culture rests on has rested on um racial injustice. Um I say if you’re going to be part of this organization, you need to have this basic understanding. Um And we need you to do this two day training and, and here’s, you know how to pay for it. Um Because there’s a basic understanding of that, that really shifts in those kinds of very immersive trainings. I’m not talking about a two hour what hr does at a large corporation. Um And, you know, we just said these are our values and you have to really get it. If you’re gonna be part of this team, I would certainly do that with board leadership, but this is a journey and this is part of the, and, and we want the board to be part of this journey and we need the board leadership to start it out. And if the board chair won’t do that, you do a succession plan, it’s not like you kick them out right away. But ultimately, a board is not gonna progress until you have somebody at the head of it for whom this is the air they breathe. Hm. Now you can have a chair and a president, you can have an honorary chair and an honor. You know, there are all kinds of ways to move people to the side that don’t, you know, kick them off this planet. But ultimately, you need to have someone who does, who, who breathes this stuff and who you don’t have to explain why this matters. And then it’s deeper than going to a training to understand what implicit that, that exi implicit bias exists. Right? One of those two hour trainings, ok. Say a little more about joyful board service. What we, what we can aspire to. I, I, you know, I get this so often where board members, the boards that we’re working on, they’re, they’re niggling, they’re going after, you know, do I have, you know, is it 2000 or 3000? What do I have to do? That’s the question as to what, as to, you know, it’s like I’d like to get away with as little as I can. Um And, and it’s an imposition on me as opposed to I will do everything I can. I may not be successful at everything, but I’m gonna give it a shot because this mission matters so much. And if I can help it, God willing, I’m going to and there’s when people are at the table with that attitude, there can be a joy at both delivering yourself and seeing other people deliver and celebrating that. Um And you can build that in, you can build in celebrations, you can build in you know, balloons for somebody when they hit a certain mark. Um, you have to build in not just, um, the actual dollars, but you can build in. They made thank you calls and they never talked to anybody before. You know, there’s all kinds of ways to build in a sense that I can do be part of the fundraising process, which then builds more courage for the next step. But it doesn’t happen unless you think about it celebrating small successes. That’s, that’s a terrific idea. Yeah. And you wanna build in this, this sense of, for, for every board member so that they are looking for ways to celebrate each other. Mm. So it doesn’t just come from you the CEO, it doesn’t just come from the board chair but that they are trying to help each other up that ladder. You like to see board members uh, socializing outside. I mean, I, I can presume your answer but I want you to say it socializing outside, outside the, the form the board meetings. Iii I do but I also am realistic. Um, I don’t think it’s necessary for them to be personal friends. In fact, I’ve been on boards with people who are personal friends and it’s tough. Um, because then they kind of talk about things outside and there is like, becomes factions. You certainly don’t want, um, relatives on the same board that I’ll tell you right now. Um, not just married but brother and sister replaying the, you know, the childhood, you know, I’ve seen it all I can see in your face and it sounds like you’ve been there. Yes. Um, the b, I don’t, I think that people have to like each other. Yeah. And I think you need to have some social places. You know, it’s been hard, don’t they need to get to know each other outside the board? Um, but that’s different than, um, going outside their board service. I mean, maybe not, maybe not necessarily to me that’s part of their board service. Ok. Um, that part of their board service is, understand, you know, it’s team building and the organization can facilitate that. Right? I mean, can we have, can we host drinks or dinner after a meeting? Yeah. Um, it’s, that’s one of the things that’s been much harder in zoom. Um, my part, you know, cause back of itself as a nonprofit and they had a board dinner once a year, but they should have at my house and one year I had the flu and they had it at my house anyway. And I just went to bed and they, they stayed up till like midnight and cleaned up after themselves and left, um, that we miss. So we have a game night now, once a, once a year on Zoom because it’s once a year everybody comes and they do all kinds of like 322 and a lie and all kinds of stuff, but it’s not quite the same. Um, we did have an outdoor picnic this summer and about half the board came. Um, yeah, it’s hard, you know, that’s the hard thing is now getting people out of their shell because we’re all used to now doing everything by Zoom or going to work and coming home and, you know, scurrying home. What Zoom has that? I haven’t quite figured out is that time before meetings, that time in the middle of meetings, you know, those the times of the after meetings, those kinds of times when people would talk to each other about their kids, right? Building that in um what we’ve done some of this in the, you have to do it in the middle of the meeting because people run out at the end of the meeting and they won’t come early no matter, they say, you know, two board members will come early, right? Um But if you break into smaller groups in the middle of the meeting, even if it’s only dies or triads and give them something to discuss. Um You know, one of my provocative questions is how does your birth order affect? Um the way you take on leadership, which gets into all kinds of personal background, it assumes strength and it gets people talking to each other. So having a section like that in the middle of each board meeting can help people to start to bond and then obviously changing the, you know, changing the groups up. Yeah, and making that group uh a hint, make those small groupings deliberate. Don’t just leave it to the Zoom Universe to deliver the development. Yeah, you can either make them random or you can assign people to be with, with other, with other people and the assigning is, is much better. Yeah. Yeah, I’ve done that in some of my trainings. Um uh What else, what else you wanna touch on around this, uh this equity and equity in boards and, and inviting folks in and joyful board service. Um Welcoming notion of enlightened self interest, which I think uh it has to do with understanding the uh the meaning of your cause to people who are not directly affected by it. So, you know, when we’re teaching fundraising, we’ll say um OK, you don’t fundraise just for the people who have direct interest to your cause because that’s your clients. And if you could raise your money from them, that would be earned income and you wouldn’t be a nonprofit, but you can’t raise money from people who have no connection to your cause because it doesn’t make sense to them. Why are they gonna lie on it? And that’s the same thing with board members. You can’t ask board members to fundraise if you, they don’t feel connection to cause and, or to audiences that don’t feel connection, but you have to find the enlightened self interest, which is myself as a member of the city, this neighborhood, this grouping that I care about Children, having a head start. That’s why you’ll often find like a mom’s group in Westchester suburb in New York that’s fairly wealthy. Most of it um will take on fundraising for a program in the quote unquote inner city because they understand the meaning of this work for Children even though it’s not their Children. And the reason I’m bringing this up is because that’s where the ownership comes in the sense that it’s on to. It’s up to me to make a difference for this and that this matters to me even though it’s not my personal experience. And I think that’s group conversations, it’s conversation in the courtship process and then it’s group conversations at the board level to keep that fresh. And it has to be deliberate because it’s the board service devolves into finance monitoring. Oh, yeah, if it’s right, if it’s allowed to discussions about why the mission matters to whom does the mission matter? Beyond just the direct recipients are very inspiring and they give your board members personal uh you know, nurturing and the tools to go out to their contacts with different kinds of language. And you will often find, you know, I’m looking for areas in which different people can be experts, not just the people who have a lot of board experience or who are, you know, long time experienced fundraisers, but that people with different points of view can have the position of being an expert. Hm. And this is where you will find points of view that your classic cabal has not thought of conversations. Yes, I love how you pause and, and think through and then make your next point. Uh, I’ve just been talking to you for, uh, 40 minutes, whatever, 35 minutes I, I’ve learned. All right. Give her a couple, give her a couple of beats because uh she’s got, she may very well have more to say, I love you the way you reflect. I, uh I, I don’t have that gift. I tend to be more, more impulsive and II, I spew everything out in one shot. Well, that’s why you’re on the radio and I’m not interesting to, um, you know, I, I wanna, having served on a board, you’ve been on multiple boards. Not that many because I take it really seriously. Yeah, but it’s been more than one. Yeah. Um, and then being a, an executive director myself and, um, being a consultant of board gives me humility about, about the possibility of board service. Um And I feel like, uh people who are only on staff have expectations, uh and anger when board members don’t meet their expectations. Whereas I’m trying to say it’s human nature to triage the kind of people who will agree to be on a board are often fully committed. I don’t wanna say over committed because you commit to what you commit to and it makes sense for them to do what they have to do and not more because there’s always something else calling on their time, let alone, you know, the idea that they might wanna play golf or read a book. If you do that, if you understand it, that that’s rational, human behavior, then you don’t get as angry at people, you manage them that everyone’s gonna triage that they’re gonna, they’re gonna assess their priorities and they’re gonna, and they’re gonna act accordingly and it’s up to you to have a dialogue about that. It’s not that you, you know, there’s something wrong with letting people slide or something, but it’s um it’s understanding and helping them understand how to fit in with all the different priorities of their life, right? And where does this mission fit in, in your, among your priorities? Right. You know, it’s why I, I um when, when I, when groups do uh board member, um the contracts or whatever they call them, um I suggest that there actually be calendars in there so that you, somebody can say to you, I can’t do that in June because my twins are graduating high school. In which case we say, you know what, we’re gonna take you off of that and we’re gonna take you off of me so that you can have a very because they’re not gonna do it anyway. Yeah. And then they just stop returning your phone or they don’t respond to emails. So having respect for all the different po pos rationally on board members, time and life and energy. Yeah. And then helping them understand how to fit this in, in a way that makes sense. All right, let’s uh give you, I wanna give you a chance to uh talk about cost effective because it is a nonprofit. It’s a, it’s a consultancy for nonprofits. They’re advisors, consultants. What, what uh what, what’s the breadth of the work? And how do, how do you work with, with your client nonprofits? Well, I, you know, I’d say we are 40 this year, we are about to celebrate our 40th anniversary. Congratulations for decades. Um And I’d say that the common theme throughout has been changing how organizations are resourced, um changing the balance of money and therefore power in the sector. Um And it’s both increasing it and increasing it so that it’s not just that the most well resourced nonprofits get more resources but that it’s nonprofits that are located in disenfranchised communities and the people who work there and um uh and volunteer there are able to raise the money, they need to further those causes um And to govern themselves because to me, governance is integra apart, it’s more than just raising money. But if you don’t have AAA governance structure that works, you’re not gonna have a fundraising structure that works on the voluntary level. Um and that’s where you get to organizations where the staff fundraises, but the board doesn’t and the volunteers don’t. Um So we have, we work, we do a lot of cohort work where we’re looking at the development directors of color and we have um working with them over a six month period of time, um in a particular program that we have to help them really address um the barriers to their being, being successful and not only to talk about it but to actually address it. Um We, so we do a lot of individual coping with, with, with um executive directors who may have come up through fundraising and, but, you know, you need to do it if they need it. It is not part of the fundraising structure. The organization is only gonna get so far. Um, and board members, a lot of board consulting, um especially now with boards that know they need to diversify and don’t really like, they know they need the composition, but they don’t and they don’t necessarily know that they need to act differently to have different people in different seats. Um We do everything from, you know, eight hour retreats on Zoom, maybe six hours uh to year long coaching engagements to what we call deep dive um transformation, which is a lot of times people come to us and say, well, my board won’t fundraise and we get in there and we start talking to board members and we find out there’s all kinds of reasons. It’s not just that they don’t know how to ask for money, but it’s that there’s not financial transparency, there’s not, um, a real partnership between staff and the board. Um, there’s not a peer to peer accountability on the board. Um, there’s a, in a group of three board members who do everything and everybody else slides. Um, you know, there’s all kinds of reasons that we will help. We will actually go in and help address. We say that that’s a symptom. My board won’t fundraise and there are, you know, many, many causes of that and we will, we, one of the things we’re known for is that we will go in and address the cause. We’re not just gonna do the tactics. Um, we also do a lot of fundraising consulting for groups that, um, have had a lot of government support or a lot of foundation support and know they need to diversify and they don’t necessarily have, you know, a Lincoln center board. Um, but it is very possible that people around the country or world will care about what they do and will back it up and want to make it happen if they, you know, for one of the things they say is that in fundraising, the one thing that’s, that’s um limited is time. There’s only 24 hours and maybe one second or maybe now two seconds in the day. And so you need to make choices that are smart with how you spend your fundraising time, money is not the limiting factor, but time is. And so we’ll help groups really understand what are the likely avenues and how to structure the resources they have to reach those days. Get longer. What was one or two seconds? It actually they did make a ruling and there’s like they added a second or something. Oh, I didn’t hear about that. I, well, I’ve been squandering my, my two seconds a day. For. How long have we had this? How long have we had these longer days? Go look it up. Six months. Yeah, I don’t know how many seconds that is. I can’t do the math that fast. No, but six months is 100 and 80 days. Times two seconds. 360 seconds. It’s a good six minutes. I’ve, I’ve, I’ve, I’ve, I squandered. All right, I’m gonna try to get it back right now by cutting you off. No, no. All right. Thank you for explaining. And, uh, thanks for a frank conversation. Yeah, we don’t, you know, for our, for nonprofit radio, uh, white listeners. Uh, we’re not, we’re not, uh, we’re not going easy and you have to have, you have to have honest conversations. So, thank you. Yeah, I, I think this has been some of, you know, I’ve been in this field for 30 years and this has been some of the most rewarding and deep work. Um, it’s not surface, it really addresses, you know, I had to go back to everything I assumed from my childhood on and understand that there’s, there are different realities and that, um, it’s not that I can go back and change it, but I can change my behavior going forward so that I further a different kind of future. Mm. She’s Judy Levine and she’s the executive director of cause effective. Uh you should have already been at their website because you would have seen their diverse team when we uh when I suggested take a pause and then you came back. But if you haven’t been there or if you don’t remember where it is, it’s at. Cause effective.org and Judy Levine. Thank you very much. Thanks for sharing. Thank you. It’s great to have this kind of conversation. Pleasure. Next week, Professor Russell James returns with the right words and phrases for fundraising. He got sick and couldn’t record for this show. I know you believe that you believe the guy he comes up with, he comes up with uh I lost my voice. No, we’ll, we’ll have them next week. If you missed any part of this week’s show, I beseech you find it at Tony martignetti.com were sponsored by donor box, outdated donation forms blocking your supporters, generosity, donor box, fast, flexible and friendly fundraising forms for your nonprofit donor. Box.org. I love that alliteration. Our creative producer is Claire Meyerhoff. I’m your associate producer, Kate Martignetti. The show, social media is by Susan Chavez. Mark Silverman is our web guide and this music is by Scott Stein. Thank you for that affirmation, Scotty. You’re with us next week for nonprofit radio, big nonprofit ideas for the other 95% go out and be great.

Nonprofit Radio for October 16, 2023: Financial Literacy For Your C-Suite & Board

 

Dean Dalzell & Jerry Frick: Financial Literacy For Your C-Suite & Board

Leadership that understands your numbers protects not only your nonprofit. It also protects the people filling those roles. Two finance and audit pros walk us through six key metrics that anyone can understand, and that reveal the true state of your financial standing. Dean Dalzell and Jerry Frick are from Veracity Pros.

 

 

 

 

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Every nonprofit struggles with these issues. Big nonprofits hire experts. The other 95% listen to Tony Martignetti Nonprofit Radio. Trusted experts and leading thinkers join me each week to tackle the tough issues. If you have big dreams but a small budget, you have a home at Tony Martignetti Nonprofit Radio.
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[00:00:34.12] spk_0:
And welcome to tony-martignetti Nonprofit radio. Big nonprofit ideas for the other 95%. I’m your aptly named host and the pod father of your favorite abdominal podcast. And don’t I sound much better than even just last week, 99% back to normal. And I’m glad you’re with us. I’d bear the pain of Lenticonus if I saw that you missed this week’s show. Here’s our associate producer, Kate with what’s coming?

[00:01:15.04] spk_1:
Hey, tony, we have financial literacy for your C suite and board leadership that understands your numbers. Protects not only your nonprofit, it also protects the people filling those roles to finance and audit pros. Walk us through six key metrics that anyone can understand and that reveal the true state of your financial standing. Dean Dell and Jerry Frick are from veracity pros an Tonys take two

[00:01:17.45] spk_0:
Oklahoma City. Anyone

[00:01:50.79] spk_1:
were sponsored by donor box, outdated donation forms blocking your supporters, generosity, donor box, fast, flexible and friendly fundraising forms for your nonprofit donor box dot org and buy Kela grow revenue, engage donors and increase efficiency with Kila. The fundraisers, CRM, visit Kela dot co to join the thousands of fundraisers using Kela to exceed their goals. Here is financial literacy for your C suite and board.

[00:02:49.78] spk_0:
It’s a pleasure to welcome Dean Dasell and Jerry Frick to non profit radio. Dean has almost 30 years of leadership in administration, accounting and finance across nonprofits and for profits. He is also an outsourced CFO at veracity Pros. Jerry Frick is a finance professional with extensive experience in financial reporting analysis, forecasting, budgeting cash management grant administration and we may as well throw in auditing and internal controls. Jerry is also an outsourced CFO at Veracity Pros. The firm is at veracity pros dot com. And Dean and Jerry are both on linkedin Dean gel. Jerry Frick. Welcome to non profit radio.

[00:02:53.85] spk_2:
Thank you. Glad to be

[00:02:54.79] spk_3:
here. Thank you, tony. Glad to be here. I’m

[00:02:56.80] spk_0:
glad you are. Uh the first thing I think of is Dean and Jerry. Uh Dean Martin and Jerry. You gotta take this show on the road, the Martin and Lewis show, change your last names and start doing movies together. Duly

[00:03:09.07] spk_3:
noted.

[00:03:10.91] spk_2:
I’m ready. Where’s, where’s the casting goal?

[00:03:13.77] spk_0:
Absol Martin and Lewis, they did, they did dozens of movies together, whatever. I don’t know how many but uh there were theaters, you know, you should take this show on the road as Martin and Lewis.

[00:03:22.72] spk_3:
We’ll just have to figure out who the Straight Man is.

[00:04:01.86] spk_0:
Yes. Well, well, Dean, you’ll have to, you’ll have to make that sacrifice. That’s gotta be you, you stay, you’re gonna stay true to the, to the, uh, to the original team. Um All right. So let’s talk about some fiscal literacy, financial literacy, maybe for board members specifically, but, you know, not necessarily it could be for uninitiated or maybe un indoctrinated. I don’t know, uh, other c suite folks besides CFO S you, you are both outsource CFO S. So you’re, you’re seeing a, a broad swath of nonprofits. Why do we all just, why do we all just get hung up on numbers? Why, why do we gloss over financial, uh, financial statements? Even simple balance sheets, audits. What, why, why do we, why do we all get scared and frozen by these?

[00:04:17.14] spk_3:
I think that’s a great question, tony. I, and it’s a lot that we’re trying to help in what we’ve seen in working with different organizations, especially C suite and leadership and boards of different organ nonprofit organizations is they see the numbers, they gloss over and they are happy that they got numbers but they don’t necessarily know what they mean.

[00:04:37.75] spk_0:
So they should, they, hopefully they’re happy but they don’t even know if they ought to be happy.

[00:05:21.40] spk_3:
Exactly. And so it really gets down to the fiduciary responsibilities as a board, uh, you know, duty of loyalty, the duty of care, the, the duty of obedience, but making sure they’re fulfilling those uh, fiduciary duties and, and what we’ve seen both working with pros and in our prior life is, is that there’s really an opportunity to help the boards. Uh And I, and I jer know I can talk about this much more deeply than I can but really help the boards, uh assess what’s going on, uh, address what’s going on Act and then when necessary applaud. And that’s really what we try to help leadership, uh, folks and organizations do is how do you, how do you take those numbers? How do you understand those numbers understand what they’re telling us where we are, where we’re going. Um And how we do that in an effective way instead of giving them reams and reams of uh six point fonts with tiny numbers and dot

[00:06:12.65] spk_0:
points. Yeah. And you know, and, and my, my fear is that when it comes time to review financials, um, you know, it’s sort of done like five minutes before the meeting starts, people are flipping through, flipping through pages and, you know, that they don’t make any sense. They’re, they’re, they’re definitely abrogating their duties to the organization, to your, to your points dean, you know, they, they, and, and to themselves, I mean, they, they need to protect themselves as board members um as well as the organization and then, but it’s also, as you mentioned, you know, it’s also other, other c street leaders. I mean, they, it, it doesn’t, we, we can’t just all rely on the CFO to, to, we, we gotta have some literacy amongst ourselves. No. Is that is that, is that true, Jane Jerry?

[00:07:33.54] spk_2:
It’s absolutely true what you’re saying, tony and, and uh unfortunately, it’s all too common in nonprofit organizations that the, you know, the, the financial reporting is done by the CFO and quite often only understood by the CFO and that’s really the broken link. Um And, and it’s really not, you know, when, when you think of, of board compositions of nonprofit organizations, they go out and recruit board members who are gonna identify with their mission and maybe have some specialties in, in the mission area. A non profit is lucky if they get one board member who can understand financials. And so you’re right about, you know, just how quickly they get glossed over and you know, the, the board collapse if they get a report, even though they don’t understand it, they don’t have any idea what it’s saying. And that’s really the dilemma that, that we are trying to overcome with our clients is, is we want to get them reports that are not just jumbles of numbers that make no sense. We want them to see something that they can connect to. Um and, and really understand the financial health of the organization. And also how do those numbers connect to the mission delivery that that organization is trying to fulfill?

[00:08:15.99] spk_0:
All right, so, so let’s dive in. So how do we start to make this, these statements, these numbers uh you know, less abstruse to people more comprehensible, connect with them, Jerry, as you said, you know, how, how do we, how do we start to break this down so that it’s not just one person or maybe two in the entire organization, including the board that, that can make sense of these things.

[00:09:31.11] spk_2:
So I think you, you use the term that I would use to, it’s break it down. Um We’ve got to get away from thinking, you know, more data is better. Um The data is there, the CFO is required to understand the data and what everybody else needs to understand is what is the story that this data is telling us. So you have to break it down into, into the components that are really important and you know, when it comes to reporting those components to the board, uh less is more in my opinion, you know, so don’t I my experience and I know Dean has had this experience too. If you provide a board financial reports that just have columns and columns of numbers, you’re inviting them individually or collectively to go down rabbit trails that are just gonna waste time and accomplish nothing. So what you wanna do is you wanna summarize this information in, in a much more readable fashion.

[00:09:34.18] spk_0:
A dashboard uh uh uh A dashboard is

[00:10:14.24] spk_2:
perfect. We focus on dashboards and, and taking a balance sheet as you said and taking the income statement and, and summarize the numbers down to you know something much more readable. But then you, you can’t just stop there. You’ve got to provide and this is what the CFO S job and probably the executive director or CEO S job is. You’ve got to provide some analysis of what this is telling you. So that could involve narrative, it could involve charts and graphs, something more visual. And Dean, you want to speak to that so

[00:10:59.20] spk_0:
we can go to the visual. But, but let’s get to some key metrics because uh and, and maybe visualizations may help. I’m not dismissing that but and this is perfect because you, you two are uh talking to the guy who took uh accounting for poets in in college. I mean, I mean, all I can remember is assets, equal liabilities plus owners’ equity. I never understood how the two columns could come out to be equal. It just seemed like magic to me. It seemed like a bunch of lies and magic. I don’t know how the two numbers that the columns were supposed to always equal to come out to be the same to me. They sound opposite assets and my abilities. But you don’t have to explain. You don’t, you don’t have to help me pass my college, my college accounting course. But let let’s get to some like basic metrics. What, what, what are some, I don’t know, four or five key numbers or key trends there, there’s not a specific number that, that leaders and board members need to track.

[00:12:22.98] spk_3:
Well, that’s a, it’s a great question and I think, and you, you hit the nail on the head. Tony is sometimes with some boards, it’s even an educational process on what a balance sheet is. What are assets? What are our liabilities? What are net assets? What are unrestricted, net assets versus temporary restricted net assets and then the statement of activities and the statement of cash flows. So we’ve even found before we even get to the ratios of doing an education and have it be a continuing education process for the boards just to help them read a financial statement at a very basic level, mind you but, but this helping them understand, you know, assets is what, what you own and liabilities is what you owe and net assets is what you’re worth and sometimes just the principles of that and then once they have that base education, start looking at things of like their current ratio, which is a pretty common, you take a look at your current assets against your current liabilities and assess where you’re at. And typically we like to recommend to most organizations uh that that current ratio be uh be at least two that you have at least $2 of current assets to, to every dollar of current liabilities that should give you at least some cushion, not a whole lot mind you, but at least some cushion to whether uh any changes on a period to period basis is a great one.

[00:12:32.92] spk_0:
Ok, so that’s what you call it, the current current ratio, assets to assets over liabilities of assets to liabilities,

[00:12:48.88] spk_3:
current assets, current liabilities and when I say current assets, any assets that, um, that aren’t held like in buildings or, or any long term investments or that type of thing, things that can be easily converted,

[00:13:21.60] spk_0:
liquid have some, you know, you can liquidate them within two weeks or a month or something like that. Not a building. But, but, you know, I don’t know, I can’t think of an example but, uh, ok, something that you could, so that if your liabilities got worse then because you, you like to see a 2 to 1, uh, uh, assets, liquid assets to, to liabilities as a minimum as a, as a minimum

[00:13:23.38] spk_3:
and the current liabilities would be anything you have due in the next year. So that would be any typically in your accounts payable and bills you have to immediately. And then also if you have a mortgage, any, any liabilities that you have over the next 12 months or if you have a loan or other obligations that you have to others outside the organization.

[00:14:02.26] spk_2:
And it’s really for the board to understand if you don’t have a good current ratio, if you don’t have at least that 2 to 1, you know, what if it’s 1 to 1, um, you know, really what, what that is saying, or what abort should interpret that to mean is we have no flexibility. You know, we all of our assets are now spoken for because of our liabilities. How do we operate this organization going forward? How do we deliver any mission when we have no capability of investing any additional assets and programs?

[00:14:25.24] spk_0:
1 to 1 sounds treacherous. It is treacherous or less. I mean, it could, could be less than one too.

[00:14:50.15] spk_2:
We’ve absolutely had experiences with organizations who are less than one and it really can handcuff that organization from being able to sometimes even being able to operate for, for the long term. I mean, that’s when we start to get in to have the conversation about, can you sustain this? How long can you sustain this organization with this kind of financial picture?

[00:15:27.96] spk_1:
It’s time for a break. Donor box. You’ve heard the testimonials, easy set up, fast checkout QR codes simple for your donors and incredible results like you’ve gone to 10 18 70% increase in donations. If you’re looking for a fast flexible and donor friendly fundraising platform for your organization. Check out donor box, donor box dot org. Now back to financial literacy for your C suite and board.

[00:15:33.82] spk_0:
All right. So that’s great. The current ratio sounds critical. What’s a, what’s another valuable benchmark for, for, for leaders leadership to, to be tracking?

[00:16:25.01] spk_3:
I think another time they one is days of, of calculating how many days of cash that you have on hand. And the reason I say timely is just in the matter of last week, uh, nonprofits who received federal funding were staring down the barrel of a federal government shutdown. Um And so some nonprofits either whether they’re government funded or even not government funded. If you lose a ma major funder or your, your pipeline of funds is stopped because congress uh is failing to act and improve a budget or approve continuing resolution. How many days of cash do you have on hand to continue those operations? To make payrolls to pay your immediate bills? So that’s again, taking a look at your liquid cash or things that could be easily converted to cash and then taking a look at your expenses that you have and try and calculating an average daily expense,

[00:16:36.16] spk_0:
average daily.

[00:16:57.36] spk_3:
And so you take a look at your total cash. You take a look at your average daily expense, uh and then you come up with a number and typically depending on the organization for most government funded nonprofit organizations, we typically like to see 30 to 90 days of cash on hand. Meaning if there’s all of a sudden, a sudden sudden stoppage, uh they can continue for another 1 to 3 months for other non profit organizations. Uh We typically like to see up to 100 and 80 days. So up to a six month, it can sometimes be difficult for government funded because a lot of government funded organizations are reimbursement based. The government asked to spend the money and then you get the money from

[00:17:16.38] spk_0:
that. But what instance would it be where you want it to be more like 100 and 80 versus 30?

[00:19:11.62] spk_2:
Well, again, I think that then again, this is a great opportunity for the board to really think about what are our sources of revenue, what are the risks of losing some source of revenue? And therefore, you know, if, if the risks of a source of revenue, either drying up or needing to change are high, then you would want to set a benchmark or a target for a greater number of days uh of cash on hand or some, you know, some boards who want to, you know, just be more prudent and look to an unknown future. They, they may just want to say, hey, we want to set aside six months of operating cash in a reserve fund so that if something does happen, we already have it. We don’t have to worry. We, we can go on business as usual because we’ve created a rainy day fund. If something has happened. But one thing I wanna mention on this as well, tony is there are organizations, there are non profit organizations we’ve encountered who have too much cash. And the risk there is if you are going out to donors, private foundations, corporations, individuals and continuing to solicit contributions from them. And they wanna look at your financial performance before they make a decision if they see that the organization is sitting on a whole lot of cash. The obvious question they’re gonna ask is why do you need my money? You got all this cash in the bank. Why should I give you anything? You know? So there’s a danger on the flip side too?

[00:19:41.99] spk_0:
Ok. Ok, good. All right. So risk management, uh but operational management as well. All right. What a current ratio, days of cash? I love these, you know, let, let’s identify like half a dozen or something. What, what’s another, I’m not, it doesn’t have to be six but, you know, some decent numbers. So that, so that people know, you know. All right, here’s, here’s the numbers that, that this board wants to track on a quarterly basis and we, so we want to see not just the current but the trend also. So if we identify a problem with days of cash in, uh, in Q one of, of 24 do we see a difference by Q two or three? You know, are we improving? So what else, what else besides these two metrics?

[00:22:05.35] spk_2:
So another one that, um, seldom gets looked at, but it needs to be looked at a lot more is what we would call fundraising efficiency. So, really, but that is looking at it, it’s, it’s taking the total amount, you know, choose a period of time and how much money did you raise through contributions? You know, et cetera in that period of time. And what did it cost you internally to raise that? So, if you raised a million dollars in the last six months, that’s great. What did you spend, if you spent a million dollars to raise a million dollars, you’re not very efficient in your fundraising methods. So you really need to start to break that down and, and start finding out what are the diff, you know, what are the different sources of revenue you’re raising? How are you going about it and, and break it down to? What does it cost us to raise $1 of revenue? If it’s, it’s, if it’s a dollar to dollar, something’s not efficient, you know, you, and there are different metrics that you can measure against, you know, and it depends, you know, if you’re doing a fundraising event, for example, that’s one of the most costly types of fundraising that nonprofits engage in you. The organization is lucky if it, if it makes 15 cents on the dollar. In other words, it may cost 85 cents for every dollar raised in a fundraising event. Whereas though it takes longer, it takes a longer period of time to solicit grants from private foundations. The return on the time spent is far greater. It may only be, you know, maybe 10 cents of expense for every dollar that you can be awarded in private foundation grants. So again, you gotta break it down and figure out, you know, the organization needs to understand where does it want to put its the resources that it is committing to fundraising um uh activities.

[00:23:11.89] spk_0:
And this is, this is commonly referred to, as you mentioned it in passing cost to raise a dollar. What does it cost us to raise, to raise a dollar? Um The, the, you know, there’s a, there’s a lot of uh our confusion about or uncertainty about what to what to include in the costs. So, you know, you mentioned grants, Jerry. So, you know, you have a grants researcher and writer, so his her or their, you know, direct cash compensation, all their benefits, right? You know, that that’s fair to lump in. Uh if I would say, you know, an individual fundraising, all the, all the major gift officers that you have all their direct cash, all their co comp usually is another 25 30 maybe 35% depending how generous you might be. Uh So you can include their cash and their compensation, um their benefits. Um But then beyond that, you know, what’s what, what’s, what’s fair game to include? That seems to be a lot of it seems to be a lot of open discussion about what belongs in there.

[00:23:56.44] spk_2:
What? Well, uh I would be asking the organization, what are you spending on marketing and advertising and where are you spending it? You know, are you doing direct solicitations via either the old traditional mailing solicitations or using social media for doing solicitations. Are you meeting, you know, do you have gift officers who are meeting one on one with uh potential contributors? And what does that cost? You know, are you, are you buying meals? Are you, you know, do you have, are you spending any kind of money on donor relations, you know, gifts or any, any other, you know, what do you spend to acknowledge gifts and that sort of thing? All of that needs to be considered. Yes, you’re right.

[00:24:26.63] spk_3:
And a piece that’s that I’ve seen excluded that, that I would recommend not excluded is, is just the administration, administrative instru infrastructure because that fundraising department is gonna use the finance and accounting team is gonna use the hr team is gonna use the, the it team. So I don’t, although I don’t like the term overhead, it’s overhead is making sure that your fundraising area, all people that you had mentioned, tony are also being attributed that they can’t exist in a vacuum. They use the organizational resources in order to get their job done as well. So you have all the direct costs that Jerry had mentioned and the staffing costs, there’s also uh an infrastructure cost just to be a part of the organization that should be attributed to that fundraising

[00:25:01.56] spk_0:
as well. Right, proportionally proportionally. Absolutely. Right. So, you know, finance 20% of finances time maybe uh booking gifts, let’s say, let’s say finance books it and there’s not a, there’s not a uh uh AAA data processor, you know, a data processing function in the fundraising team that finance attributes to 15 or 20% of its work to, to the work of fundraising. So 15% of that financial overhead that, that finance team like, like like that, is that right? Is that

[00:25:31.27] spk_3:
you absolutely right. And that ensures, especially if you receive grants and even more specifically government grants that ensures that you’re not charging those finance costs that 20% to a grant. That that would would absolutely be, it would be a contract violation if you were charging some of those fundraising costs to a funding source that says, you know what, that’s not allowable, you can’t do that. So it’s making sure that those costs are identified appropriately and proportionately. I like that term that you used to each of the areas that, that, that finance or hr department serves.

[00:25:59.24] spk_2:
I think we, we, we can’t forget some of those easily forgettable costs. You know, think about how does money move these days, it’s moving electronically and through credit card transactions and all of those have a cost and again, those are often overlooked as part of your fundraising expense. You know, the cost to process all of those credit card gifts.

[00:26:32.15] spk_0:
Ok. Yeah, fair. Right. All the, all the back end whatever apps you subscribe to or platforms that are supporting you, whether it’s mailchimp on the male side or, you know, give butter on the, on the, uh, on the donation processing side or, you know, whatever. All right. All right. All right. So we got three. Any uh what other, other critical metrics for leadership

[00:29:00.57] spk_3:
management and fundraising expense is another one. We take a look at this one can be some controversial. Uh, because I think there’s different uh uh ways on on assessing what, pardon me, what is appropriate and what’s not appropriate. But that’s really how much is the organization spending on management and administration. And we typically include fundraising in that, uh, in that overall versus how much is it spending on programs spending on, on direct mission. Uh, and that really has a wide range and it really depends on where the organization is at. So when I say right, wide range at the, at the low end, I would say 7 to 9% the very low end. So that means out of every dollar 7 to 9 cents is going to support, uh, fin or going to support management administration, fundraising. Um, anything lower than that would indicate to that you’re probably not spending enough on your infrastructure. You might be operate a little bit like that. But, but, but it’s, it would be rickety, it’s not sustained, sustained. Yeah, absolutely. And, uh, and then that can range all the way up to 40%. Uh, and depending on where the organization that could be higher. Um Especially if it’s a new organization uh where you are spending on infrastructure to get it up and running. But once you approach 40% or 50% then all of a sudden you’re spending more or approaching to spend more on your management and administration that you’re actually spending on. The reason you’re there is to, is to achieve your mission and fulfill your vision. Um And, and the reason why I say it’s a little bit controversial is, is um some funders still today, see the lower number, the better. That’s not always the case for the reason I just spoke about. Uh, but part of it, whether the number is right or not, it’s more making sure the organization and its leadership know what their number is and where it’s tracking, uh work with a client the other week where um theirs is in the 30 which is fine for their organization, but it’s been tracking up over the last three years. And so I said, I don’t know if I would put a, uh a red, you know, to use a color code. I wouldn’t, I wouldn’t have your indicator or your dashboard like blinking red yet, but it might be starting to glow a little bit yellow saying, you know, keep an eye on this. Uh and, and understand what those costs are. Um And if there’s an opportunity uh that, that needs to be addressed uh or a challenge that needs to be addressed at some point in the future?

[00:29:16.96] spk_0:
Yeah. Are these, are these management and fundraising costs just creeping up, you know, unwittingly or, you know, on the flip side, there may be a conscious investment may maybe we’re investing in some administration and infrastructure for launch of a new program in 18 months. So we’re, we’re investing for the future. So it’s intentional but uh uh you know what’s going on? What is the reason?

[00:30:04.27] spk_2:
And tony, what you just said, that’s the question board members need to ask. So if they’re seeing these indicators creep up like we’ve talked about a responsive board needs to say why and then it’s the duty of management to know the story to be able to explain why. And then the board can say, ok, we get it, we understand we’re backing it, we’re behind you or it can also be the duty of the board to say, hey, stop one second here. Um we need to discuss this further because we’re not necessarily um certain that what’s happening in practice that we’re ok with

[00:30:28.45] spk_0:
so so this one is a ratio management and fundraising expense to program expenses

[00:30:34.48] spk_2:
to total expenses. You want to take it as a percentage of your total? Oh

[00:30:49.14] spk_0:
to total. Oh ok. Oh to total. All right. Oh because then because then what’s left is devoted to presumably. Ok. Ok. Ok. Yeah so that I just want to make sure, you know, again, accounting for poets. So the, so the denominator there is, that’s your, your annual, your annual budget total, your total expenses is everything, is everything. That’s your, that’s your annual, your annual budget, right? It’s your

[00:31:07.23] spk_2:
annual, it’s your budget. You’re operating your total budget, including all your program expenses. Absolutely.

[00:31:14.44] spk_0:
Of course. Program. Yeah. All right.

[00:32:02.84] spk_1:
It’s time for a break. Kila increase donations and foster collaborative teamwork with Kila. The fundraisers. CRM maximize your team’s productivity and spend more time building strong connections with donors through features that were built specifically for fundraisers. A fundraiser. CRM goes beyond a data management platform. It’s designed with the unique needs of fundraisers in mind and aims to unify fundraising, communications and donor management tools into one single source of truth bila dot co to sign up for a coming group demo and explore how to exceed your fundraising goals. Like never before. It’s time for Tony’s take two.

[00:33:26.24] spk_0:
Thank you, Kate Oklahoma City. If you are near there, I’m gonna be there in uh November from November 5th to the eighth. I’m speaking at the Sarky Foundation conference. If you’re in Oklahoma, you may very well know the Sarkies Foundation. Uh So if you’re in the area, if you would like to get together, I don’t know, coffee, lunch, drinks. Let me know again, November 5th to eighth. Um staying right in downtown, you can get in touch. Well, you could just use a simple email is the best way. Tony at tony-martignetti dot com. Uh, if you forgot my name, then you’ll, you’ll forget my email. So that’s not gonna work. Um, well, I guess you have to remember my name too to go to my site. If you want to use the contact page at the site, you’ll have to remember my name again. Uh, it’s tony-martignetti and the site is tony-martignetti dot com. So, I guess one way or the other, well, if we’re gonna get together, it would be nice if you could remember who I am that I would, I’d, I’d be grateful, you know, I’d be grateful. I promised to remember who you are. So, one way or the other get in touch, love to get together with you if you are in the Oklahoma City area and that is Tony’s take two K.

[00:33:34.82] spk_1:
Can you imagine, like going out to meet with someone for coffee and they’re just like, who are you again? Yeah. Just give me the free coffee. Who are you? I

[00:33:38.01] spk_0:
know, I’ve heard your name. I know, I’ve heard your name but, right. And you’re buying the coffee, right? What’s, what’s your name? You, you’re picking up the tab, right? Ok. No, I’m sure that’s not. I’m sure that’s not gonna happen.

[00:33:49.59] spk_1:
Giving people free coffee.

[00:33:51.76] spk_0:
Oh, no, I’ll pick up the check. Yeah. No, I, that part, that part will happen. Yeah,

[00:33:57.33] spk_1:
that sounds good. If you’re a

[00:33:58.71] spk_0:
listener, I’ll buy you coffee. Sure.

[00:34:02.36] spk_1:
We’ve got Buku but loads more time. Let’s go back to financial literacy for your c suite and board.

[00:34:12.46] spk_0:
Are there any other key metrics? Yeah.

[00:35:04.22] spk_2:
And I don’t know if I would define this as a metric, but it is certainly something that should be paid attention to and it’s called the composition of your net assets. So in non profit organizations, net assets have to be divided in two buckets. One bucket is what you call your unrestricted or without donor restriction. And then you have a bucket that is with donor restriction. And it’s really important to be certain that you understand what’s in each of those buckets in total. So again, a risky situation for a non profit organization is if they, if they see that a very large percentage of their net assets are in the bucket with donor restriction, that means they have some, they are limited in what they can do with those.

[00:35:10.43] spk_0:
Jerry. Is that essentially your endowment? It

[00:36:08.29] spk_2:
could be, yeah, endowments would be with donor restriction or we have the other category where you know, a donor places some kind of what we call a temporary restriction on a contribution. So either it has to be used for a specific program that the donor has identified, they want it used for, or there can be a time restriction where they say I’m gonna give you $300,000 but you, that’s to be used over the next three years. So now they’ve placed a time restriction on that contribution. So those have to be really carefully monitored. And this is one of the areas that we see so many non profits misunderstanding, um how to do that because what happens when you get money in the door, many nonprofits just deposit it all in the same bank account. So now you have one bank account that is, that has your restricted and your unrestricted dollars commingled. And if you’re not tracking that the risk of spending those restricted dollars outside of what the donor’s intent was, is very high.

[00:36:56.81] spk_0:
Now, now you’re getting into potentially illegal territory because so many of the states, maybe it’s all, but many, many of the states have the uni have adopted the uniform, uh management, uniform prudent Funds Management Act, for instance, a mi a uniform prudent management of Institutional Funds Act or they’ve ident they’ve adopted either the, the, the recommended uh unified statute or, or something similar to it. And there are, there are state laws around how around only spending the way donors have told you that they want to spend.

[00:37:58.13] spk_2:
That’s absolutely correct. And that’s what that is an enorm, an enormous risk. The other part that I find risky, I just, um, was speaking with a group of, of board members and executive directors a couple of weeks ago and I had an example that I wanted them to, to see if they could interact with it in the, in the example that I gave them was fictitious, but that fictitious nonprofit had 90% of their net assets were donor restricted or in that donor restricted bucket and only 10% unrestricted. And so my question was, how do you operate this organization on only 10% of your net assets? How can you operate? And you know, that’s again, something that, that is not clearly understood and so many mistakes are made in those areas and nonprofits potentially get themselves into very hot water as you just described.

[00:38:07.12] spk_0:
I mean, that’s gonna show up too in, in another metric like days of cash,

[00:38:11.67] spk_2:
it will days of cash

[00:38:13.12] spk_0:
might be like four.

[00:38:15.02] spk_2:
That’s absolutely right. Um And again, a mistake that many non profits make when they are calculating their days of cash, they’re calculating all of the cash, not just the unrestricted. And we, we emphasize this with our clients over and over again. Let us help you calculate the days of cash, but we’re just looking at the unrestricted.

[00:38:38.61] spk_0:
Yeah, because, right, because there’s a restriction on all the rest, right?

[00:39:33.06] spk_2:
One other thing in terms, you know why this is important and, and I have a client that relies heavily, heavily heavily on um private foundation funding. That’s great. And they’ve been very successful at getting those sources of revenue, but they mostly come with restrictions. And so if a if a non profit is putting an overemphasis on getting that kind of revenue and it’s always restricted. They, they are handcuffing themselves because that they’re only allowed to spend that money on certain things and then you have nothing left to pay for infrastructure or administrative or fundraising costs. You’ve got to, you know, you’ve got to balance out your unrestricted contributions in that as well. You’re not gonna be, is to

[00:39:36.08] spk_3:
be a strategic issue. There. There, it gets back to that duty of care. They’re making a strategic miscalculation, how they’re pursuing funds as,

[00:40:14.14] spk_0:
as valuable as the restricted funds are. You know, it’s not like we’re, we’re not discouraging, seeking restricted fund. I do plan to giving fundraising, some of those dollars are in trusts and, and those trusts or even the wills, you know, occasionally, not, not usually, but occasionally come with restrictions. It’s devoted to, you know, palliative care. It’s devoted to the, the children’s program, et cetera. Uh So, but those, so those are valuable, but I understand the point of being very conscious of the, the composition of your net assets. The, the what, what, what you, what again, it’s a ratio, what your, what your unrestricted to restricted net assets look like and, and are you ham hamstringing yourself?

[00:41:06.14] spk_3:
Yeah, and another ratio uh just to tag on to it, once you figure it out that composition, you take a look at your liquid unrestricted net assets and you look at that number against your total debt. So not only your current liabilities, but your total debt and really gives the board and the executive director. So it’s often referred to as Luna, so, liquid unrestricted net assets uh to debt. And it really takes a look at how much do we have, how much are we relying on ourselves versus how much are we relying on others to fund our operations? Um And again, it’s, there’s not necessary. Well, I mean, there’s a bad number you don’t want to be insolvent, um, and have more debt than, than, than unrestricted net assets. But you, it’s a number that, that should be known within the organization if you’re, uh, and that should, that number should be two or greater sort of similar to the current

[00:42:00.51] spk_0:
ratio, the liquid, liquid unrestricted net assets. All right, let’s break that down. Liquid, we can, it’s cash or we can get it to cash easily, unrestricted Jerry and I were just talking about that the restrictive versus unrestricted, the composition of your net assets, uh, net assets. All right. So it’s, it’s not just liquid unrestricted net assets. So, what, what’s, what’s a non, what’s a non cash net asset? Isn’t to me that just sounds like cash. Well, it must not be,

[00:42:22.41] spk_2:
again, it isn’t always just cash because what else could it be again if we, if we remember the basic formula that your assets are what you own, the liabilities are what you owe and the difference are your net assets. Well, in the, in the group of assets, you can have all your fixed assets if you have a building that has a, you’ve got that as a value in your assets. So, so that’s an asset that could be flowing down into your unrestricted net assets, but it’s not. So you can only look at the liquid portion.

[00:42:39.65] spk_3:
Another great example would be

[00:42:51.53] spk_0:
wait, I gotta, I gotta hold you off. Dean, hold on, hold that thought. Don’t, I don’t wanna hold the thought, write it down if you, I don’t want to miss your point, but I don’t understand what, aside from cash, what, what else could be a liquid, unrestricted net asset aside from cash.

[00:42:58.64] spk_2:
Um, if you’ve got, if you have any kind of investment funds that can be converted, if you’re carrying any receivables, those

[00:43:07.37] spk_0:
fairly liquid, right? You’re expecting you, you’re expecting, right? You’re expecting some grant or receivable. We all know what receivables are. Ok? Ok. All right. Thank you. Examples. Help again. Accounting for poets. Ok. Um, go ahead, Dean. You were gonna make a point.

[00:44:11.50] spk_3:
Oh, and then another thing that you should exclude on the current asset side or any prepaid expenses that the organization might have. And depending on the organization that, that might be significant and prepaid expenses would be if you paid your insurance a year ahead of time or if you had your website, um, uh, uh, costs or other costs for software license fees are a great one where you pay for a year or two or three and you write the check all at once, you’ve committed the check. But a, a gap says you have to record that as a prepaid expense. And you only recognize the, let’s say it’s over a year time, you only recognize 1/12 of that expense over the year. So if there’s a prepaid expense on your, on your balance sheet, you wanna be, you will want to exclude that from that calculation because that money is already out the door even though it’s,

[00:44:17.58] spk_0:
we’re getting a little into the weeds now a little bit. That’s about you mentioned gap. I, I know remind listeners what, what gap is otherwise I gotta put you in jargon jail.

[00:44:29.22] spk_3:
Generally accepted accounting principles.

[00:44:59.21] spk_0:
Gap and all, all your audits and all your statements are done under, under gap under generally accepted accounting principles they’re signed to by the, the, the firm that does the audit or the financial statement or whatever. All under gap. All right. Careful honest, tony. All right. Yeah. All right. Parole, parole is parole comes easy. Um, but you got to serve some time. It’s not probation, it’s parole. Um, ok. We, we’ve identified five. Ok, we got another one.

[00:45:24.80] spk_2:
We have another one. So I’m gonna start this out by saying that there is still misconception in many people’s minds, whether they work in nonprofits or they’re, they contribute to nonprofits that the term non profit means the organization can’t make any money. So I just wanna start this out by saying that, um, designation of non profit, that’s a tax status. That’s all it is. It’s a tax status. It’s not a business model. Is this

[00:45:38.75] spk_0:
misunderstanding still out there? Oh,

[00:47:40.65] spk_2:
oh, greatly out there. It’s still out there. So the ratio that we, we want to communicate is we want to measure, are you making any profit? You know, do you have a surplus? We don’t, we don’t necessarily use the term profit, we’ll call it surplus. Um And, and we want, uh especially boards to be concerned whether or not the organization is planning for through their budgeting process. Are you planning for a surplus? And in your actuals, are you actually making it? Are you, are you getting there? And if you’re not, there’s a problem that needs to be addressed because this is all about sustainability. If the organization is not making a surplus, they can’t sustain themselves or grow. And so we really look for a ratio of about, you know, a safe ratio is about 5%. I think that’s what we’re looking at now. 5% 5% surplus on your net revenues. You know, so if you, if you bring in a million dollars in revenue, we feel a safe place is, is to be showing a, a $50,000 surplus on that. And if that’s not happening, there needs to be a discussion, why, why isn’t that happening. Now, I have worked with clients who have over many, many years accumulated a lot of unrestricted net assets and they may have a year where they are planning to have a deficit and there’s a reason that they’re planning, they’re gonna invest in something new. And so they’re going to commit some of their accumulated unrestricted net assets as an investment. That’s ok. We’re not saying that can’t be done, but you can’t live that way forever.

[00:47:44.09] spk_0:
Ok. Surplus profit.

[00:47:47.23] spk_2:
It has to be, it needs to be measured.

[00:47:50.54] spk_0:
That sounds like that sounds like your investment capital investment in new ventures, maybe, uh a new whatever, maybe a new staff position or two. I mean, that, that’s, that’s your growth, isn’t that your growth money? It’s

[00:48:12.37] spk_2:
your growth money. You’re, you’re exactly right. And if nonprofits are not planning for that, yeah, there really is no standing still. If you’re not planning for growth, you’re actually planning for contraction.

[00:48:40.55] spk_0:
Yeah, because inflation is going to erode your erode you every year, 3 to 5 to 8% or, you know, however bad it might be. Uh, yeah. Ok. Right. So it’s, it’s just, it’s just bad business to say we, we, we, we need a, we, it costs us a half a million dollars to run this organization each year. So we need to raise a half a million dollars. We need to have a half million dollars of revenue of some of some sort. Right. No, 5 50 or 600 or 6 50.

[00:49:08.37] spk_2:
Right. That’s exactly right. Yeah. I mean, it seems so, um, intuitive, you know, like it should come simple. But again, in, in, I think Dean and I would both attest that in our experience with nonprofit clients is that is often overlooked. It’s, it’s not discussed. So, when we’re presenting financial information, again, we don’t have to give all. We don’t have to go into the weeds and give the recipe for the soup of how we got there. But we better be showing and the board better be looking for. Is there a surplus? Are we performing?

[00:49:28.78] spk_0:
Ok. And sometimes you’re, you’re pushed back on because people say that we shouldn’t have a surplus. We should be spending everything we earn to help, to help our community. We, we’ve got, we’ve got Children going hungry. Everything we earn has to go to those kids

[00:49:53.35] spk_2:
and, and, and, and, and it’s not as prevalent as it used to be. But, you know, that, that fear that if we, we have an audit that shows a surplus or we file a 9 90 tax return that shows a surplus and the public is viewing that, that they’re gonna go nuts over it. Um, now again, it’s all relative if, if you brought in $2 million and you have a million dollar surplus. Well, yeah, I’d probably be a little bit nuts about that. You know, why do you have a 50% surplus.

[00:50:21.64] spk_0:
All right, you’d like to see at least 5%.

[00:50:24.30] spk_2:
We, we feel 5% is a safe target.

[00:50:27.62] spk_0:
5% of the net revenues for the, from the year for the year.

[00:50:31.54] spk_2:
We feel that’s a safe, safe starting place.

[00:50:48.64] spk_0:
Ok. You know, the irony of some of this is that, um, people look at these, I, I guess I’m, I’m, I’m gonna lump board members. I mean, you know, board members look at some, some of these numbers and they, they would run their business the same way. Those of those who are in business or have their own businesses, they would do the exact same thing. But, but they don’t, but they apply a different set of rules to the nonprofit. No, it shouldn’t have any growth capital. No, it shouldn’t be able to invest. It should be spending every, we should be spending every dime we earn, but they wouldn’t do that to their own family business.

[00:51:29.81] spk_2:
Correct. Yeah, that’s so true. What you say is so true, tony. And, and sometimes, you know, again, I think as a, an outsourced CFO we find ourselves delivering that very message to the board, challenging them on that, that business model that they’re, that, that they are purporting that the business model should be a zero bottom line and be, we just push back and challenge that and, and try to help educate why that’s not a good business model. They be able to feed the

[00:51:49.12] spk_0:
kids. Pardon me? Yeah. And you know, you wouldn’t do that in your own business. You may be able to feed the kids this year and maybe next year. But wouldn’t you like to be able to feed them five years from now? You’re on a trajectory that’s gonna make that very, very, very difficult.

[00:53:09.46] spk_3:
Yeah. And to add on to that and you alluded to this earlier, tony, you were talking about tracking it over time, you say, are we, are we, is this metric or this uh ratio improving, not improving and or not improving? And where boards and leadership can really take it to the next level where I’m going is establishing targets, what’s important to your organization. And as a board saying, you know, we’re at only at 20 days of cash on hand, let’s establish a target of 50 days of cash on hand and I’m making those numbers up and then reporting progress to your target. So similarly on a budget, on a financial budget, you put together, you’re operating a budget, you’re evaluating how you’re operating uh during a year or a month, but establishing targets for each of those ratios and maybe it’s all, maybe it’s all six that we talked about, maybe it’s two or three that are most important, but having that conversation and putting longer term plans because you’re not going to solve all the world’s problems in a year. But having longer term plan and establishing a target and then measuring against the target? And are we achieving that we’re not achieving that? What adjustments and why is that target is what it is and having that conversation and really tracking almost having like a budget for the ratio or, you know, or a target for the

[00:53:16.31] spk_0:
ratio. Well, that’s how these can become management tools. You’re absolutely right. Management and oversight.

[00:54:31.86] spk_2:
Yep. Yes, that, that’s exactly right. Um, and I agree with what Dean is saying, you know, really the kind of the next step is besides reporting these on a regular cadence, whether that’s monthly or quarterly, start to look at the trend, you know, you need to build out trends. Um So where, where were we two or three years ago compared to where we are today? Have we made the progress that we said we wanted to make? And if not, why not, you know, do we need to change something about the style of how we operate the organization? You know, all of that becomes part of the conversation? And I think that it’s possible for board members to get there with that part of the conversation if they are being provided financial reports that they understand that give them these snapshots, these dashboards that we’ve talked about so that they’re not looking at pages and pages of numbers that make no sense, give them something that, that they can make these assessments very easily and then have the discussion and decide what actions need to be taken.

[00:54:38.35] spk_0:
All right. So it sounds like we’re, we’re comfortable with these six metrics.

[00:55:01.51] spk_2:
Yeah, I mean, and there’s, you know, there are, there are all kinds of other metrics, but these are, you know, when you talk about some of the common ones that really what we try to focus on, get boards to focus on, get executive directors to focus on is w how can we help you measure the current financial condition and whether or not it’s going to be sustainable? Is your organization? Do you have the capability to be to sustain 35 years down the road?

[00:55:15.46] spk_0:
Ok. So we’re, we’re confident we’re in these six, we’re not, we haven’t left out anything critical, have we?

[00:56:07.83] spk_3:
I think we covered a lot of great bases and one of the reasons why we record why we, and like Jerry said, there are more, but all of these ratios, all of these data points, the beauty of these is, these are publicly available from other organizations via their form 9 99 90 is informational return that all non non profit organizations of a certain size are required to file and it’s publicly available information. So if your ABC nonprofits and they’re trying to set those targets or trying to understand and understand where they’re at or how they’re doing it. Like, hey XYZ nonprofit across the street, let’s see what they’re doing. You can look at their 9 90 calculate their ratios as well and you can sort of evaluate and start to benchmark. Like, are, are we doing good in our sector? Are we not doing good in our sector? So, while I would recommend, and I’m sure would recommend is, is understand where you’re at. Um understanding where your brother and sister non profits are at is also a great bellwether to say, hey, are, are we doing well, are we not doing well with our peers in the organization? And it’s all publicly available information uh for other non profits as well?

[00:56:48.41] spk_0:
All right. Ok. Leaving it there. Then, Dean. All right, Martin and Lewis, Dean, Dean Del, you’ll find him on linkedin. Jerry Frick. Also on linkedin, their firm is at veracity pros dot com. Dean Jerry. Thank you. Thank you very much. Thank you.

[00:56:51.68] spk_2:
Thank you, tony. It was

[00:57:26.93] spk_0:
really a pleasure. Oh, thank you. I’m glad listeners. I would like you to know that we had another show where we, we talked about a book devoted to board member, financial literacy and that was the May 31st 2021 show with Andy Robinson and Nancy Wasserman. Their book is the board members easier than you think, guide to nonprofit finances. So if you want to dive deeper into this, maybe buy a copy for each of your board members. Uh That’s a uh just a AAA further resource beyond this excellent conversation that Dean and Jerry and I just had

[00:57:45.73] spk_1:
next week, the surprising gift of doubt from the archive with Mark Pittman. If you missed any part of this weeks show,

[00:57:48.66] spk_0:
I beseech you find it at tony-martignetti dot com. Don’t forget that name tony-martignetti

[00:57:55.82] spk_1:
or no coffee for you. We’re sponsored by donor box. Outdated donation forms blocking your supporters, generosity. Donor box. Fast, flexible and friendly fundraising forms for your nonprofit donor box dot org.

[00:58:13.67] spk_0:
I still love that alliteration, fast flexible, friendly fundraising forms. All right, sorry.

[00:58:35.12] spk_1:
And by Kela, grow revenue, engage donors and increase efficiency with Kila. The fundraisers CRM visit Kila dot co to join the thousands of fundraisers using Kila to exceed their goals. Our creative producer is Claire Meyerhoff. I’m your associate producer, Kate martignetti. The show’s social media is by Susan Chavez. Mark Silverman is our web guide. This music is by Scott Stein.

[00:59:02.18] spk_0:
Thank you for that affirmation. Scotty be with us next week for nonprofit radio. Big nonprofit ideas for the other 95%. Please go out and be great.

Nonprofit Radio for September 26, 2022: In Nonprofits, Do We Trust?

 

Gene Takagi: In Nonprofits, Do We Trust?

Gene Takagi

Public trust in nonprofits is eroding. Why is that, what does it mean for our work, and what can the nonprofit community do about it? Gene Takagi, our legal contributor and principal of NEO Law Group, returns with his insights.

 

 

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[00:00:52.08] spk_0:
Hello and welcome to tony-martignetti non profit radio big non profit ideas for the other 95%. I’m your aptly named host of your favorite abdominal podcast. Oh, I’m glad you’re with me. I’d get slapped with a diagnosis of fragility as angry. Um if you nailed me with the idea that you missed this week’s show in nonprofits, do we trust? Public Trust in nonprofits is eroding. Why is that? And what can the nonprofit community do about it? Gene Takagi are legal contributor and principal of neo Law group returns with his insights On Tony’s take two. This is not planned, giving

[00:00:57.14] spk_1:
we’re

[00:01:41.13] spk_0:
sponsored by turn to communications pr and content for nonprofits. Your story is their mission turn hyphen two dot c. O. And by fourth dimension technologies I. T. Infra in a box the affordable tech solution for nonprofits. tony-dot-M.A.-slash-Pursuant four D. Just like three D. But they go one dimension deeper. It’s always a pleasure to welcome back Gene Takagi, you know who he is. Of course he he we owe him the introduction that he that he deserves, but you know who he is, He’s our legal contributor, Managing attorney of neo the nonprofit and exempt organizations law group in saN Francisco he edits the wildly popular nonprofit law blog dot com, which you should follow and he’s a part time lecturer at Columbia University. The firm is at neo law group dot com and jean is at G tech. Gene

[00:01:58.66] spk_1:
thanks

[00:01:59.11] spk_0:
for being back Welcome.

[00:02:00.73] spk_1:
It’s great to be here.

[00:02:03.15] spk_0:
It’s always a genuine pleasure. Thank you.

[00:02:07.78] spk_1:
We’re

[00:02:20.77] spk_0:
talking about public trust today. Uh not only your concerns, but you’re, you’re seeing evidence of. And I’m certainly reading some things too about eroding public trust in nonprofits. What what are you seeing? What are you thinking about that?

[00:02:27.69] spk_1:
You know, my first thoughts, tony is that trust really is the foundation of, of good relationships, right. No matter whether we’re talking about person to person,

[00:02:39.09] spk_0:
person to

[00:03:18.40] spk_1:
charity, you know, person to other institutions and charities I think are especially reliant on trust because if you’re asking people and groups and organizations to give money to you, um, they’ve got to trust that you’re gonna do use that money for charitable purposes, not for personal gain, not for other things, but for the charitable purposes that they want to support. And when trust erodes in our charities, that’s really a red flag and sort of a harbinger of things, bad things that could follow. So trust is really important, I think, um, to talk about. And the study, the most recent study that came out from independent sector and Edelman Data and intelligence found that there’s low trust amongst all institutions. So maybe not completely surprising, but less than a third say the trust, government, large corporations and the news media

[00:03:35.93] spk_0:
and

[00:04:08.91] spk_1:
charities, relatively speaking are better than that in terms of the trust factor, but it’s been dropping and nonprofits as a, as a sector, The trust and nonprofits now is 56%. The rest either are neutral on it or have a distrust of nonprofits, only 56% and only 36% trust philanthropy or foundations and grantmaking organizations, so that’s really, really low. And women’s trust and non profits dropped even more than than men. Um, and I think another flag to point out is our younger generations, especially gen Z

[00:04:17.56] spk_0:
really

[00:04:18.43] spk_1:
have a distrust of nonprofits. Um, and

[00:04:22.83] spk_0:
with

[00:04:23.75] spk_1:
the wealth transfer that’s expected from baby boom generation to millennials and two gen Z, that’s got to be alarming to nonprofits. And I, I think it’s just worthy to call out right now.

[00:04:35.97] spk_0:
Do you know what that number is among gen z. Trust in nonprofits that in the independent sector include that in in their survey.

[00:04:49.81] spk_1:
Well, the statistic that I, I saw that that called out to me was 57% of gen z. Americans say giving directly to individuals makes a bigger impact than giving to nonprofits. So they would rather give to individuals on go fund me or another crowdfunding site than to give to a nonprofit. They find that more trustworthy.

[00:05:16.77] spk_0:
There’s another dimension to the, to the trust, which is government, trust in nonprofits. And you could read government as congressional or, you know, I. R. S. But you know, they they, the the U. S. Government has bestowed the charitable deduction so that the money is used for, as you said, you know, for charitable purposes as disclosed in your organizing documents. And if if I’m thinking more of Congress, you know, if congress feels that

[00:05:43.59] spk_1:
the

[00:05:43.80] spk_0:
nonprofit community can’t be trusted, you know, we could start to see some erosion of, uh, clawback of some of the, the benefits that nonprofits enjoy. Tax free status, for instance, and the charitable deduction to name a couple of

[00:06:00.50] spk_1:
wildly

[00:06:01.37] spk_0:
wildly valuable ones.

[00:06:22.64] spk_1:
Yeah, and that’s such a great point because just a few days ago, there was news about a case in Minnesota where government funding to feed poor Children, um, there was a huge scandal involving tens of millions of dollars. So, um, it really speaks to two if government stops trusting nonprofits or certain government agencies and cuts funding to agencies, how harmful that might be to charities and the beneficiaries they’re trying to serve.

[00:06:35.87] spk_0:
I think that one was even worse. I think it was like $240 million dollars

[00:06:41.59] spk_1:
worth

[00:06:42.04] spk_0:
of pandemic aid money. I saw that in, in Minnesota is supposed to be going to feed Children during the pandemic and, and pocketed. Yeah,

[00:06:52.51] spk_1:
patterns there as well. It’s, it’s,

[00:06:55.94] spk_0:
yeah,

[00:06:58.09] spk_1:
it

[00:06:58.93] spk_0:
is. It’s, it’s, um, and then of course there’s always been Charles grassley. I mean, he’s been, he’s been nipping at, uh, foundations and donor advised funds for for years

[00:08:03.64] spk_1:
now. Yeah. And in fact, the whole charitable sector, I think, um, and a significant portion of our lawmakers, um, take a consumer protection perspective of, we want to protect donors, um, and not strengthening the nonprofit sector perspective they want to create laws that will per, you know, try to prevent, um, uh, fraud or misuse of charitable funds as if this is rampant amongst the nonprofit sector, which my position is, it is not, but there are certain high profile cases that hit the new york times and the Washington post and all the other newspapers. And there’s so much media coverage that focuses on scandals because that’s what’s gonna sell right. The tweet or the short snippet that people’s attention span will, will actually stop on. Um, it’s gonna sell much more if it’s a scandal rather than a long term growth in in impact. Even, you know, the, the great news that child poverty has, has been really declining in in the country, which should be huge news gets short shrift compared to some of the big scandals that we hear about.

[00:09:08.60] spk_0:
Yeah, yeah. When I name dropped Charles Grassley, I should have said Senator, senator from Iowa, Republican, senator from Iowa Charles grassley. Um, yeah, right. It’s, it’s the scandals that, that’s, that get clicks that sell papers that get attention. I remember, I’m sure you do several years ago there was a scandal among an, an organization supposedly raising money for Navy Veterans like Navy Navy Veteran Foundation or something like that several years ago, but it was very high profile. Um, what was the other, do you remember, I don’t mean to put you on the spot. It’s okay if you don’t remember because I don’t the, uh, the veterans organization that was accused of squandering, you know, tens of millions of dollars on lavish retreats and high, high executive salaries. But, but, but it it had it had great outcomes. It was, it was funding lots of veterans organizations.

[00:09:25.25] spk_1:
I think the one you’re talking about is the Wounded Warriors.

[00:09:29.11] spk_0:
Thank you. Yes. Project.

[00:09:51.07] spk_1:
And yeah, it’s, um, it’s always difficult. Um, looking at an organization through the eyes of the media, um, about how, you know, how well or unwell they did. I don’t want to create, um, you know, uh, discuss particular scandals too much other than to say that they create problems for the whole sector. So, you know, that’s, it’s just something to be aware of. And they’re not necessarily reflective of the vast majority of nonprofits out there trying to do good work and help people.

[00:10:17.64] spk_0:
The 99.99% you know, our our that’s even higher than the nonprofit radio 95% No, uh, 99.99% of nonprofits are not scandalous. And could they, could many of them be running more efficiently. Yes, but we’re not, we’re not talking about mere efficiency. You know, we’re talking about erosion of trust because of high profile crises or scandals malfeasance.

[00:10:37.97] spk_1:
Yeah, high

[00:10:39.21] spk_0:
profile,

[00:10:39.92] spk_1:
not

[00:11:55.21] spk_0:
representative. It’s time for a break. Turn to communications. They know the nonprofit community and they know pr and journalism. Both partners are former journalists peter pan a pinto, one of the two worked as senior managing editor at the Chronicle of philanthropy. And after that he was at the council on foundations. So he understands the nonprofit space very well, which means he understands your challenges, understands how important pr and being a thought leader is to to your work. And the two of them together know how to build relationships with outlets, not just with journalists, but you know, also podcasters, um, conference organizers. So they understand nonprofits, they understand communications, how to build relationships and that’s what’s gonna get you heard across all media. So let’s turn to turn to communications. Your story is their mission turn hyphen two dot c o Now back to in nonprofits. Do we trust?

[00:12:00.88] spk_1:
It takes me to another tangent though, now that you talked about efficiency, tony and that’s kind of, we’ve talked about it before and you’ve talked about it with the writers of uh, article or a letter called the overhead myth. I don’t know if you recall

[00:12:16.06] spk_0:
that many years ago. Yes. The C E O. S of charity Navigator better business. Bureau wise giving alliance and guidestar.

[00:13:08.09] spk_1:
Yeah. And you know, they were saying that we shouldn’t, you know, base ratings on a charity in terms of how worthy they are to receive funds from donors simply based on overhead ratio. You know what their admin and fundraising costs are relative to their programmatic costs and those are really wise wise words, um, that that were stated in that letter. But even today we still see organizations even high profile ones that talk about their low overhead ratio. And it can engender trust um, in their organization at the expense of trust of other organizations that legitimately have higher overhead ratios because the infrastructures and you know, the things that they need to do may be completely different. So it’s not fair to, you know, compare across the board and across the maturity of an organization. So

[00:14:06.82] spk_0:
another very valuable thing to invest in is is research, research, uh, maybe maybe going beyond research, activating a new program that, you know, that may or may not succeed, but you have to invest upfront, you know that it’s annoying the folks who hold different opinions about wise investment in technology, you know, it’s Uber should be losing money for the 1st 12 years, you know, because it’s investing in the future. Um, Tesla, you know, non profit unprofitable for many years, but you know, look where they are now, but, but in the nonprofit sector, you know, we don’t we don’t allow that that research and um, spending on innovation, we consider that overhead like, you know, like, like rent, which rent happens to be important too, but you know, something, something um, rent is not a good example, but sort of, you know, frivolous or you know, self indulgent when it could very well be research and and scaling up for for a for a dynamic

[00:14:29.60] spk_1:
future or even things like a living wage.

[00:15:22.90] spk_0:
Yeah. Good. Exactly. Thank you. Yes. Um, yeah, I I don’t like the, you know, I don’t like the double standard where we we we praise it in in some industries, but we we we criticize it uh, in in non profits. And I’m thinking specifically about investment in the future and whether that’s people or programs or even technology, technology is a is a valuable investment. It saves time. It creates productivity, makes people more comfortable at work. It enables them to work out of an office now and be remote, give them that benefit, which so many people are craving now, you know, but these are these are all wise investments, not not um, detrimental overhead.

[00:16:33.02] spk_1:
Yeah, I absolutely agree. And there’s a way to do it cheap. You could invest in technology on the cheap and that might have long term adverse consequences, including to kind of the sort of the data protection and privacy issues that can result. So if you’re really thinking ahead and investing in, not only just technology, just to be sort of more effective and efficient in the short term, the protective of your beneficiaries and your staff and others your donors in the long term, um, then you need to make more of an investment in that. And that’s another thing where, you know, we lose trust if you if you sort of blow your donor lists that are supposed to be private and you know, other big companies get ahold of it and start to target your donor base for unrelated things or even if they’re related sometimes, but not your organization and it was due to a slip on your part or your technology and information technology protocols. You can run into trouble. So again, investments have a double edged sword there. Great. But they can result in a loss of trust too if you’re not managing it properly and you compromise people’s information.

[00:16:41.40] spk_0:
Um, and also, you know, you mentioned living wage but investing in people so that people stay with your organization.

[00:16:48.75] spk_1:
All

[00:16:49.07] spk_0:
right. And that that starts with a living wage that also impacts to on technology. Uh, you know, time away professional development. You know, these are, these are investments in staff that people see and appreciate and make longevity with your organization more likely than you know, than than to to jump ship every six months.

[00:17:11.75] spk_1:
And that builds trust to write, I’m much more comfortable working with you if you’ve been with the charity for 10 years, Tony than if you were hired three months ago and there’s always a different person I’m talking to as a donor.

[00:17:31.13] spk_0:
Absolutely. Yeah. All right. You have some insights into what we as a community or hopefully even individual nonprofits can can start to think about take to their C. E. O. S. Take to their boards. This is always where you Excel gene.

[00:18:33.73] spk_1:
Well in the first steps are kind of simple. Um you know, it’s be compliant yourself, make sure your own houses in order. Um so we can sort of raise all of the issues with where you can lose trust with organizations. Um but even though 99.9% of the organizations are well intentioned, I can’t say that 99.9% of the organizations are compliant. Um so working to make sure you’re compliant Working to make sure that the tone is set at the top with the strong board of directors that is actually providing direction and oversight and not just simply helping you, you know, with fundraising and otherwise just rubber stamping the decisions of the leaders. I think it really is important that the tone be set at the top of the organization through the board of directors. A

[00:18:34.26] spk_0:
tone say say more about the tone.

[00:19:11.50] spk_1:
So the tone of placing the importance of a trusting relationship with our beneficiaries with our employees with our other stakeholders. I think that’s really important and that should be reflected in policies. So it’s not good enough to say, you know, this is what we believe in. So the, you know, one of the hot topics today is a board sets a diversity equity and inclusion policy. But if that policy just sits on the shelf and that’s the end of the discussion of it. And there are no actual changes or action plans attached to that that’s gonna maybe harm the organization more than help it. So the tone at the top means a board that is doing its role in moving that organization forward and focusing um not only on doing good work and, you know, metrics for for programmatic success, but on building trust within and outside of the organization.

[00:20:07.00] spk_0:
And that that Ceo board chair uh Ceo executive committee, if the board has an executive committee relationship is key to this. I mean, they they all whether it’s two people or the Ceo and a committee, you know, need to be uh you know, committed to the same, not only the same mission, but the same uh strategy for getting there. You know, the same commitment to the things that you’re talking about, this needs to be a a unified

[00:20:08.30] spk_1:
working

[00:20:09.10] spk_0:
group at the top between the Ceo and the board leadership.

[00:21:55.36] spk_1:
Yeah, it’s absolutely critical tony I agree. There is, however, sort of another dimension to this which adds complexity and that’s kind of the feeling amongst particularly younger generations. Again, and why there’s a little bit of distrust is too much power focused on the top of an organization without sort of distributing leadership and and the right to participate in this. You know, the bigger decisions of the organization being dispersed throughout the organization and getting input from beneficiaries about um you know, how the organization should evolve or um move forward in further its purpose if we’re not really thinking about getting other voices in it, and particularly if our boards are not very diverse, um that’s gonna engender more distrust as well um with with an organization and this leadership. So while what’s happening at the top level and the relationship between the Ceo and the chair of the board is critically important, it is really important to also make sure that leadership, authority and power is being dispersed down through the organization and that the board actually can listen to directly um input from some of the staff. Um and we shouldn’t create like a wall between board and staff completely. You know, that there’s a little bit of um new thinking on that because the old old ways is like the board should not micromanage right. We should not interfere with staff decisions, which is partly true, but it doesn’t mean that we create a complete block. So the board members don’t see the staff members and the staff don’t see the board and they just don’t know each other. So, um there is a sort of a balance there that needs to be taken.

[00:22:20.82] spk_0:
Can we, can we say a little more about that in terms of examples of how this could be done? Like you’re you’re talking about staff, but also the beneficiaries of the programmatic work. Uh is this um like, I mean, certainly beneficiaries could be members of the board or or is it more an advisory committee, but then to your point, you know, you don’t want it to just be a committee that the board doesn’t listen to. The ceo doesn’t listen to. You know, how can we uh actually execute on on some of this in terms of staff and beneficiaries?

[00:24:23.71] spk_1:
So there are a lot of different ways that it might be done and there’s no one right way for, you know, for all organizations, but getting other voices involved can be done in, you know, um through committees as you suggested, but they can’t just be advisory. If you’re really gonna disperse power, you have to give them some power even if they’re not made up of only board members and some people call any committee that is not composed of only board members, they call them at advisory committees. And because of the name, they think that they can only give advice to the board, but they don’t have any management authority. But that’s not true. You can give these other committees management authority, the way you can give a Ceo or CFO management authority, the board can delegate authority down to these other committees. These non board committees as well. So that may be one way of getting power dispersed through the organization, that that committee might be made up of some employees, some beneficiaries and maybe there is a pipeline so that some of the other people that you’d like to put onto a board, but you might not know very well, you might not have enough experience in certain things that you’d like to have them develop more knowledge of the organization and the work before they possibly a strong candidate for joining the board, but that could be a vehicle or an on ramp to being a board um board member as well. And again, creating a more diverse and stronger board with diverse perspectives and understandings of what the organization does and who it impacts. So I think there are definitely ways and we’ve seen this in other models as well. Some that have worked with some organizations and same models not working with other organizations. Hill Ocracy is sort of one example of that. What

[00:24:24.13] spk_0:
is that drug in jail? What? Hill Ocracy.

[00:25:53.62] spk_1:
Hill Ocracy is a form of management where there are still remnants of hierarchy, but a lot of decision making is made in kind of circles and circles might be employed, they might be employees and others and circles have certain autonomy over their body of decision making. So you might have a circle based on HR issues. So it’s not just one person with the final say, it’s this circle or a group in the law, we would just call it another committee. But um in hypocrisy there all circles and and this was used by some high profile for profit companies and some nonprofits, some had success with it, Some didn’t. So um there are other models out there as well, not one size will fit all, but again, there’s an administrative cost to trying to implement new models, um, but new models or maybe the way that we want to go and their movement organizations all over the place that are impacting how nonprofits and for profits are to be governed and managed. And we should be listening to some of these forces that are out there because they will gradually shape what we’re doing. You can see this by some younger people not sticking with employment as long as they were the great resignation and stuff. If you feel powerless within an organization or if you don’t feel the organization is representing what you want, your employer to be doing, they may not stay and having a little bit of say in what the organization is doing, even if it’s just the starting points because you can’t jump from point a to, you know, to the ideal point in one step, it’s gonna take a long, a long time to get there. But just to seeing that progress may be assigned to somebody to to say, I’m gonna stick around here and and find out

[00:26:35.35] spk_0:
alright creating vehicles for right people’s voices to be heard. Um, and you’re right, it’s, it’s incremental, but just the, just the showing of some progress, some initiative to uh, opening up the leadership, opening

[00:26:38.15] spk_1:
up

[00:26:41.97] spk_0:
strategic decision making, could be, it could be uh, you know, valuable to, to folks right? And encourage them to, to stay versus looking for someplace that’s more inclusive. Yeah.

[00:26:53.98] spk_1:
You know, if your Ceo doesn’t trust the board or if your employees don’t trust the ceo, how are you going to expect donors and your beneficiaries to trust the organization? So it really trust has to be built throughout the organization.

[00:28:41.45] spk_0:
It’s time for a break. Fourth dimension technologies. Are you seeing technology as the investment that it is not as an expense, but an investment in your sustainability, your staff productivity, your staff happiness, um, satisfaction, an investment in your donor relations through your crm database. Uh, it’s an investment in your organization’s work and its future. That’s what technology that’s where your technology ought to be thought of. And fourth dimension four D. For short can help you make those investments wisely so that you’re not squandering on something you don’t really need. Like maybe your backup is sufficient, but you need the multi factor authentication installed, etcetera. So you know, they can help you think through smart technology investments. That’s it four D. And you know where the listener landing pages to check them out. It’s at tony dot M A slash four D. Which by the way is just like three D. But they go one dimension deeper. Let’s return to in non profits. Do we trust? What else do you see Gene as as things we can we can think about besides this sort of distributed, I’m calling it distributed leadership or maybe you call it distributed leadership. Yeah.

[00:29:32.73] spk_1:
So other things. Maybe some simple tips guard private data. We talked a little bit about it before with technology. If you’ve got data that you’re promising that will be kept confidential. Make sure you’re guarding that. Be careful about automating and depersonalizing interactions with technology as well. Like we could have a sort of a voicemail for everybody and you know, hit one if you want to do this. It too. If you want to do this and completely not let any donor speak to any individual without, you know, spending an hour on the phone that may not be, uh, seen as something that would build trust. So we have to be careful of our uses of technology there as well in our communications. Um, if you’re going to say something, um, don’t talk the talk. If you’re not going to walk the walk, right? So don’t make promises that you’re not going to keep

[00:29:41.70] spk_0:
that for an example of that is A D. I. Policy,

[00:29:45.44] spk_1:
right? Exactly

[00:29:46.80] spk_0:
written and never, never executed or remains written once and never evolves.

[00:31:13.44] spk_1:
And if you have a campaign to engage in a particular, uh, you know, program and you don’t raise enough money. And so that program never runs, you better be explaining this to your donors. Um, why that happened. And the possibility that that might happen when you start fundraising for it. So don’t just say, you know, after the fact when they complain that said, well we didn’t raise enough. So we used your money for other things that’s not going to engender trust. Um remember your mission and your beneficiaries don’t exist in a vacuum, right? Um, so it’s not just about your organization. And if you your numbers go up, um whatever metrics that you use financial performance or number of beneficiaries served whatever they are, you shouldn’t look at it as a silo. You should be looking at the entire ecosystem in which you are participating. And that would be, you know, open up things like environmentalism like you might not think environmental, your organization’s not environmental organization, but if climate change continues and creates hardships that, you know, scientists are predicting, predicting you probably will have an impact on your mission and your beneficiaries. And so to sort of think, just, you know, outside of that, that silo you want to be thinking about what your impact of your decisions will be, not only on your organization and beneficiaries, but on your allied organizations, on the broader community and what will that do to trust as well. So,

[00:32:03.91] spk_0:
a lot of these ideas, a lot of what you’re saying could be, you know, germinating in an advisory committee, you know, how could we look differently at at our contribution to climate change and what climate change means to us in the future for our for our for our people and for our work, but also what could we be doing right now, You know, even if we’re not an environmental organization siloed as you’re saying, you know, we still have an environmental impact. So what what contribution to to minimize climate change or reverse climate change can we make as well as planning for the for the future? Uh you know, that that those kinds of conversations can come out of these um advisory committees that is that are comprised of staff and and beneficiaries. I mean, these are the folks that live the mission day to day.

[00:32:36.09] spk_1:
Yeah, I love that idea to tony Sometimes the board may not have um or feel that they have the bandwidth to sort of discuss these sort of broader issues. Um and they’re a little bit more focused. So having the help um the advisory committee on an issue like like climate change for a non environmental organization or an organization whose mission is not focused on the environment. I think that would be great.

[00:32:45.06] spk_0:
Yeah. And I want to reiterate your point that which I’ve never thought of, advisory committees can be granted policy making authority and and and change within the organization. So whatever that looks like, you know, you can bestow that that authority

[00:33:05.16] spk_1:
Absolutely, and you can give them a budget to even sort of to putting

[00:33:11.20] spk_0:
money behind it. But that that yeah, money talks. That’s a that’s a big step granting them a budget granting them some granting them authority to make change that’s empowering and an advisory committee. All right.

[00:34:01.14] spk_1:
I think, you know, one area of trust that we haven’t spoken yet, but maybe, um why I as a lawyer and talking about these things and you’re not getting it from another consultant, is that the laws can also impact trust and non profits have to decide whether they want to set a position on certain laws. And um, some of the things that I’m thinking about is the deductibility of charitable contributions. So, we’ve had an above the line contribution where non itemizers could deduct as well because of Covid. Um, but that was just temporary. Um, and now there’s sort of a push for, well, we should make a charitable contribution deductible to all taxpayers, and not just about the 10% of taxpayers who itemize, who tend to be, you know, have a little bit more wealth, or some, in some cases a lot more than those who don’t itemize.

[00:34:17.90] spk_0:
Is it that small? The proportion of taxpayers who itemize is around 10%,,

[00:34:22.34] spk_1:
10-13%, is what I’m hearing.

[00:34:24.86] spk_0:
Okay,

[00:35:52.18] spk_1:
So, um, again, you know, part of trust and distrust has to do with concentrations of power and wealth, right? And when the 1% or the .1% control so much policy control the leadership of pivotal organizations in all sectors, and in government, um, there’s going to be a distrusted institutions. Again, that, you know, one third of people distrust big institutions. Um, and, you know, that concentration of wealth and power is, is the reason why. Um so laws that sort of enforce that. So if we just give you no deductible, make make tax benefits to, to richer people who can deduct, who can itemize their deductions and not to others that may feel really unfair to the public. And another reason for distrust. So, will your organization’s, even though tax policy is probably almost no organization’s mission, it has an impact. Um, and so it may be something that organizations want to take a look at. And there are organizations like independent sector of the National Council on nonprofits and others who the Tax Policy center that that can explain this a little bit. But you you may want to take a look and see if you want to put a position on it. And one of the things that I also think, um engender distrust is when the media miss reports, the law in one area where the mis reported it is a lot of media say, charities can’t lobby and that’s just not true. Um, so charities can lobby on things like, you know, the the above the line deduction. Um, and and on other things as well, and there are just certain limits that apply, but they’re often generous, So learn a little bit more and we can build a stronger sector?

[00:36:21.84] spk_0:
Well, you and I have talked about the the lobbying limits on previous shows, is it is it safe to say that the law hasn’t changed over the past? I don’t know, 23 years maybe, since you and I have talked about this.

[00:36:34.17] spk_1:
Okay,

[00:37:06.11] spk_0:
So, so at Tony-Martignetti.com, you can search gene Takagi, you’ll find many episodes that he’s on and one or one or two are about the uh, the lobbying limits, I think, I think the last time may have been 2020 when the pre election. So we may well, with the, with the election in late The election in late 2020, so we may have done something like in mid-2020 or so on the lobbying, uh, exemption or Well, that’s not that’s not that’s not the right phrase. What the limits of lobbying and you make the you just said, you know, they are, they are generous in some cases. It’s not it’s not that it has to be a de minimus proportion of your budget or something.

[00:37:24.83] spk_1:
Yeah, the

[00:37:26.87] spk_0:
yeah,

[00:37:27.68] spk_1:
the losses insubstantial which scares the majority of charities away from doing any of it, but it turns out it can be fairly generous limits to engaging in lobbying.

[00:38:01.79] spk_0:
Okay. Um, and the point that you made before that, I was going to say something about that too. Well, sorry, what did you say? Right before you were talking about the uh, the permissibility of some lobbying activities. You made a point? Yes, thank you. The last thing we want is for Donating to charity to be perceived as, uh, as an elitist activity. That only the only the top now you’re saying whatever 10 or 13% of the population can, can give because they’re the only ones who get the advantage because they’re the only, they’re the ones who itemize their deductions. The last thing we want is for donating to charities to be perceived as an elitist activity.

[00:39:13.92] spk_1:
Yeah, absolutely. tony and with, you know, with our current tax policy, how it works. Um, then I don’t want to get too complicated with that. We are seeing a shrinking middle class. I don’t think there’s anything denying that people, most people have less discretionary income. So if we look at the fundraising statistics now, the giving statistics, we see that, um, even if giving goes up Giving from kind of the middle class and smaller donors has shrunk, um, and, and quite significantly, and it’s, it’s the people, um, that have put in huge contributions that have made up for that. So the Mackenzie Scott, you know, with, I think $13 billion dollars over the last few years, they’re making up for that. But that can change the way nonprofits run if, if it’s all about, again, elite, wealthy, powerful individuals who make the big contributions that then have the ear of the boards of these organizations that then talk about policy and they create policy or, or advocate for policies that keep that dynamic in existence. So it is problematic.

[00:40:52.59] spk_0:
It’s time for Tony Take two. My latest video on linkedin is this is not planned giving uh it’s short under two minutes. I give you an example of what is not planned giving and remind you what planned giving is, how simple planned giving is when it’s done right, when you start with simple gifts by will. But I’ve got kind of a lighthearted back way of looking at it through what planned giving isn’t in the opening. So latest video on linkedin, you’ll find me on linkedin. My name is tony-martignetti by the way that has escaped you. And uh it’s my latest video there That is Tony’s take two. We’ve got boo koo but loads more time for in nonprofits. Do we trust with Gene Takagi? Look at this dark potential that people look at at the United States as alright, the wealthy control government because of dark money and and the Citizens United decision, the Supreme Court uh wealthy control business because only wealthy people start and or run run businesses and grow them and only only white males have the access to capital to start businesses. And then and then the perception that um the wealthy control the nonprofit

[00:41:13.41] spk_1:
sector, you

[00:41:21.27] spk_0:
know, and the wealthy control of media, you know, this is all this is all very uh a very detrimental, very dark cynical way of looking at the at the country, but I’m not I’m not sure that where that’s far away from

[00:42:10.55] spk_1:
it. Yeah, I agree. tony And I think past generations, you know, including ours, you know, we’ve always kind of done better than our parents. Our parents were lucky enough to put us in that position. But the younger generations now economically um and maybe, you know health wise and mental health wise, they may not be doing as well as their parents overall and they’re questioning kind of the system because of that. Um and we maybe didn’t question it because our generation did better than our parents um in those terms. But now there is just legitimate questioning of do we need to change these policies and these dynamics and these power structures and um you know, organizations have a say in this and and use your voice, get get people to vote. Maybe that’ll be my my one of my big messages vote

[00:43:27.00] spk_0:
voting is fundamental to although, you know, in a lot of states that’s being eroded you becoming more difficult, although in a lot of states it’s easier to um you know, another thing that comes to mind when, you know, you’re talking about the generations below the the the boomers not doing as well as the one before them. Um The FDA just yesterday recommended mental health screening at regular uh regular doctor visits, like an annual annual health health checkup for everybody under 65 And and they had been considering this policy that this recommendation is just a recommendation to the medical community from from for years before the pandemic. This is not, this is not pandemic-related recommendation. They had been considering this for years before the pandemic that there’s a lot of stress and anxiety among the population under 65 and 65 is basically the baby boomer cut off within a couple of years.

[00:43:59.55] spk_1:
And then, you know, as you noted, this was even before Covid that they’ve been advocating for this and now with Covid and the mental health issues that are sort of go along with not just the disease, but the isolation that many are experiencing and long Covid, which is sort of an underappreciated under recognized problem and disabilities maybe creating more disability, disabled americans than anything. Um, since you know, the World War two, I think would be the last one. It’s just, it’s mind blowing

[00:44:01.44] spk_0:
and I and I and all this does contribute to a decline in trust in all institutions and nonprofit. The nonprofit community is a major institution in the country. So you know, that’s, that’s how this is all related

[00:44:15.09] spk_1:
to what you

[00:44:21.48] spk_0:
and I are talking about. I want to make that connection explicit that anxiety among the population creates anxiety for nonprofits and, and and distrust and disbelief in nonprofit work. Whether that’s justified or not perception is reality.

[00:44:36.71] spk_1:
Yeah, I agree. tony

[00:44:40.74] spk_0:
All right. I don’t know. So we had, we had said one of the things we’re gonna talk about is what happens, what happens if this continues? I mean, I already painted a pretty dark cynical scenario. Um, is there anything more you want to say around? You know, what, what the implications are if the community doesn’t start to help itself?

[00:46:25.73] spk_1:
Well, maybe on a more micro looking basis, it just means for a charity, they’re gonna experience diminished fundraising. Not everybody gets Mackenzie scott, Jeff Bezos money. Right. Most of them are relying upon a pool of donors, um, many of which are aging, um, and may age out of their donor pool. Um, and shrinking again, middle class, shrinking, discretionary income for many people, meaning West donations. Um, we might see more direct giving to individuals as people are saying, well, I don’t trust charities overall. I’d rather just give to my friends who say, you know, somebody is in need as crowdfunding fight sites just continue to, to grow in importance and also in in power as well. Um, and that’s just gonna be to the detriment of, you know, beneficiaries of our charity. So again, in the micro level, we make less money, people trust us less. Our employee retention is less. Um, our donor pool is shrinking and we can help less people even as the need for our services increases. So that’s kind of the dark side look of it. Um, we can try to be the nonprofit that stands out and you know, is the trustworthy non profit from, from a public perception standpoint. Um, that’s good. But again, don’t see yourself in a silo lift yourself up with all the boats in the water and, and really try to strengthen the nonprofit sector where you can, and, and advocating on some of the laws that make things more fair, I think is a good start there

[00:46:41.97] spk_0:
advocating maybe there’s a way of partnering

[00:46:45.00] spk_1:
with other

[00:46:55.64] spk_0:
organizations, not, not in all in all things. I don’t mean a legal formal partnership, but you know, if, if there’s, if there’s a way of working together for an event or, or some kind of advocacy,

[00:47:03.61] spk_1:
you

[00:47:11.44] spk_0:
know, we’ve had shows on the values of that and how to do that. Um, so that everybody, you know it, so that it’s, it’s not seen as a, as a zero sum within your, within your community that if if if someone else, some other organizations benefiting, then you’re losing. You know, that’s not the way to look at,

[00:47:25.67] spk_1:
at,

[00:47:26.47] spk_0:
at the world and and that not nonprofit support. We we all could be or a couple of couple of organizations together could be rising together.

[00:47:37.64] spk_1:
Yeah, I’ll add that the independent sector survey, the Edelman Data Intelligence survey that we mentioned at the start of the show also has some tips on building up trust within the sector. So it’s not all of dark outlook. It’s just encouraging people that the importance of this is very, very high. Um, so let’s go out and actually make things happen? So that, that dark outlook doesn’t happen

[00:48:05.70] spk_0:
within independent sector. Gene, what’s the, what’s the name of the you’re saying? Edelman data?

[00:48:11.03] spk_1:
Yeah, I think they contracted out with Edelman E D E L M A. And Data and intelligence and their third annual reports. This is an annual report is available on the independent sector website.

[00:48:26.66] spk_0:
Okay, thank you. Edelman E D E L M A N,

[00:48:30.68] spk_1:
correct.

[00:48:49.24] spk_0:
Okay. Okay. Uh, you mentioned the five oh one C four’s a little bit, but there have been a couple in the news very recently, most recently the uh, Patagonia companies, uh, sort of evolution into a uh, a new nonprofit, a new a new five oh one C four. non profit the hold fast collective.

[00:51:57.05] spk_1:
Yeah. So the founder of Patagonia and his family member, they were the principal owners of Patagonia and they decided to give up ownership of the company, but you know, they gave it not to a charity, but to a 501 C four organization. Um, it’s called the social welfare organization and for listeners who aren’t maybe familiar with it, you probably are familiar with many five oh one C four organizations themselves, like the N. R. A. Planned parenthood, the A. C. L. U. Sierra Club. So these are advocacy organizations that have kind of charitable like purposes. Um, but our can engage in unlimited lobbying and can engage in election nearing or political campaign intervention? Supporting political candidates and political parties, as long as that’s not their primary activity or purpose. So this is sort of the source or one of the big sources of where dark money comes in tony that you mentioned with the Citizens United Decision before donor that wants to support a candidate but stay hidden from public view about their support of the Can rather than giving directly to the candidate, could give to a 501 C four organization and the C Four organization can get their money’s into the candidate. And the donor that is disclosed is the C Four organization, not the donor to the C Four organization. So that’s how you can create dark money. And with the Patagonia case, it’s very clear who the donor was. So we don’t expect that to be the dark money that we’re as leery of, but it’s still, you know, a huge gift which, you know, for somebody who believes in in in the environmental movement I think is a great gift. But news media miss reporting it or some news media are mis reporting it as kind of something that doesn’t get a tax benefit because a donor doesn’t get an income tax deduction for giving to a five oh one C Four organization the way they do if they give to a charity. Um but there are other tax exemptions that apply like a gift tax exemption or in a state tax exemption. So this gift is overall saving. Um uh mr Schwinn nerd um the owner and his family probably somewhere in the realm of $800 million in taxes. Um So it is not completely a no tax benefit transaction. Again this is not to disparage them for taking advantage of a system that allows for these gifts Um to go with with some tax benefits, but it’s not just the income tax deduction that matters in in donations there for for very wealthy people like billionaires. Um the gift and estate tax exemptions which can be 40%, right? So it can be very very high higher than income tax they matter. Um and so that’s something to be aware of that. Um this is a very wealthy person who gave up much of the ownership share, I guess all of his ownership shares to this 501 C4 organization, except really importantly 2% of the gift. Overall gift was given to a trust that’s not a nonprofit.

[00:52:14.55] spk_0:
Yeah those voting, those are the 2% of the voting that are the voting shares,

[00:52:58.58] spk_1:
right? So because they’re in control of that trust with with some close advisers um they have not given control out of Patagonia, right? They still can control Patagonia. Um And again they’re taking advantage of existing law what what it allows but it allows billionaires to not give up control of their company, get an $800 million tax benefit for giving or you know $3 billion Uh to a 501 C4 organization that could spend nearly half of it on endorsing political candidates. Um So it’s kind of an interesting tax system that that allows for that.

[00:53:18.19] spk_0:
And if if you consider that, you know supportive of uh of a liberal progressive cause because the whole fast collective the the new C4 is is devoted to uh the ill effects of climate change, you know, reversing climate change, impacting climate change. Uh So if you consider that of a left cause, then there’s an example on the right side with uh mr barr seed and the marble Freedom Trust. Another five oh one C four.

[00:53:44.39] spk_1:
Yeah. And that sea forces led by Leonard Leo who maybe the person most responsible for the changing of our Supreme Court and therefore the decisions on things like abortion might be largely attributed to mr Leo,

[00:53:56.21] spk_0:
fundraiser and activist and very well connected guy in conservative circles.

[00:56:20.34] spk_1:
Yeah. And used to be Executive vice president of the Federalist Society whose mission was to change the composition of the Supreme Court. So um I I don’t think that’s controversial and that’s just what their goal was. And they were very effective at achieving that goal. But this $1.6 billion kind of same thing. There there are some tax benefits that go along with it. There’s no income tax deduction. Um and mr uh c passed away. I think this was given after his death. But another big contribution to an organization led by somebody who has immense influence and now a huge war chest that can be used for political activities. Again, the primary activity cannot be political campaign intervention. Um, but some people believe, or many people believe that means 49% of the funds can be used for political campaign intervention. And that’s kind of the source of dark money. Although again in this case we do know where the donor came from. Um, so it’s not dark in that way in terms of hidden donors, but it’s still donations that didn’t go directly to the political candidate. It went through five oh one C four first, get the tax benefits for that, which his heirs, I guess would appreciate. Um, uh, and the impact of that again, is that? Well, in both cases, very wealthy people are able to keep control with people who they trust or their family members of their money to be used for political purposes. They can’t use it for themselves to, you know, to buy huge houses and boats, but they can use it for things that were very important to them. But that means for people like us and most of your listeners, tony is like, what influence do we have compared to that individual who gave billions of dollars to influence political elections. Um, and you know, what, you know, can we change our Supreme Court sort of composition the way that they’re able to do, probably not by ourselves. So it again is, is the reason why people go, hey, these are nonprofits that they’re using to do this. I don’t trust non profits, this is what they’re used for. And charities kind of get lumped in because the ordinary, you know, people, the lay person doesn’t know the difference between a five oh one C three and five A one C four organization.

[00:56:36.19] spk_0:
Yeah, and that’s right. And it’s it’s if it’s mentioned in a in in press coverage, you know, it’s mentioned in passing that it it’s it’s an organization that’s distinguished from from uh charities. But you know, it’s like, it’s like a sentence or two. You know, it’s it’s never it’s never a focal point. So your point is correct that people just lump them all together

[00:57:00.57] spk_1:
and flows through nonprofits and that’s why we shouldn’t trust nonprofit.

[00:57:04.97] spk_0:
So the wealthy control government and they control politics and they control business and media and and nonprofits.

[00:57:18.46] spk_1:
Yeah, that’s that’s what we, We’re finding more and more is the case, but we’re trying to change policies and change minds about this so that we can see that the impact of the 99.9% out there is actually even bigger than the impact that we mentioned about a few individuals. Um, it just has to be organized. Um, and non profits are way to do that.

[00:58:21.68] spk_0:
Well, that’s a, that’s a pretty good way to close. Probably we should have closed with what our community can do. But you know, you’re suffering the lackluster host. So uh you can rewind to that section and then uh fast forward and you can end with that if you want to. Um, but but jean, you know, always thank you, you know, sort of reality, but also wisdom and inspiration. And and not only um ethereal pedagogical inspiration, but you know, ideas that we can we can we can act on. So thank you. Thank you.

[00:58:24.63] spk_1:
Thank you Tony. And your closing statement is actually always the greatest ending. So, I’m looking forward to hearing it.

[00:59:39.16] spk_0:
Okay, All right, thank you jean. Next week. Let’s see what develops and why do I even say uh, next week if I don’t know what’s coming up next week, but we’re here we are. We’re talking about trust and part of that is transparency. So I’m being transparent that I don’t know what next week’s show is gonna be, I know what the 1 to 2 weeks from now is gonna be. We’re gonna have beth cancer and Allison fine talking about their new book, but I can’t promise that for next week because well, that would be a lie and that’s going to reach the trust because they’re not on next week. Next week. Uh, it’s up in the air, but trust me, it’ll be just that’s conclusory. Just trust me now, I hope you trust non profit radio I’ll find something good if you missed any part of this week’s show, I Beseech you find it at tony-martignetti dot com responses by turn to communications pr and content for nonprofits. Your story is their mission turn hyphen two dot c o and by fourth dimension technologies I. T. Infra in a box, the affordable tech solution for nonprofits. tony-dot-M.A.-slash-Pursuant four

[00:59:48.37] spk_1:
D. Just

[01:00:03.54] spk_0:
Like three D. But they go one dimension deeper. A creative producer is Claire Meyerhoff to show social media is by Susan Chavez. Mark Silverman is our web guy and this music is by scott stein, Thank you for that. Affirmation Scotty B with me next week for nonprofit radio big nonprofit ideas for the other 95%. Here it is, Jean, go out and be great.

Nonprofit Radio for September 6, 2022: Sustainable Fundraising

 

Larry Johnson: Sustainable Fundraising

Larry Johnson is author of the book, “The Eight Principles of Sustainable Fundraising.” He walks us through several of them, including “Donors are the Drivers™,” “Leadership Leads™” and “Divide & Grow™.”

 

 

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[00:01:51.84] spk_0:
and welcome to tony-martignetti non profit radio big non profit ideas for the other 95%. I’m your aptly named host of your favorite abdominal podcast. Oh, I’m glad you’re with me, I’d suffer with infra occlusion if I had to bite down on the idea that you missed this week’s show, sustainable fundraising. Larry johnson is author of the book The Eight Principles of sustainable fundraising. He walks us through several of them, including donors, are the drivers, leadership leads and divide and grow. I’m Tony’s take to make it about your mission. We’re sponsored by turn to communications. Pr and content for nonprofits. Your story is their mission turn hyphen two dot c o and by fourth dimension technologies I. T. Infra in a box the affordable tech solution for nonprofits. tony-dot-M.A.-slash-Pursuant or d just like three D. But they go one dimension deeper here is sustainable fundraising. It’s a pleasure to welcome Larry johnson to non profit radio He is founder of the Eight Principles and author of the award winning book the eight principles of sustainable fundraising. He’s an internationally recognized coach trainer and thought leader in fund development and philanthropy. The principles are at the eight principles dot com and larry is on linkedin. Larry johnson, Welcome to the show.

[00:01:54.56] spk_1:
Well Tony, it’s indeed a pleasure. I’m looking forward to this.

[00:02:14.05] spk_0:
Thank you very much. I am as well. It’s a pleasure to have you, Let’s talk about the eight principles. What were you thinking when you uh rarefied fundraising into into eight Cognizable bites for folks.

[00:03:22.38] spk_1:
Well um you know, I’ve been in this business what 30 plus years now, yikes anyway. One thing I’ve noticed throughout my career is that people tend to focus on the process or the tools and not really the underlying principles or unchanging sort of laws that are operating in the background. And, but if you look at organizations that are truly transformative in the way they raise money and the way they engage their donors in the way they continue to grow every year. Even if they don’t, they ever heard of the eight principles, you could take and look at their organization and see them observing all eight of them. And so when I went to write the book, the idea was to create a book that was sophisticated, yet simple and that could be applied both at the technical levels and at the board level that here, this is what’s going on. And if you understand it, then you’ll be able to assemble a program that makes sense for your organization because not every organization is the same. The constituencies aren’t the same. And so it’s really, it’s foolish to try to make everything work everywhere because it won’t. Uh, and that’s one of the reasons why so many organizations are pushing uphill.

[00:03:32.41] spk_0:
So, you see these as a, as a foundation for all sustainable fundraising.

[00:03:33.99] spk_1:
Yeah. And the reason why is they’re all based on human nature. Um, and, uh, I mean, we’re actually gonna be going into into, into ASIA, into India later this year and they’re just as applicable there as they are here because they’re based on human nature.

[00:04:24.33] spk_0:
Okay, well, we’re gonna, we’re gonna hit three of them that I feel are areas that we haven’t had many guests or any guests talk about. And then, you know, if, if there’s still time we’ll go back and hit a couple. But uh, you know, for listeners, I want, I want it to be stuff that we haven’t talked about very much with with other guests. So your number one of the eight principles of sustainable fundraising is donors are the drivers. What’s going on here?

[00:05:33.58] spk_1:
Well, um, donors A. K. A. Investors. I like the word investors. Um, they are driving the philanthropic enterprise without them. There is no philanthropy. There is no fundraising. But the irony here is they’re not driving it with their money. There’s the key, um, people are obsessed about the money. Well, yes, money is involved, but it’s not really the focus. And especially at the focus of, of donors, investors. They’re looking for something different. But then it’s also not really, their focus is really not the mission of the organization either. Um, it is, again, tangential, what donors are looking for is the fulfillment of their own dreams and aspirations. That’s what they’re really looking for and the organization that can provide that they’re the ones that will elicit the transformative and ongoing support of these people. Um, and so they are indeed driving the enterprise. And there’s a lot of, a lot of my friends out there in the wealth management world, tell me that for lack of engagement by nonprofits, there’s probably at least a billion dollars sitting out there un engaged. And, uh, and that, that doesn’t mean it’s tied up in a donor advised fund or any sort of instrument there. It’s just sitting out there because it’s never been engaged.

[00:05:48.98] spk_0:
I mean, there could be more than that. That that’s a very speculative,

[00:05:51.90] spk_1:
right? It is, it is

[00:05:56.19] spk_0:
Estimate, I mean, it could be $10 billion. I mean, I know nonprofits could be more engaging with donors. So I’m not, I’m not quibbling that it’s not a billion. It could be 10 times that,

[00:06:03.96] spk_1:
yes, it could be absolutely, absolutely. But the keys, they’re driving the enterprise, but they’re not driving it with their money,

[00:06:19.09] spk_0:
right? You’re saying their aspirations and their dreams say more about how you see nonprofits fulfilling donor aspirations and dreams.

[00:06:46.11] spk_1:
Well, tony if I were approaching you as a, as an executive of a nonprofit or a fundraiser, a board member or anybody else and you were a potential investor. Um, I would first try to figure out what it is that you that really gave you fulfillment what it is you’re really looking for. And we’re talking about very serious transcendent fulfillment, not immediate short term and, you know, especially with today’s technological tools that are available, you know, in the old days, you just ask people and that still works. Um, but you can figure out pretty quickly, you know, what is it that’s driving these people, what is it they’re not missing because what you’re giving them is something they cannot buy. You see, they can’t buy that. Um, and let me tell you a little story

[00:07:21.93] spk_0:
before your story, hold, we’ll get we’ll do your story. I love stories, not putting the kibosh on the story, but hold off what they can’t buy. They can’t buy the fulfillment that nonprofits can provide, that

[00:09:26.91] spk_1:
they can’t buy that. So, if the if the nonprofit is going to offer this to them, you know, and then they will more than gladly give them an exchange. You see, let me let me let me illustrate this. There is a there is a for profit market vertical that understands this intrinsically and in fact, their entire um market proposition. Their whole sales proposition is if you use their product, you will become personally fulfilled sex appeal, you know, self worth all in one package. And most of us use those products and I, and I usually say, so what is it to a group? And maybe one person will get it right, It’s the cosmetics industry, Alright, that’s exactly their sales proposition you use our product, you’re going to be beautiful, self fulfilled sex appeal, the whole thing. So, and the story is okay to illustrate that I went into a department store, it’s been four or five years ago now and I went into the cup of the men’s cologne fragrance counter, whatever you wanna call it. And there was a young clerk there, young man and I walked up and I knew what I wanted, you know, and he says, um, can I help you sir? Well, if you know me, you know that I love to ask questions just to see what kind of response I’m gonna get. And right in front of me on the counter was this, you know, men’s health? One of these men’s magazines opened to a full page cosmetics at full page. And the ad was very simple. It was a um it was a photograph, full page photograph. And it was this this uh this gigolo with this, with this blonde in a white bikini on a yacht, in the Aegean. And then the, an image of the product was superimposed onto the photograph very prominently. And it’s, you’ve probably even seen it. It’s a very well known brand. So I said to the young man, I said, well, so tell me pointing to the ad, if I buy this, do I get hurt? Well, he looked at me like he didn’t, he was just he was he couldn’t quite

[00:09:31.60] spk_0:
was a man,

[00:09:33.80] spk_1:
it was a gigolo with the, with the blonde.

[00:09:36.78] spk_0:
Oh,

[00:09:38.32] spk_1:
okay, so you know, the the idea is you’re you’re transmuting yourself there on the yacht with this blonde, that’s the whole thing. Okay,

[00:09:46.19] spk_0:
Yeah. The guy at the Clark county has to offer you?

[00:10:19.58] spk_1:
Well, first of all, he couldn’t quite process what I just said because it was so damn obvious. That’s why. And then, so then I said so, but that’s the implication, isn’t it? And he said, yes, it is. That’s what I’m telling you. And you see, and you see, so they’re making billions of dollars selling a counterfeit. And what I tell nonprofits is you have the real thing because people want to be involved in something that’s bigger than themselves. They want to feel they’re part of something bigger than themselves. And if you can provide that they will be with you over and over and over again. You try to browbeat them with with moral ISMs or statistics or other things. You know, people just kind of tune you out. They may give you a hush and go away gift. Like here, take some money, go away. But you’re not gonna get the kind of transformational engagement that you can, if you really understand that you want to tap into that person’s desire to do something bigger than what they can do.

[00:11:11.01] spk_0:
Let’s see what are some ways that, that we can, we can do this. How can we, I guess I guess I’m asking you in our, in our marketing, which may just be conversations, I don’t, I don’t mean necessarily in our print marketing or digital. But in our conversations even, you know, how can we rise to this principle of fulfilling dreams and aspirations for donors?

[00:12:17.47] spk_1:
Well, the first thing is you have to figure out what the dreams are. You have to know what they are. And that takes some time. Um, it takes some effort. It’s not impossible. And you know, I worked for one of the major consulting firms for over seven years and I did a lot of campaign feasibility studies a lot, uh, could do them in my sleep. And one thing I discovered about those is even though they consisted of anywhere from 40 to 50 individual interviews, um, if the initial interviews were chosen correctly, if we could get the right balance in the first half dozen or even maybe nine, um, I knew how it was gonna turn out in the end. I can tell you this is what’s gonna happen at the end and that comes from doing it from the experience. So, but the client of course one of the 50 interviews and that’s what the client got. All right. But I could because I remember getting a call from my boss once after the after the first three or four days. How’s it going larry? I said, well, it’s going to be X, Y. Z. Okay, fine. And I spent the balance of the time during the interview. So a lot of it is, you know, I’m an old school guy. Be

[00:12:27.18] spk_0:
careful there. I hope you didn’t, I hope hope after those first eight or nine interviews you didn’t engage in confirmation bias and then you just you just attempted. You and your all your subsequent interviews. You, you skewed your conversations to confirm what you had already told or you already fixed in your mind even was gonna happen. You didn’t let that happen. Did you know, confirmation bias?

[00:12:43.26] spk_1:
No, I’m an engineer by training.

[00:12:47.04] spk_0:
Okay. You’re

[00:12:48.01] spk_1:
looking at the data at the end.

[00:12:49.76] spk_0:
All right.

[00:13:40.22] spk_1:
You’re you’re looking at, okay, this, this is all the answers to the questions how they all stack up, but you can get a pretty good idea of how it’s going. If you’re listening carefully, you begin to see patterns emerge. And there are there is the odd ball one that you, at the end, you get a few interviews that that throw everything out of whack that happens. But typically you don’t have my point in saying that is you don’t have to, you don’t have to go out and interview 300 people. You really don’t have to do that. Um, you know, you interview a good segment of your population and the key is to be listening uh, and ask open ended questions. And if you guarantee them anonymity and confidentiality, they’ll tell you anything, you want to know, people really want to do that. So that’s that’s an old school guy. And so that’s what I would do uh to get some ideas as to what are the messages And there aren’t, they don’t have to be that many, maybe three or

[00:13:42.97] spk_0:
four that

[00:13:59.89] spk_1:
resonate with the people who support us because I know we’re not talking about principle for, but principle four is learning plan learn who would naturally support you because not everybody will okay, learn who that is, who big picture and, and then then make plans on how to reach out to those people because they’ll be reachable different ways. So you go back to donors. Other drivers, figure out what those touch points are, you know what and there and they’ll be there and they may be a little bit different than what your mission is, but it doesn’t mean it’s, uh, it’s contradictory, it’s just, it’s just a collaborative or a line.

[00:14:36.07] spk_0:
Okay, let’s move to, uh, principle number three. Of the eight principles of sustainable fundraising leadership leads, leading by example, Talk about this one. Why is this so critical? What are, what are leaders not doing that? They ought to be doing?

[00:14:42.99] spk_1:
Well, let me go back and say one thing about, is the drivers that I’m going to go into this.

[00:14:47.90] spk_0:
Alright, alright.

[00:15:30.90] spk_1:
There are levels of donors are the drivers, remember if donors are driving the car, they’re in the driver’s seat, they got their hands on the steering wheel. Um, if that donor is a really good match for you and you’ve done your work, you’re gonna be in the passenger seat, you’re gonna be in the navigator seat up front. Uh, if there’s sort of a match, you’ll be in the back seat, you’ll still be there, but you’re not gonna get the kind of attention that the, that the navigator would get or if you’re barely hanging on, you’re gonna be in the trunk, okay? And so you get whatever’s left over, you open the trunk after two hours and you’re still breathing okay, fine. That’s their levels of that. Not every donor is going to be that 100% sweet spot. Uh, and I’m not suggesting that you limit yourself to that. But if you’re focused on that, you’re gonna pick up everyone that would remotely be in that, that, that universe.

[00:17:12.88] spk_0:
It’s time for a break. Turn to communications, like so many other things in life. Getting in the media depends on relationships. You’ve got to be known by folks who work in the media to be heard by folks who work in the media to get their attention. It’s so much easier when you know somebody, it’s so much easier when you want to be heard when you have an existing relationship before you’re out for the ask, right? You draw the fundraising analogy first meeting. Do you ask somebody for a gift, highly unlikely you build up a relationship, you get to that point. Media is the same way. You have much, much better odds if you have an existing relationship when you make your ask based on the news hook or something happening at your organization that, that is no, is newsworthy? Whatever it is, it’s the existing relationship turn to knows how to set those up for you, how to build them and grow them. So you get heard at the time you make the ask turn to communications, your story is their mission turn hyphen two dot C o. Now back to sustainable fundraising.

[00:17:17.97] spk_1:
Leadership. Leadership

[00:17:19.68] spk_0:
leads. Yes. What, what, what, what can we be doing better here?

[00:18:57.77] spk_1:
Well, let’s look at what that means. Leading by example, you look at any organization, whether it’s a commercial enterprise, whether it’s a civic association, whether it’s a political party, whether it’s a nonprofit social, whatever it is. Um, leaders are expected to assume certain responsibilities. I mean, they’re obviously the fiduciary ones, uh, and the other issues that are related to that, but it’s, they set the pace for the example. What’s the quality of the leadership by these people morally upstanding? Do they represent the essence of the organization? Um, you know, are they representative of those who are investors to the organization? That’s a big key. Uh, and I’ll give you an example about that. Um, I was working with a social service organization that covered about 45 counties and they were concerned, they weren’t getting any support out of this one county. And I said, well, who on your boards from that county. Well, no one I said, well, there’s your problem right there. You’re not tapped into the networks there. So they corrected that. Um, but then the other key is they only have in a nonprofit setting leaders, I. E. The governing board and certainly their their employee, the executive. And I think that needs to be stressed is that the executive is an employee of the board. Sometimes you get these weird sort of relationships and how they relate to one another. Um, but the key there is that they only have three things they should be focused on. Number one setting policy for the organization, number two advocating for it. Hey, if they’re not, if they’re not a fan, why are they on the board? And three, they should be there charged with making sure they’re sufficient resources with the delivery of the mission and in a non profit that almost always includes some philanthropy or some fundraising. I mean, there are other sources of revenue,

[00:19:17.15] spk_0:
but fundraising

[00:20:57.82] spk_1:
is a part of it. So wherever the leaders lead you, that’s where your people on the outside are gonna take their cues. So if for instance, I’m a big believer and I make no bones about this. Is that every board member and I’ve been a nonprofit board member needs to be financially committed. And now, what does that mean? Well, some people use it to say there’s a board minimum or we have this or that or whatever. You know, I really don’t, I don’t really like those because I prefer something I call equal sacrifice, not equal amount because everyone around that table is gonna, their pockets are gonna have different depths to them. And you know, for someone, $1000 could be quite a sacrifice. And for someone else, hey, they’ll spend that at Sun Valley down the road for me and one weekend easy. So it just depends on who you are and and where you come from. And because I’m a big believer in that board should be representative of the constituencies they they support or that they reach out to. So, so but they all have to be and that includes person that should be personal funds, not corporate funds. I think, you know, people use people, you know, people who are corporate appointees. Um they not, they may not be useless, but they tend to be very weak board members because they’re told by their boss to go and be a part of that. They want to have a representation. Um, it’s not really that effective. Neither is the board member who’s on 12 other boards and you’re getting them simply because they have a recognizable name names don’t bring in support. They really don’t. But but leadership leader, they will lead you irregardless of whether they’re leading you in the right place at the wrong place. They will lead others, they will get that message, but here’s another piece of it is people before

[00:21:07.03] spk_0:
you move onto the next piece. The equal sacrifice. I like that. Uh equal sacrifice instead of equal amount. Sounds sounds like the stretch gift. You know, everyone should be stretching to to what is a stretch for them.

[00:21:20.64] spk_1:
Yeah, it should be uh,

[00:21:24.66] spk_0:
I think

[00:22:36.94] spk_1:
stretch but doable and then the way you achieve that and what I, what I counsel clients to do is something called peer solicitation and that’s not what it’s known in the current and the current. That’s not the current version of that. Pierre solicitation is where boards, there’s a small group of the boards that that takes and evaluates people in terms of their bill And then people are asked face to face for a specific amount for their annual gift at the beginning of the fiscal year. Uh they can pay it in cash, they can make a pledge, they can make payments whatever they want to do, but it’s got to be satisfied by the end of the fiscal year. And then you take all those, all those, all those evaluation amounts, you add them up, take about 20 or 30% discount on that total. And that’s your, that’s your group goal because you want the board to feel as though they’ve accomplished something. I don’t like goals that are so high that it’s almost impossible to reach goals should be floors, not ceilings because the idea is to create that momentum. And if you do it up front and you can say, hey, you know, our, our goal for our board this year was $65,000 and we raised 72 5. Great, Wonderful. That’s terrific. Think about how that plays in the public square. Think about what that says to the people who are on that board and and all their friends and people they know, wow, Hey, you know, they must really believe in that, that that organization is going places. Let me let me learn more about it.

[00:22:48.96] spk_0:
And alright, well, and you achieve that by taking the, the what you expect the aggregate to be for the year and you’re discounting it.

[00:23:04.21] spk_1:
Yeah, yeah. But, but it’s reasonable. It’s something that’s based on what, you know, the individual. All

[00:23:04.48] spk_0:
right, what else about leadership leading?

[00:25:02.28] spk_1:
Well, another thing is, you know, I said, fundraising is a big part of it and people, they always start groaning well, you know, um, You know, I’m not good at asking for money. That’s just not for me, I don’t feel awkward, I feel awkward. Well, what I tell people is board involvement in fundraising only about 5% of its actually asking. Alright, that’s the very minor part of it, a big, big part of it is the board to be able to number one properly resource a fundraising program knowing it costs money to raise money. And then also when they, when the reports are made and when the analysis is done for the board to be sophisticated enough to ask the right questions of the fundraiser and the executive, you know, you know, one of the, you know, the number that usually, or often let’s put it that way comes up, you know, at a board meeting is, well, what did you raise in the last quarter or six months or whatever it was? That is a totally meaningless number from a fundraising perspective, that’s an accounting number. That’s a cash number. That’s the result of your fundraising. That doesn’t predict anything. Even the brokers say past performance is not an indicator of future performance. They get that in real fast. So, but there are other variables that are identifiable in a program that will, if the board is aware of these and presented and educated, they’ll be able to evaluate, they’ll be able to see, okay, you know, our retention rates really low. We need to work on that our average giving rate is stagnant. You know, we’re here here here and you see board members are not stupid people, You know, they can assess this, but they’re not given this opportunity. I think there was a study, Oh, it’s been several years ago now where I, I shocked that 75% of the board members they surveyed wanted some sort of formal understanding of fundraising or training and only about 20% were ever offered anything like that. And that’s, and so these are these people are volunteers Tony this isn’t their full time job. So it’s not their stick to go in and kind of relationship is really, really aggressive to go and figure it out on your own.

[00:26:28.74] spk_0:
It’s time for a break. Fourth dimension technologies. They have the free offer. It’s still going exclusively for nonprofit radio listeners. You know, you’ll get the complimentary 24 7 monitoring of your I. T. Assets and they’ll do it for three months, 90 days monitoring your servers, network, cloud performance, your backup performance All 24, 7 of course, if there are any issues during the period, they’re going to let you know immediately and then at the end of the three months you’re gonna get their report, telling you how you’re doing. It’s all complimentary. It’s on the listener landing page. It’s at tony-dot-M.A.-slash-Pursuant D just like three D. But they go on to mention deeper, Let’s return to sustainable fundraising. Let’s talk some more about what board members can do around fundraising besides soliciting. And I understand re sourcing you said re sourcing the development function, properly asking the right questions, focusing on the meaningful metrics, not the vanity metrics. Uh, let’s talk something about individual board member activity aside from soliciting. So, you know, making introductions, hosting small events, things like, you know what your ideas around those that individual board members can do around fundraising.

[00:28:03.88] spk_1:
Well what I tell you what I tell organizations when they’re looking to evaluate their board or improve it or whatever I say, you know, the, you know, boards are, excuse me. Boards should be organic groups, meaning they’re responsible to each other, they’re not responsible certainly to their employee. The executive and the boards that do best are the ones that are, are organic. And the way you get that is that first of all, the idea of equal giving excuses of equal participation and that kind of commitment. But another way you do that is to things you make sure that you have a variety of skills on your board. You don’t need six accountants and nine attorneys. You know, you need to spread that around a little bit and then the other pieces, if you look at the constituencies from which you expect to raise money and however you want to identify those, you should have at least one board member that represents those constituents. Each of those constituencies because they’re the person that has the network that you’re looking to to, to to build and then that that individual’s job, one of their jobs is advocacy, is making sure that their network knows who you are as an organization and the great work you’re doing, that. You’re willing to introduce your friends and relatives to this organization, you know, and if a board member isn’t willing to do that, I question their commitment. Why are you on the sport? I mean, if you don’t really feel good enough to tell your friends and relatives and business partners that this is a good thing, why you know what you’re doing that.

[00:29:47.58] spk_0:
I was on a board years ago by the way. Larry. If you need to take a sip of water, please go ahead. I’ll, uh, I’ll make my question. Uh, uh, Loquacious to give you a chance to take a, take a drink and a breath. Um, I was on a board many years ago. Uh, and one of the board members was, was kind of embarrassed to ask for money. He didn’t, he didn’t feel that the organization really merited the support of his friends he was giving personally, But I think that’s because we all have an obligation. But he, he was, he was kind of embarrassed actually. He felt that, yeah, that the organization just was not, wouldn’t be meaningful to his, his colleagues in his, this happened to be an attorney in his, in his law firm wouldn’t be meaningful to them. They wouldn’t be interested without, without ever having talked to him about it. Very, you know, very unfortunate. Um, yeah, it’s just a terrible, unfortunate, sad mindset. You know, why are you on the board? If you don’t think your friends, even your colleagues forget friends, Your professional colleagues are going to have any interest that you serve on the board. I mean, that’s your biggest hook or at least that’s your first hook. Maybe it’s not your biggest hook. That’s your first hook. I spend time with this organization. I go to their performances. I go to the meetings. I’m on the, I’m on a couple of committees. You know, that’s your, that’s your entree and then what good that the, that the community that the organization does, the education program in the elementary schools, the performances, etcetera. But he just had the vastly wrong and very unfortunate mindset.

[00:30:12.95] spk_1:
Well, you see that mindset goes beyond board members and what’s happening there is the person is not comfortable. And so they’ve feel authorized to take the agency away from the other person. They’re making the decision for

[00:30:18.50] spk_0:
them. That’s

[00:30:19.63] spk_1:
what they’re doing. And, and I, it’s like when, you know, you’re doing an awareness meeting or an event

[00:30:24.78] spk_0:
well, and they’re also, they’re also just making everything easier on themselves.

[00:30:28.84] spk_1:
Of course they,

[00:30:29.81] spk_0:
well, my, my, my, my fellow, uh, partners aren’t gonna be interested. So I’m not going to approach them.

[00:31:23.95] spk_1:
So, but it’s the whole idea of awkwardness and you, but they don’t realize they’re taking agency away from these people. They’re not giving them the opportunity to make the decision on. That’s really what they’re doing. Now. There is the flip of this. I’ll tell you a story. Um, I was working with a client up and catch them, which is Sun Valley. I live out in Idaho and Sun Valley is a very wealthy community. It’s not very big, but there’s a lot of, a lot of money there And we were doing an annual fund where this one individual had made a cash gift to $250,000. And so he was assigned to do another to go and solicit one of his board members and this man’s name. Others call him John offered the guy that the other board member will, will you take 50? And where upon the board members said, Bill, don’t embarrass yourself with that. I want the 2 50 that I put put in. I mean, there’s, I mean, I wouldn’t necessarily advise that, but he obviously knew the man well,

[00:31:42.07] spk_0:
right. Talking about peer to peer. Yeah, if you can, if you can get friends, I was gonna say putting pressure on, let’s just say soliciting, uh, if you can get friends like that soliciting each other, Nobody’s gonna walk away disappointed.

[00:31:52.60] spk_1:
No, No. I just love what he said was, don’t embarrass? You

[00:31:58.61] spk_0:
Don’t embarrass yourself 50,000. Yeah, Yeah. That’s, that’s a, that’s a great lesson in peer to peer board board soliciting keep the keep the professionals away and let’s just get the 22 good friends having lunch together. One of them has an agenda to talk to the other about his or her board. Giving all right,

[00:32:17.59] spk_1:
Anything

[00:32:18.22] spk_0:
else you want? I I got admonished on because donors of the drivers, I left that too early. So anything else you want to share on leadership leads before, before we move ahead.

[00:32:33.32] spk_1:
Um, I don’t think so. I just say that, oh, when you in, when you insist, when, when you insist on equal sacrifice, here’s what happens. You get a group of people, of individuals that become accountable to each other.

[00:32:46.92] spk_0:
There’s

[00:32:57.13] spk_1:
the key and they begin to function as a group, not as a collection of individuals. And that’s where the trail, that’s where two plus two equals five, you see is because that synergy of a group functioning as a group, not as a group of it, not as a collection of individuals. And that doesn’t happen very often. But when it does, it really really energizes an organization. You see it make great strides very quickly,

[00:33:20.21] spk_0:
shared sacrifice. If we’re all sacrificing equally. And I don’t mean dollar wise, I mean, I mean, capacity wise, we’re all sacrificing for the good of this organization. Yeah. That’s going to create a cohesion.

[00:33:27.51] spk_1:
That’s what you that’s what you’re looking for. Is that kind of, you know, we’re all in this together. Um and we’re gonna make it we’re gonna make it successful

[00:33:36.03] spk_0:
partnership in sacrifice.

[00:33:38.32] spk_1:
That’s right. That’s exactly what it is. And as I said, it becomes an organic group. It’s not it’s no longer just a collection of individuals.

[00:33:55.30] spk_0:
Good enough. Okay, Let’s talk about principle number six, divide and grow. What’s this? What’s this about?

[00:35:20.41] spk_1:
Well, a divide and grow. Um The shorthand version of that is treat different donors differently. Alright. So that um what you’re essentially doing here is you realize that your donors are not all the same, they’re not all the same age that they don’t have the same situation in life or as the Germans would say, where they are in their lifespan, um, their interests, all of the, they’re all different to some degree. They come from different backgrounds, different places. So that the organization that can allow for these, and that creates a pathway for donors to come closer to you emotionally over time and see, I’m a big believer in really focusing on high retention rates, not cache entry rates. Those organizations are the ones who achieve this transformative giving over time. Uh, and that’s so that when you divide your constituency into these air into these levels of, you know, you know, ages and, and where they are in life and income level and all these kinds of things that, that define, you know, what the person is going to be like when they come to you and you treat them that way. And, and you, you can, of course with today’s technology, even the very smallest organization can do this kind of thing. Uh, it doesn’t, you know, in the old days, you know, three or three or five cards and an army of researchers and, and people making phone calls and you can still do that. But the point is, you don’t have to, but you know, I’ve known this for a long time. But then there was research published about five years ago, I think it was Russell James, I’m sure, you know, russell

[00:35:33.09] spk_0:
Russell Professor Russell James texas Tech University.

[00:36:46.40] spk_1:
Yeah, So and what they discovered was when donors are given a pathway that brings them closer emotionally. And I stress that word, the emotional connection with the organization over time To the point where they make a gift out of an asset, not income. And it doesn’t have to be a large one can be maybe a couple $1000. I mean really it doesn’t have to be huge when that happens. And you can get a core group of people, maybe only 10 or 15% of your donor base that has done that the entire fundraising program in terms of income, just skyrockets. And the reason why is you have a core group of people that are so emotionally committed to you. They come hell or high water they’re gonna, they’re gonna be there for you no matter what happens, you see, and that’s what you’re looking for. Is that core group of people that are so emotionally committed to you and they may not be your top givers financially, but they will drive everything else. That’s the key. Um, and that’s why although I’ve done most of my work in capital fundraising and major gift fundraising in all the conventional terms, I I even sort of steer away from the term major giving anymore because that’s an internal term. It’s reflected on ability. Um, and I really, really focus on emotional commitment because I think the rest will come. And of course in your area, the deferred giving area, that’s those are asset gifts, you know, usually by definition.

[00:37:01.29] spk_0:
Yeah, right. You were talking about giving from assets, but

[00:37:16.11] spk_1:
I mean, I had a fun gift be satisfied by the liquidation of a small, a small money market. 10 grand. Okay. I mean, yeah,

[00:37:51.83] spk_0:
sure. That can happen. Um, yeah, the ultimate, you know, the for a lot of folks that their ultimate gift has to come in their estate plan because either they can’t or they believe that they can’t make their ultimate gift while they’re still living. So they put it in their estate plan and there there’s there’s a plan to get in a nutshell. Alright, So, yeah, so, all right. So you want us to, you know, dividing and growing, you want these, you talk about mutual, mutually beneficial relationships.

[00:39:22.17] spk_1:
Yes, these are, these are not one way relationship. These are mutually beneficial relationships. Um, you know, you know, I have something called the, if you read my book or my other stuff, I have something called a donor pipeline pipeline signs kind of commercial and kind of cold, but what it really is, it shows how donors come to you and they come to you through three or four different sources and then over time, how you get to know them and move them closer to you and then you can attach certain kinds of fundraising methods and relationships and things that they do over time and then a capital campaign, which is a very specific, relatively short term way to raise a lot of money for a specific so set of, of things or ideas then what that, how that serves in all this is to kind of goose what I’ll call goose the whole system because it raises everybody’s awareness of what’s going on. And then, you know, for those who understand that the real or that I would think the more significant payoff Quote of of a capital campaign is not the money raised in the immediate, uh, for the immediate, in case it’s how you’ve positioned your, your donor base to continue to give at higher levels over what, 10 or 15 years. And universities, they figured this out 30, 40 years ago when they invented what they called the continual campaign, the continuous campaign. And so, you know, before that, you know, you and I probably have to remember that these universities would hire, you know, couple score of, you know, field officers and run the campaign then fire everybody. And five years later they do the whole thing all over again. That’s a very inefficient way of raising money. And so they realized, oh, we can do this differently. And so that’s, you know, but you can do it even as a small organization.

[00:39:45.82] spk_0:
Yeah. Keep those relationships going rather than trying to renew them every five or seven years on your on your campaign cycle. Yeah. That seems antiquated. Alright.

[00:40:00.38] spk_1:
Yes,

[00:41:36.64] spk_0:
it was, Yeah. My early days. It’s time for Tony’s take two. Make it about your mission. Your work. That’s what you have in common with your supporters. Whether we’re talking about volunteers, donors, other types of supporters, they love your work. You do the work. The mission is what you have in common. So you know, as we’re approaching rapidly, the all important fourth quarter, keep the mission in mind as you’re crafting messages, whatever digital print the mission is what moves your supporters. That’s what they love about you. That’s what they give their money, their time to make it about your mission. It’s special to them. Sort of keep it special in your mind. Don’t let it become routine and mundane and, and un interesting to you or you think what’s interesting to you is not going to be interesting to other folks. Not so not so they love your mission. Your mission is what you have in common with those who are loving you who are supporting you. Make it about the mission. That is Tony’s take two. We’ve got boo koo, but loads more time for sustainable fundraising with larry johnson instead of doing just three of the 8, 3/8. Let’s, let’s talk about four of them. We have, we have a little more time left and then we’ll just tease, you know, all eight of them. But I would like to talk and you’ve, you’ve talked around this one and you’ve alluded to it. Number seven renew and refresh. You know, keeping a high renewal rate, high retention rate. Let’s, let’s just flush that one out as, as our, as our fourth one renew and refresh.

[00:43:27.63] spk_1:
Well, it’s, it’s said, it’s said in that order on purpose, your first goal is to renew the investors you currently have, that’s your first priority. And your second priority is to refresh your base because people die. People change their interest. People go into a different stage of life. I mean will go into bankruptcies or they lose their all sorts of reasons why people will stop giving to you and many, most of them legitimate reasons. You know, you haven’t necessarily quote pissed them off or anything. So that, so that renewing should be your number one priority with your donor pool. Unfortunately it’s not for most people. I can’t believe, I can’t tell you the number of development officers I’ve heard tell me, well, I’d like to renew more, but my executive just wants to get more new donors into the fold. And that just seems to be the, I mean, I’m like, I don’t understand where that comes from quite frankly. I mean, but I mean who am I to say? But anyway, renewing first And the, and there’s, you know, and renewing donors is actually easier now than it was when I was just in this business. And yet it seems that there’s more turning going on than it was when I was first in this business, I think there are a couple of things that are driving that first of demographics we’re dealing with, we’re dealing with younger generations in the boomers whose patience and attention levels, attention spans are quite a bit shorter and their reasons for giving are different. They’re much more impact driven than those in our age range.

[00:43:33.34] spk_0:
This is interesting. Larry, let me, let me let me stop here. Do we know that retention rates, which are, which are quite low, uh, around 20,

[00:43:43.98] spk_1:
pathetic

[00:43:45.38] spk_0:
Part. Yeah. Our retention rates lower than they were 20 years ago.

[00:43:56.38] spk_1:
I think they are. I mean, I would have to check the numbers, but in terms of my experience, excuse me, there seems to be less churn, have

[00:43:59.62] spk_0:
a drink, have a drink while I uh, say that Larry’s having a little sip of water from his yellow yellow water bottle. Very pretty.

[00:44:47.75] spk_1:
Uh, there’s, there’s, there seems to be more turn that may simply because there’s more younger donors. I mean, people send, there’s sort of this false calculus out there that millennials aren’t philanthropic. Well, they are, they’re a very high percent of them give, but they give it a different way than baby boomers do like you and I, but yes, the renewal rate is pathetic. And what I, the, the, the analogy I use is that, you know, I think the, I think, I think it’s like the the first year renewal rates always hovered in the high thirties 30% somewhere in there, the ones I’ve seen. But if you look at the consumer products, Uh, renewal rates, they’re 95 and 96%. So what I say to people is people are more loyal to their toothpaste and they are their charity. This

[00:44:57.24] spk_0:
is a very good example actually.

[00:45:06.18] spk_1:
Mean P and G. Has that figured out tony They got it figured out. So why is it if they can figure it out for something as mundane as toothpaste. Alright. Uh, why is it that nonprofits can’t employ there again? They’re selling the real thing. They’re not selling a pony thing. It’s real. It’s hard. You know, why is it? They can’t get there. Well, because they’re not investing the time and effort to make it happen. It’s just not on their radar screen. Um, that’s, that’s what I’ve seen. And maybe

[00:45:27.48] spk_0:
your advice around increasing retention.

[00:45:49.66] spk_1:
Well, it has to be an organizational mandate number one. We are going to set these goals and they’re gonna go up. I mean, there has to be the board executive. Okay, This is gonna happen. All right. We’re not happy with this. Okay. Number one, we’ve got to make a change and then you go back and you just deconstruct every single piece of what you’re doing and you look at, okay, Is this adding to or or or or taking away from the ability to renew

[00:45:55.38] spk_0:
looking at the donor journey?

[00:45:57.40] spk_1:
Yes, yeah, just

[00:46:10.66] spk_0:
listeners, we recently had um uh, I guess talking about the, the welcome journey, your email welcome journey just within the past month or six weeks or so, So you know, that’s welcoming brand new donors, you do that over the first week to 10 days, so that’s part of what you’re talking about. That’s

[00:46:19.99] spk_1:
just absolutely, that’s

[00:46:21.07] spk_0:
the initial phase of what you’re talking about, that. But the whole journey, let

[00:46:24.43] spk_1:
me give an example of the initial phase why it’s so very important. Um you maybe you’re, I know, I know you’re old enough, I don’t remember a woman with the name of Pearl Mesta.

[00:46:33.82] spk_0:
No

[00:46:35.29] spk_1:
esto was the heiress to the Mesta Machine fortune in Pittsburgh, and they’re the ones that produced a lot of the heavy artillery and guns during World War two.

[00:46:43.25] spk_0:
I went to school at Carnegie Mellon. Uh

[00:46:45.69] spk_1:
there you go. I

[00:46:46.82] spk_0:
knew, so I know. Andrew Carnegie Did you ever

[00:46:50.17] spk_1:
machine in Homestead? It’s still there.

[00:46:52.45] spk_0:
Okay, I know Homestead Homestead works used to be, it was a big Steeltown Homestead. Okay. Mr Works. Alright.

[00:47:33.73] spk_1:
So anyway, Pearl Mesta uh in the 90 the sixties, uh, you know, was the grand dame of Washington social life. Okay. Everybody wanted to be invited to one of Pearl’s parties. Okay, whether you’re Republican democrat, it didn’t, it was the place to be boy and if you don’t wanna pearls list, you’re at the top and everyone came and it was a very congenial group? Well at one point someone asked her pearl, you know, what is it that makes your party? So everyone just can’t wait to get there. And here’s what she said. It’s all about the hellos and the goodbyes.

[00:47:38.65] spk_0:
Mm think

[00:47:43.30] spk_1:
about that. You know how

[00:47:43.71] spk_0:
welcome you feel, coming, coming and going

[00:48:00.93] spk_1:
right, right. And and she saw that as her job when someone crossed her threshold who may not know more than two people in the whole room, okay to make them feel at home and welcome. And that takes

[00:48:02.66] spk_0:
purpose

[00:48:03.63] spk_1:
to welcome them. Call them by name and you know, take care of their coats or whatever it is that you need to do and then introduce them to someone

[00:48:11.00] spk_0:
introduced right and

[00:48:28.66] spk_1:
get them started and break the ice for them. That’s what she did. And then when it was time for someone to leave, she didn’t let them sneak out the front door, the side door. Oh, tony thank you so much for coming. I can’t wait till I can have you here in my home again. See the difference, but that’s the hostess is as an active role then, you know, she’s not over there huddled in the corner with all of her friends,

[00:48:37.18] spk_0:
you

[00:48:37.35] spk_1:
know, and and there’s the difference and I’ve seen this in awareness meetings when I was in universities where you got the administrators all hovered over in the corner talking to themselves. you know, what the hell is this about? Get out there and talk to these other people?

[00:50:10.31] spk_0:
Yeah, I hope. Yeah, I used to see that when we had in person meetings, you know, too many, too many development folks or even it doesn’t, they don’t, it’s not even just the fundraisers, it’s, you know, too many insiders talking to each other because they’re all comfortable with it instead of talking to the donors who they don’t know or maybe just, you know, casually. No, but you know, I’m breaking the ice with those folks and making them feel welcome. Yeah, I hate to see those clusters of employees. Again, not only fundraisers, you know, anybody for any, anybody doing program work, anybody representing the organization at a public event, you shouldn’t be huddled with your fellow employees, you should be out talking to the public, telling them what you do. You it may be mundane to you, but it’s not mundane to them. They, you know, quoting from glengarry glen ross. They don’t step foot on the lot. If they don’t want to pay. If they don’t want to buy, they don’t step foot on the lot. They’re not ready to buy from the, from the alec baldwin, you know, booming iconic speech folks don’t set foot on the lot if they’re not ready to buy, they haven’t come to spend time with your organization, if they don’t want to learn about it. So whether you’re a fundraiser or you’re not, if you don’t have an outward facing job, then, you know, if you don’t want to talk to the public, then don’t come to the event. This is, this is an awareness raising. You

[00:50:15.95] spk_1:
know, just

[00:50:28.82] spk_0:
come to the employee holiday party and then you can huddle with all your fellow employees, but coming to a public event, talk to the public, get away from the folks, you know very well because you work with them and, and get out talking to folks you don’t know, tell them about what you do

[00:50:33.01] spk_1:
when I Years ago.

[00:50:35.31] spk_0:
That was a bit of a,

[00:50:36.67] spk_1:
it was not

[00:50:37.38] spk_0:
sure. I’m sorry. But

[00:50:38.83] spk_1:
you shouldn’t be

[00:50:40.50] spk_0:
years

[00:50:41.34] spk_1:
ago when I was running the major,

[00:50:44.06] spk_0:
when

[00:51:09.56] spk_1:
I was running the good major program at Suny Buffalo. I was very, we were very much mindful of, you know, and this is politically incorrect today. But we were in the Chiefs and indians A’s okay. How many, how many people do we have? We gotta make sure we balance this thing out and, and I, and I made I made it very clear to, to fundraising staff that were there. You know, here’s your assignment. You are not here to suck up free food and booze. Thank you very much. That’s not your role here. In fact, if you get anything to eat or drink at all. That’s, that’s lucky on your part. Okay. That’s not what your

[00:51:15.30] spk_0:
extreme. I like to feed food, I like to see that folks are said and, and uh, you know, plus you can meet people over the buffet table. Oh

[00:51:24.62] spk_1:
yeah, I mean I, I said that, I mean I expect people to enjoy themselves. Uh and I, and I think it’s important that,

[00:51:30.78] spk_0:
but, but there’s a reason that you’re there.

[00:51:32.71] spk_1:
Yeah, you’re not there just to suck up free food. I

[00:51:35.88] spk_0:
used to go to these events with the name, list of pack,

[00:51:38.85] spk_1:
list

[00:51:39.22] spk_0:
of pockets. I’m getting too excited. I used to go to these events like this with a list of names in my pocket, on a piece of paper folded in half. So it would fit in my breast jacket pocket. And these are the folks that I want to talk to who said they’re coming and from time to time I would excuse myself, go in the hall, look at the

[00:51:57.37] spk_1:
list,

[00:52:18.29] spk_0:
check with the front, the registration desk to make sure that these, you know, I can’t find somebody. Did they come or that they didn’t come so I can’t talk to them. But I would check the list, go and talk to folks you should be going with and, and for some of these folks, you know, there were, there were reasons I wanted to talk to them. Some of them, it was just a refresh and renew. But some, you know, I had a specific agenda item to talk to them about. You know, these these events are not, you know, to your point, you’re lucky if you eat and drink, they’re not social, these are work events.

[00:52:29.27] spk_1:
That’s right. You’re not

[00:52:30.01] spk_0:
gonna be, you’re gonna be working in advancing relationships.

[00:52:32.61] spk_1:
You’re not, you’re not just schmoozing, You’re working.

[00:52:36.47] spk_0:
Uh,

[00:52:53.03] spk_1:
this is purposeful. Um, well, and I used to, and I used to have the officers that attended, I used to have them submit the names to me of all the people they have meaningful conversations with. You know, how did we cover the floor? You know, it was left out. Um, that was key cause this, this was a very, of course, if it’s a sit down event, it’s all about strategic seating. Of

[00:52:58.37] spk_0:
course, yes, Yes. Don’t put the employees together. Put the right donors with the right potential donors. Put the right staff with the right donors. Yes. Be very intentional. Very purposeful

[00:53:10.75] spk_1:
or donors who have personal differences. You don’t see them together.

[00:53:16.96] spk_0:
Yes. Um, if it’s not a sit down event or if it’s the cocktail hour, you see somebody standing alone or sitting alone, over in a chair or a sofa, go up and introduce yourself.

[00:53:25.67] spk_1:
Don’t

[00:53:34.44] spk_0:
let people sit by themselves alone and stand alone in the cocktail hour. You know, they’re looking for somebody to come up to them, do it again. If you don’t want to do that kind of work, then just go to the employer employee holiday party.

[00:53:40.85] spk_1:
You

[00:53:41.90] spk_0:
know, you might not have an outward facing job. but if you’re going to an outward facing event representing the organization, then you need to be outward facing and not huddled with your fellow employees.

[00:53:51.68] spk_1:
So

[00:53:52.67] spk_0:
going back

[00:54:24.09] spk_1:
to the premise here of renew, that should be the number one driver in terms of the donor pool focus on renewal and building that relationship over time. Uh, it’s, you know, you know, in terms of, you know, I’m an engineer, I’m a business guy, you know, I’m interested in return on investment. How much does it cost? You know, and it is a cost. It’s much less expensive in dollars and cents to maintain a relationship to get a very large gift than it is to constantly be trying to bring new people into the fold as you know, No,

[00:54:25.71] spk_0:
that’s donor acquisition costs a lot more than donor.

[00:54:28.83] spk_1:
Yeah, it’s so much more expensive

[00:54:32.09] spk_0:
multiples.

[00:55:10.77] spk_1:
And so then from a financial point of view, it’s makes sense. Everything, It just makes sense. But you, but you’re really working on this relationship over time and then you do have an acquisition program that, that drops people in at various levels when they come in, but that’s where the focus should be every and so people aren’t doing that. As I said, the first step is to go back and deconstruct the entire program and begin to rebuild it with renewal as the number one focus. And then, and of course that’s gonna really, um, give some executives heartburn because they’re so dependent on these small first time gifts to make, to make a budget, you know, which is, you know, that’s an exercise in futility. But it happens all the time because that will absolutely give them heartburn. But what’s gonna happen here? What’s gonna happen there? But

[00:55:20.51] spk_0:
over time you’ll have a more sustainable fundraising revenue when you retain your donors and grow them

[00:55:27.41] spk_1:
well, not only sustainable, but a lot more money. Pure and simple. And I would go so far as to suggest that you could probably do this in a way that it wouldn’t even affect your current income levels. I think you get enough replacement from your acquisition in your renewal’s

[00:56:22.00] spk_0:
maybe maybe. But even if you don’t, it’s still worth, it’s still worth investing in the long term retention or renewal and growth of your existing donors. All right. That was # seven renew and refresh. Alright, so Larry, give us the rundown. Uh, are you able to recite them? Okay. Okay. Okay. So we’re gonna go through the eight. We, we touched on 4/8. So we did half the other half are at the eight principles dot com. Larry, please just run down your, your eight principles of sustainable fundraising.

[01:00:11.58] spk_1:
The a principles are principal one donors are the drivers donors dr philanthropy, but they drive it with their dreams, not their money principle. To begin at the beginning, you need to be able to know your mission and be able to communicate it in a way and in language and in areas and places where your prospective investors will receive it and understand it. Clearly three leadership leads, Your leadership leads, sets the tone for everything else and they will lead. Everybody else will follow their lead, whatever whether that’s good or bad principle for learning plan. You need to first learn who would naturally support you because not everyone will even philanthropic people, Not everyone will and then construct a plan or a program. And how do you reach those people? Where are they? What do they read? What do they do? Who are their friends? All this sort of thing. Principle five. Work from the inside out. Begin with those people closest to you, both in terms of, of affinity and to your mission but also closeness to your organization. That’s why I’m a big believer in doing board campaigns, annual campaigns and doing employee campaigns because it’s you begin and you move out in concentric circles, it’s like building that network. Principle six divide and grow simply treat different donors differently And you’re constructing a pathway that over time will bring your donors closer to you emotionally. Principles seven renew and refresh. Your first focus should be to renew your current investors, the other people who have already voted with their money. You know, they’ve already told you, hey, we support you and oftentimes they’re ignored or simply given you know, whatever. Quick, quick Thank you and then Principal eight integrate, evaluate, integrate, invest, integrate and evaluate. I get that. Right. Okay. So you, you tricked me up. Okay. First of all you have to invest in your program. It costs money to raise money. But this is the role of the board to understand what these general guidelines are in terms of what it takes to raise money over what length of time, you know, how much of investment do we have to make for it begin to pay off over time? Um, integrate. Now this can be, this can be a problem with small organizations or large organizations. And integration is simply understanding that you need to make sure that you, as you communicate as you solicit as you focus on your donor constituency. It needs to come across as a uniform message to the receiver. And what I mean by that is in the case of a big university. You, we have all these different appeals and their college and their this and plan giving and major giving and all this sort of thing. And you know, if, if those things aren’t coordinated the effect on the donor, it, it’s like they’re coming at them. They don’t know, you know, and we’ve all had the horror stories of that sort of thing. Um, you know, one in particular was, I was running again this back at Sunni and a major gift officer called me up. They were in California and they said, I just had a very interesting experience. And I said, what’s that? He said when I was in there visiting the couple, the doorbell rang and it was a plan giving officer. Well in the university’s wisdom, you know, our two organizations were silo where you see the result that God and so and then on the other end of the spectrum, another kind of offender of this kind of thing are the independent schools where they are soliciting parents left and right for every little ding dong thing on the face of the earth and people get worn out with that really quickly. And so you know, when I worked with independent schools, I say, hey, we need to budget as much as this is possible and have a uniform appeal to these donors and organizations schools that have done that the donor satisfaction goes up and they raise a lot more money. Okay,

[01:00:26.41] spk_0:
that’s integrate. So invest, integrate and evaluate,

[01:00:38.64] spk_1:
evaluate. You know, how many times have I heard? What we’ve always done it that way. What do you mean? You’ve always done it that way. That’s prescription for death in most places. And so every year there ought to be an evaluation of the plan evaluation. How do we perform, what do we do well, what we do not do well, what do we need to change? What do we need to tweet? What

[01:00:48.80] spk_0:
are the important, what are the real meaningful metrics?

[01:00:55.09] spk_1:
That’s right. And then how do we make those better larry

[01:00:55.64] spk_0:
johnson. The Eight Principles, You find the principles at the Eight Principles dot com. His book is the Eight principles of sustainable fundraising. You’ll find larry on linkedin Larry, thank you very, very much for sharing.

[01:01:08.53] spk_1:
Oh, it’s my pleasure, tony This was a lot of fun,

[01:02:18.43] spk_0:
I’m glad. Thank you. Thank you very much for being with me. Next week planned giving with eastern donors. I learned a lot in this one. If you missed any part of this week’s show, I beseech you find it at tony-martignetti dot com were sponsored by Turn to communications. Pr and content for nonprofits. Your story is their mission turned life into dot C. O. And by fourth dimension technologies i Tion for in a box, they’re affordable tech solution for nonprofits at tony-dot-M.A.-slash-Pursuant for d just like three D But as you know, they go one dimension deeper and they’ve got the free offer. Our creative producer is Claire Meyerhoff. The shows, social media is by Susan Chavez. Marc Silverman is our web guy. And this music is by scott Stein, thank you for that. Affirmation Scottie with me next week for nonprofit radio big non profit ideas for the other 95% go out and be great

Nonprofit Radio for March 22, 2021: Build Your Best Better Board

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Gene Takagi

Gene Takagi: Build Your Best Better Board
Gene Takagi returns! He’s got strategies to help you build the diverse, effective, thoughtful, appropriately-sized, well-trained board you deserve. He’s our legal contributor and managing attorney of NEO, the Nonprofit and Exempt Organizations law group.

 

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Every nonprofit struggles with these issues. Big nonprofits hire experts. The other 95% listen to Tony Martignetti Nonprofit Radio. Trusted experts and leading thinkers join me each week to tackle the tough issues. If you have big dreams but a small budget, you have a home at Tony Martignetti Nonprofit Radio.
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[00:01:39.64] spk_0:
Hello and welcome to tony-martignetti non profit radio big non profit ideas for the other 95%. I’m your aptly named host of your favorite abdominal podcast, and I’m glad you’re with me. I’d come down with dyskinesia if you gave me a taste of the idea that you missed this week’s show. Build your best Better board. Jeanne Takagi returns. He’s got strategies to help you build the diverse, effective, thoughtful, appropriately sized, well trained board you deserve. He’s our legal contributor and managing attorney of Neo, the nonprofit and exempt organizations law group tony State, too. Podcast pleasantries and planned giving accelerator. We’re sponsored by turn to communications, PR and content for nonprofits. Your story is their mission. Turn hyphen two dot c o. It’s my pleasure to welcome back, as it always is. Jeanne Takagi. These are legal contributor, managing attorney of Neo, the nonprofit and Exempt Organizations Law Group in San Francisco. He edits the enormously popular nonprofit law blog dot com and is a part time lecturer at Columbia University. The firm is that neo law group dot com, and he’s at G Attack Gene, welcome back to the show.

[00:01:41.84] spk_1:
Thanks, Tony. It’s great to be back. How are you?

[00:01:59.94] spk_0:
I’m doing well. Thank you. It’s always a pleasure. Many, many years. It’s a pleasure. Each time you’re you are teaching us what’s important, what we need to keep centered. What’s, uh where are ships Should all be facing in the same direction. So what direction is that? You keep us. Keep us on the straight path. I appreciate it. I know our listeners due to thank you.

[00:02:06.34] spk_1:
Thank you, Tony.

[00:02:23.84] spk_0:
Let’s get started with your building. Your best. Better board. We’re not We’re not gonna We’re not going to settle on nonprofit radio for your lackluster better board. We want your best, Better board. And I think the place to start is with board roles. So what are we expecting our board members to do?

[00:02:52.74] spk_1:
Yeah, I love this conversation, tony. It’s actually one of my favorites. And yeah, it was probably Gosh, it was early on, I think when we first talked a little bit about boards getting sort of distracted from doing the financial oversight and forgetting to do some of the other things that boards are supposed to do. Um, and, you know, part of what we talked about could have been, like 78 years ago was like, Hey, somebody should be over overseeing. You know, whether the program’s doing Are they having an impact or not? Are they really furthering your mission in the way that you want them to?

[00:03:11.94] spk_0:
You know, I have to remind you you and I did a mock board meeting one time, and either you threw me off the border. I walked out. I forget

[00:03:15.22] spk_1:
which

[00:03:30.04] spk_0:
back in the old studio was many years ago. I don’t know what we’re talking about. Something board related, obviously. But, uh, yeah, either I got booted off or I walked out and quit. I forget, uh, we’re trying to avoid that. We’re trying to avoid that in our best better board,

[00:03:32.54] spk_1:
but we’re definitely going to try to approach any of these things with extreme tact

[00:03:37.84] spk_0:
I lack, which I often lack. I probably walked out. I probably quit or something.

[00:06:01.14] spk_1:
Yeah, just just overall, the same financial diligence is great. So take a look at the financials, make sure you understand them and make sure that the organization is able to pay off its debts that they become do that you’re not sort of bleeding money and just managing your financial assets. But non profits exist more than to produce a financial bottom line, of course. So you know in the for profit world boards and probably got a different duty, maybe a little bit more. I mean, everybody has to act in the best interests of the corporation, right? That’s a fiduciary duty. But what is the best interests of the corporation for for profit? Oftentimes it’s associated, at least in large part the benefit of its owners or shareholders. But in the non profit, there are no shareholders or owners, right? It’s for the benefit of advancing the mission. And that’s what the board has got to remember, that it’s got to be purpose driven. It’s got to be, um, acting in furtherance of the mission ahead of everything else. Um, and the one caveat I’ll add to that which we may have talked a little bit about before, as well is you’ve got to add values to that statement, so their values probably baked into your mission statement but also baked into the organizational culture. So if our mission is to feed people who are experiencing homelessness or a lack of income, resources or we’re not just going to throw food out in a trough, right? You know that might be the best way or the most effective way to get as many people fed as possible. But that would be completely inconsistent with anybody’s values. Or so values and mission sort of go hand in hand, and focusing on that is really important. So not just financial oversight, the programmatic oversight the role of the board has got to look forward to. You’ve got to set the path with those values and mission for the organization’s future, not just looking behind you, but looking ahead, um, and so guiding the organization with those thoughts, acting as ambassadors, getting the feedback from the environment about what challenges and what opportunities may be out there. Those are all things the board can bring back to the executive and to the staff, sort of to help them do their best.

[00:06:44.34] spk_0:
And these are all very, uh, lofty. And and, um, I don’t want to say pedagogical, because that makes it sound like they’re not grounded, but But these are these are very we haven’t even talked about. You know how many board meetings you have to attend in a year. And how many subcommittees you have to serve on? You know, we haven’t gotten to that yet. You know, we’re talking about the the ambition, but it has to be centered. It’s It’s like you said. It’s the mission and values of the organization. I mean, if someone doesn’t respect those, then you’re not gonna get your best better board. You’re going to get a crappy person. Maybe it gives a lot of money, but ultimately, the ships are not sailing in the same direction with all the board members on each one.

[00:06:50.14] spk_1:
Yeah, I think that’s right. And I loved your introduction about having the best Better board. Not this lackluster,

[00:07:13.34] spk_0:
lackluster better. But yeah, that’s for other podcasts, not on the radio. We don’t tolerate lackluster mediocrity, mediocre better boards that we want to. We want the best Better board. All right, so So it really it really does start with loft and ambition around around Mission and values.

[00:07:15.74] spk_1:
I definitely think so.

[00:07:29.44] spk_0:
Yeah. Okay. Okay. So now let’s drill down. I mean, in terms of what we’re expecting the board to do, you have to be up front with what these expectations are and that that happens in recruitment, right? Not not in their first board meeting. You should be explaining the expectations while you’re talking to somebody about joining the board. Not after they have joined.

[00:07:41.54] spk_1:
Absolutely. And too often. I see tony and I don’t know if you’ve experienced this as well, but somebody tries to recruit you onto the board and they go, It’s really not that much work, you know. It’s easy. Um, well, that’s going to get you a lackluster and maybe not even a better board. So,

[00:07:59.57] spk_0:
um,

[00:08:45.54] spk_1:
yeah, so it really is about setting expectations of Hey, you really believe in this mission and you have the same values that we’re trying to move forward with. Let’s do something great with this organization. Let’s make a great impact here. This is These are the kind of things that we expect of our board. This is how often we meet. You know, this is, um, what we expected each board member in terms of attendance and in terms of maybe making a meaningful contribution. I don’t like set amounts because that can hurt diversity and inclusive inclusion. But a meaningful donation to to the organization it could be in time if not in money or in other ways. But the expectations, I think, need to be spelled out in front before you actually invite somebody onto the board.

[00:09:00.24] spk_0:
And when you’re spelling them out, I mean, do you Do you like to see a writing a document with, you know, Please take this home with you and consider consider, as we’re having our conversations about about you being on the board, consider all these things like you give them a document to read or just a conversation.

[00:09:24.64] spk_1:
I think both tony. So I I you know, it may depend upon the organization how formal they get, but if you do actually have a recruiting sort of policy or procedure or recruiting committee in place, I like to put some things down in writing just to make sure that we’re all on the same page and letting people know what the organization’s expectations are and how often boards meet. And if there is a meaningful contribution, expectations all of those things up front. So if somebody is not interested, they can right away say, you know, this isn’t for me, you know, I like what you do. But it’s not for me and another person who might say I’m really interested in doing all of those things. You know? I’d love to be a part of your board,

[00:10:11.94] spk_0:
All right? So be upfront about expectations. There’s no point in in concealing the work and the requirements, only to have the person blindsided when it comes time around, when it comes time for each board member to make their annual contribution. And and And they didn’t know that it was supposed to be a meaningful gift or they didn’t know there was a board giving requirement of any sort. You know, when it comes time to assign committee. So I didn’t know I was gonna be on a committee. I thought I just came to board member board meetings four times a year. Now we have committee meetings to I didn’t know about that, and then you set yourself up for a disaster.

[00:10:46.54] spk_1:
Yeah, I think that’s right. And if you if you start to um, the danger of it is is you don’t want to just sort of create this list of these are the things you have to do for the organization to run. You’ve got to always again relate it back to the mission and values. This is why we love to contribute as board members to the organization. Because this is what impact we can have. And this is the direction we see ourselves going to be able to have even greater impact. So you just keep reinforcing that message to get your best board members.

[00:10:55.74] spk_0:
You let me ask you a question. Are you Are you, uh Are you by any chance, playing with a pen or or anything?

[00:11:02.14] spk_1:
I am not rocking back and forth on my chair.

[00:11:06.44] spk_0:
And I know there’s, like, a little clicking, and I’m not. I know you’re not. I know you’re not typing like you’re not writing a document while we’re talking

[00:11:13.94] spk_1:
about you’re

[00:11:14.15] spk_0:
writing a client agreement or something.

[00:11:16.51] spk_1:
Typical things you expect from a lawyer, right?

[00:11:32.14] spk_0:
Yeah. You double bill your time, right. You get $800 an hour billed to clients at $400 an hour. You’re sitting in one’s office. You’re doing the work for the other. No. Okay. No, you’re not. Your hands are free, okay? I don’t know. There’s, like, little the mice are clicking or

[00:11:33.26] spk_1:
something. Maybe I’m rocking in my chair. I will try to hold back my enthusiasm.

[00:12:18.04] spk_0:
Okay, Alright. It doesn’t It doesn’t sound like that. Okay, Well, listeners, I can’t identify the sound of the but I’ll call it out because I’m not going to keep it quiet because we all hear it, so we’ll talk about it. Well, I don’t know what it is. This little tapping, clicking my mouse sound. Let’s talk about diversity. This should be a value. You and I have talked about this. We’ve had heartfelt conversations a couple of times about white male power and using that power and sharing power. And so let’s talk about diversity as a value for your board. How does that play into what we’re talking about? Your your best. Better board?

[00:14:50.74] spk_1:
Sure. You know, for the organizations who have responded to sort of this increasing understanding and awareness that diversity is an issue in various aspects, not just on board composition, but in the way our infrastructure as a country and even as the world is designed where, um, people who are in positions of power, no matter what race or gender or whatever, whatever they are tend to create systems that keep themselves in power. And so diversity has this great benefit of saying, Let’s take other lenses and look at what we’re doing. And look at the world that we’re in, um, for nonprofits, especially the world that’s directly impacting what we’re trying to do out there for. The people were trying to do it for what is impacting it, who is being affected the most, Um, and if that’s important to to organizations and their leaders, then I think they’ve really got to embrace diversity, not just by saying it, but by actually putting action steps into what they’re doing, Whether that’s going to be building it into true board diversity with inclusion. So not making people feel, you know, like they’re they’re just a simple tokens of taking a better picture but really being able to contribute to the power of the organization to address things that other people may not have seen. So, you know, I may identify with people who I relate to, but I may have very little understanding your perspective of people who are different from me who congregate in different circles who have different ideas. Um, and we have to think about all of those things, especially for serving a classic. Beneficiaries that are board members may be far away from. So if we have a board that’s more privileged, and we are helping a lot of people who don’t have some of the privileges that the board may have in terms of representation, how will we ever see the world through their lens? How will they understand? How will we understand where services are doing from their eyes? So trying to to get that diversity in an inclusive matter for purposes of increasing equity, I think, is a value that non profit should strive for.

[00:16:11.94] spk_0:
It’s time for a break turn to communications relationships. They’ve got the relationships with the media outlets so that when you need to be in the news, when there’s a news item that you need to comment on, your voice needs to be heard. Turn to has the relationships to get you heard. It’s not cold calling. They have the existing relationships. They give it like gifts. You get a lot of gifts from cold calls. Do you get any gifts from cold calls? You get your best gifts from cold calls. If you’re doing cold call fundraising. No, you don’t. Of course, it’s the same with media. The relationships are in place. So when you want to be heard, turn to picks up the phones and leverages those relationships That way you’re gonna get heard. Turn to communications. Turn hyphen. Two dot c o. Now back to build your best. Better board. Diversity has to be centered. Um, but And you wanted to go deeper than just like the board should reflect the community or the board should reflect those we serve. You mean you’re looking for something deeper than just reflecting an environment?

[00:18:17.04] spk_1:
I think so. So it is reflecting different perspectives as well. So I think traditionally, we thought of it as a skills based diversity. Like we need a lawyer. We need an accountant. We need a financial manager, a fundraiser on our board. And then we became all a little bit more woke and we said, Hey, we need racial diversity in our organizations. Um, but we didn’t say why that was or many of us didn’t say, why do we need racial diversity in our organizations? Is it simply to make it look like we embrace diversity and we take the better picture? Or is it because we want a true understanding from somebody else with a different lens and perspective? Who could tell us if there are gaps in our services for their communities? If there are gaps in the laws that are creating inequities that affect our mission as well? So the more we get these other perspectives, whether it be from a racial diversity angle from a disability angle, which I think is increasingly a really important thing to look at as we are facing an older population where disabilities are highly, you know, they make up a great percentage of our organizations and they’re kind of sort of the the unseen Group in many ways, um, we’re just getting started on addressing some of those concerns. But, um, the way we serve people can really miss many of those that are impacted, that that would be true beneficiaries of our service if they could access our services. But if we don’t make it accessible to them, then we just missed them, and that may be completely unintentional. But if we don’t have people who can identify and spot those things because they live it, um that would be, you know, short a shortfall in leadership. And that’s where we have to sort of address, Um, taking a look with a much broader lens and not just in our boards, but in our programming, in our staffing and just getting more awareness and bringing more lenses to what we’re doing.

[00:18:55.54] spk_0:
Let’s talk about bringing someone new to the board because we’re gonna be recruiting our new board members that are going to be part of our best better board. So now if we’ve recruited the right people, we need to socialize them to the organization. It’s more than I think. It’s more than just formal training. You know, the the organization has a culture. The board has a culture. Hopefully, they’re healthy. Let’s assume, but let’s take that. Let’s assume that these are healthy. Culture is not. Not. Cultures were trying to reverse, uh, you know, like intolerance or something. But healthy cultures. There’s a formal training and an informal training.

[00:20:26.74] spk_1:
I absolutely agree with you, so you know orientations can start even at recruitment. But once you decide that you want to elect somebody onto the board and they want to be part of the board and you elect them. I think it really is important now for them to be ingrained in what the organizations and the board culture is, what the priorities are getting a better sense of what the programs are. I’ll confess. I’ve been part of boards where I may not have a very good understanding of some of the programs. I get lost in some of, you know, again, the financial reports and maybe one program officer. You know, a year shows up and describes their program well, that that’s not really giving me a full sense of what the organization is doing. So more of that, um, is really going to be beneficial. Um, it will also help in sort of preventing there from being this wall between who the board is and who the staff and who are. The people that are actually implementing the program are other than the executive director, so boards often just meet with the executive director. But in an orientation or training, I think more deeply getting ingrained and that’s a board staff retreat. Joint retreats are good things. Board buddies and maybe a board staff buddy system could also

[00:20:31.34] spk_0:
is that like is that a mentoring board board buddy?

[00:20:53.34] spk_1:
Yeah, I think it could be partly mentoring, but I think the relationship really extends both ways, right? We can get more information from an outsider’s perspective to help the organization, and when they have fresh eyes, they may see different things. So instead of just saying, I know more than you, I’m going to mentor you. We can be buddies and learn from each other.

[00:20:56.64] spk_0:
And then you mentioned staff buddies, too.

[00:21:21.34] spk_1:
Yeah, I I don’t think it’s a bad idea for boards again to get more involved with their staff. We don’t want to micromanage. So there is this fine line there. But just getting an understanding from the staff about what they see in the organization, I think is important other than the executive director who may be the one who attends every board meeting. But if we just see one other staff member once a year, that really isn’t giving a sense of what is going on and what the organizational culture is. We might know what the board culture is, but do we really know what the organizational culture is?

[00:22:10.34] spk_0:
If it’s a staff buddy, it’s not only micromanagement, from the board member down. But then you also have to be conscious of the staff member trying to leverage a relationship with a board member like trying to do something or avoid doing something that the CEO may want or their vice president that they report to may want or something. You know, uh, that just it has to be managed. That’s all. Just You have to be conscious of the possibility of somebody exploiting and a relationship with the board members saying things that are inappropriate. The board members.

[00:22:52.14] spk_1:
I think this has to be designed with a consultant who really understands the area because you’re absolutely right. Tony. Yeah, if you if you aren’t careful, what you’re doing is you’re creating people going behind the executives back to make complaints to board members. And that’s not what the purpose is. So it might be controlled by saying, Hey, the board staff buddy thing is a meeting of the board and staff person in a joint group in a group where we’re all meeting in different corners of the room and just talking about certain specific topics so it can be regulated a little bit more carefully with rules of the game spelled out in advance. This is not a place to complain about employment issues. This is Yeah.

[00:23:04.34] spk_0:
Um, what do you like for board terms? What do you have? Advice? Two years? Three years? Should How many? How many years or how many terms should board members be allowed to continue on?

[00:24:00.64] spk_1:
Um, there’s there’s not, you know, one specific answer. I hate the lawyers. Answer. It depends. It does. But let me just say in a large number of cases, I like the 2 to 3 year term, both balancing a little bit of need for continuity and giving a fair expectation to a new board member of that. This is not just going to be a one year thing and you’re out. Um uh, and I like to have board terms to make sure that the board doesn’t become very insular and its thinking and in its diversity by keeping board members on perpetually until they’re ready to resign. It also makes it hard to ever remove a board member if people think that they have a right to serve on the board forever. So I kind of like board members not to be on board for, like maybe five or six years. Um, having said that, there are times

[00:24:02.67] spk_0:
when to not be on for five or six years

[00:24:04.99] spk_1:
to beyond that

[00:24:08.44] spk_0:
beyond. For five, like maybe two, 23 year terms, two year terms or 23 year terms of the most

[00:24:41.64] spk_1:
something. Something like that. Now, a lot of exceptions to that, if you have, if you had trouble building aboard and you have some great champions on the board. But those have been kind of the long term people who really know and really invested, and everybody else has been sort of lackluster. Um, I don’t think you should kick off your strongest board members, so you have to really think about that before you implement it. It is sort of an idealistic goal to have those term limits and, um, 2 to 3 year terms. But in other situations, I would say one size doesn’t fit. Also, take a look at your own board composition first before you make those type of decisions.

[00:25:19.94] spk_0:
What about in terms of socializing to the board, having social events for the board? Occasionally, Maybe it’s a dinner after a meeting. Um, I wouldn’t have cocktails before a meeting. But you could have cocktails after a meeting, you know, trying to get the board to get to know the members, to know each other outside the board. What else do you do? You go skiing, you go snowmobiling. You know, you’re a Fisher fisherman. You know things like that.

[00:25:26.34] spk_1:
Yeah, I love that idea. I’ve even had cocktails before boarding. So,

[00:25:31.63] spk_0:
uh, all right,

[00:26:10.84] spk_1:
but yes, um, for board members to trust each other and to be open to each other’s ideas and respect each other, the more you know each other, the more likelihood that that’s all going to happen and that you’re going to actually build the board culture rather than have people who don’t know each other who are trying to get out of the meeting, to watch a basketball game or be home with their family and sort of sit and say, This is my duty. For the next hour, I’m going to sit here, take notes and listen and try to do my job. But think of it just as a job. It’s going to be less productive. I think that if you come in and say I love these people that are kind of get to work with. And we’re trying to build something great so we can make change in the world or in our community. And so I really like coming to these events and getting a sense of it. Sometimes there’s, you know, those ice breaker things you know, for five or 10 minutes in front of a meeting that can be hit or miss and oftentimes a

[00:26:33.10] spk_0:
miss. How many people can you talk to in 10 minutes?

[00:26:35.46] spk_1:
Yeah, and that’s another reason why you shouldn’t have too big a board as well. If you have 50 people at a to our board meeting, how many people are going to get to

[00:26:51.84] spk_0:
talk, right? That’s yeah, So I know that I know your answer is there’s no hard and fast answer for this one. But since you just let into it, share your advice on on board size,

[00:28:13.54] spk_1:
Yes. So my maybe not so helpful advice is not too few and not too many, um, that if we dive down a little deeper, you need, um or you’d like to have as many board members as you can utilize to help you govern the organization and help the organization and the board do its best job. So if that number is eight, or if that number is 15, that’s, you know that may be your ideal board size. It’s more important to me to get the right people on the board, um, rather than the right number. But if you can, if you have less than five and you’re a mature organization, I start to worry that you’re gonna lack that diversity in many different perspectives. Um, and if you’ve got more than 20 I have a feeling that a lot of board members feel like their contributions are not being heard because they don’t have an opportunity to sort of verbally contribute, especially if there are few dominant board members at meetings and in a two hour meeting, even 20 people are going to have a chance to say how much about how many issues it will be very few. So to really think about that, and you want to encourage board members to attend every board meeting, not just sort of half of the board meetings or think that they can take a free ride because you’ve got enough people to do that job. I’ll just help on a committee. You don’t want them to feel that way. You want them to feel very invested.

[00:28:31.24] spk_0:
So you feel like an expectation is you attend every board meeting either physically or virtually.

[00:28:33.84] spk_1:
I think that’s the expectation. And if people are missing, you know, one out of 41 out of five meetings, one out of 10 meetings, you know that might be acceptable for special circumstances. But you don’t want it to be a habit. I think you want to aspire to have everybody attend all of them.

[00:28:58.64] spk_0:
Okay, Um, what do you What do you feel like talking about board wise that we haven’t talked about yet? Let’s not go to how to get rid of a board member yet that’s that’s toward the end. What’s your what’s on your mind around your best? Better board?

[00:30:44.94] spk_1:
Well, we talked about kind of the expectations of what the board should do, but they think each director’s gotta ask that question of themselves as well. And maybe that’s part of the board. Recruitment and orientation package is kind of a list of however many 10 things that board members should aspire to do themselves, uh, to be part of this board and attend all meetings. We talked about that, but what else should they do? They should review financials regularly, so if they’re getting a financial before each meeting, they should review them. They should know that they are expected to ask questions that might be at the board meeting or that might be before the board meeting. But if they’re getting information aboard package in advance, which they should get, um, about the matters that are going to be up for discussion at the board, they should know that they should review it first. And if they have any questions, they should share it with the group. Um, and that doesn’t happen enough, in my opinion, that there are these questions and everybody saves it for the board meeting, and then they run out of time to discuss all the issues that they want to. So just having it kind of on an email sort of mass email, the board package comes out on email, and people can ask questions about it so that everybody gets an advanced preview of what some of the issues are before you go into that board meeting and then start to discuss things a little bit more detail. Some of those things might need a little research to be answered to. The executive might have to talk to an accountant or a lawyer or someone else and say, Let’s find out what the answer is and you know that does away with that issue even before the meeting, if you can share that information. So that’s another thing to just think about.

[00:31:35.04] spk_0:
What about managing the board? Uh, some. Some larger organizations have a board liaison where that’s probably not most of our listeners with someone who’s devoted to the board. I think that’s more like university style, big university style. But there doesn’t have to be a lot of staff support for the board. I mean, not only the you mentioned getting the board packages to them at least a week. I’d say in advance, maybe a week or 10 days in advance, something like that. But it goes beyond that. Board members have questions. Have these questions that you’re suggesting they ask in advance of meetings? Um, committee work has to be supported. How do we How do we make sure that we’re giving the board members the support that they need.

[00:33:00.24] spk_1:
Yeah, and it’s a great balance. Is it? Well, it’s a great question, but it is a tough one to answer because of the balance that you have to think of. You want the board to be informed so that they can be of help to the organization. But you don’t want the board to put on so many demands upon the staff that they’re really hurting the staff’s ability to do the work of the organization, the programmatic work that’s needed. So there is a little bit of balance there. I know many staff members and executives hate kind of preparing the board for the board meeting because it may take so much work. Sometimes it’s because they’re trying to justify what they are doing to the board, because the board may come in with a little bit of a negative skew about, you know, prove to us that you’re doing good work of some kind. That may be the perception that the staff is getting. I don’t think any boards are overtly saying that, but I feel that staff can come into it a little bit defensively in preparation of board materials rather than this is an ally of ours. This should be the strongest ally that we have this board group. Let’s give them information and questions for them so that they can help us do our job better. Um, and that takes time. But how many staff are involved with the executive? Certainly is meeting with them. That probably goes without saying if there is a financial person there other than the executive, that person should probably have frequent contact.

[00:35:45.54] spk_0:
It’s time for Tony’s take to the podcast. Pleasantries. They gotta go out. That’s what we start with. Plan giving accelerator that’s coming. The podcast. Pleasantries. Uh, I’m enjoying the nostalgia of sending these again. I’ve missed it. I guess I I ignored it for a while. My my mistake. I’m sorry about that. Pleasantries to you, our podcast listener. Well, you individually. But there’s more than just one of you out there. There’s over 13,000 of you out there. So, to the podcast, listeners pleasantries. You know, I’m grateful. I am. I’m glad you’re with us. I’m glad you’re learning that non profit radio helps you helps your organization open conversations, take action steps, open discussions with the board. Your CEO, your vice president, Whoever it is, you bring stuff too. I’m glad it helps you do all that. And I hope there’s the action steps to I’m sure there are. There is. I’m sure there are the action steps. I’m sure there are. Thanks for being with us. Thanks for being with me. Pleasantries to our podcast listeners. Each of you plan giving accelerator that is the online membership community that I created to help you get your plan giving program started and growing. It’s a membership that you join for a year, and I teach you month by month lesson by lesson, Step by step. Everything you need to get your planned giving program started and growing. If you’re not doing planned giving and you would like to be, is it on your to do list? Have you, like so many folks? Say to me, Had this on your mind for a couple of years. You can get it done. You can get it started to get the initial thing started, and that’s done and then the program continues. I mean, the program doesn’t finish after a year. You continue your playing giving program indefinitely, of course, but you’ll get plan giving off your to do list. You get the going done. Your started 2021. The next class starts April 1st, all the info on how to pick my brain and have me teach you planned giving starting up step by step. Is that planned? Giving accelerator dot com. Okay, that is Tony’s Take two. We’ve got Boo Koo, but loads more time for build your best better board with Jean Takagi.

[00:36:41.93] spk_1:
I didn’t mean to downplay the role of somebody from programming coming in speaking to the board once in a while, I think I wanted to say that that was insufficient for the board to know what’s going on programmatically. But having people come in a little bit more regularly, or at least providing materials to the board more regularly about the program’s impact, you know, and that could be through stories as well. I’m kind of like in fundraising make the board engaged with what the organization is doing programmatically and invested in doing more to help the organization do better with its programs, either serve more people are doing in a better way. You want to create that connection so that the board rallies around you and actually helps you rather than just again just providing oversight and saying We want to make sure everything is lawful. Give us all this information to make, you know, make sure that we can do that. You want to do get more from your board.

[00:37:26.53] spk_0:
I like the idea of regular presentations at board meetings from from program staff. Maybe the 1st 15 minutes of a board meeting every time is from some different employee. Maybe maybe it’s not a unique pro, maybe not different programs every time. But I like the idea of devoting some board time each each meeting to to programs to what our work is, but but not being acquainted by the CEO. But having someone who’s on the ground doing the work answering, I think that would be a real fertile ground for questions to from the board and provides ongoing training.

[00:37:28.53] spk_1:
I think so, too, and maybe even somebody who is a beneficiary of the services

[00:37:32.89] spk_0:
beneficiary to yes

[00:37:51.23] spk_1:
to say Hey, you know you get a chance to speak to the board to because we want to know what you feel about our programs and our organization and how you’ve been treated. So, um, I think those things are good, and I I again think, tony, that will just energize aboard to want to do more if they feel more connected to what the organization is actually doing and not just reading about it and listening to the executive tell them about it.

[00:38:15.32] spk_0:
What about that important CEO board chair relationship that should be very collegial? It should be supportive. What what’s your advice around for? The CEO is probably mostly CEOs listening, although we do have board members listening. But probably we have more CEOs than we do board chairs. So what’s your advice there for them? Although

[00:39:07.82] spk_1:
I’ll say that probably a fair number of CEOs have actually acted in the capacity of a board chair as well and other organizations, so they may understand some of the roles from both sides. I think my advice is what you have just said, as well as to have this collegial relationship and develop one where there’s one of trust where the CEO is not afraid to go to the board and say, I’ve got some bad news. Um, I’m looking for some guidance on this. If the CEO is always about, um, my pay or my job security can be affected by telling bad news to the board chair. So I’m going to try to, uh,

[00:39:09.52] spk_0:
show hide it, make it sound, not as bad as it is not. Be completely honest, etcetera.

[00:39:26.32] spk_1:
Yeah, I think of what you know. For profit, boards of directors may say to their shareholders in public companies, Right, like you want to pose the best view of that organization as possible. I don’t think that’s a healthy relationship for nonprofit board to have its executive,

[00:39:37.42] spk_0:
and and that should be frequent communication to I mean, shouldn’t shouldn’t the CEO feel comfortable picking up the phone and seeking the advice of the board chair?

[00:40:20.31] spk_1:
I think so. And if it’s not the board chair, I I think it’s okay at times. So your board culture is going to have to allow for this, but for them to pick up the phone and talk to another board member, So I’m when I serve on the board. I’m sometimes the only lawyer on the board. I want the CEO to be able to talk to me. I’m not going to be their legal counsel, But I might have a point of view. Or I might spot an issue if they feel like, Hey, is this something we need to talk to our lawyer about? Maybe our board chair wouldn’t be able to answer that question. But maybe I would as a board member. So, yeah, I like the CEO of being able to reach out to multiple board members for for different issues. Yeah,

[00:40:48.21] spk_0:
all right. Should we should we talk about terminating board members the topic before before their time is, Do so Let’s say, you know, a three year term and they’ve been on for a year, and they’re obstreperous, lackluster, unkind. They don’t belong. Let’s just for whatever reason, they don’t belong.

[00:43:09.10] spk_1:
Sure. What do we do? Yeah, it’s a real tough one, right. So, um, sometimes you have to look at it holistically. So oftentimes I get a call and that situation will arise. But it will turn out that that board members also the biggest donor to the organization right now you’ve got to think a little more diplomatically and strategically about how to do this. Um um So again, not one size fits all But one method that some organizations have used has been to say, Let’s talk with this board member and try to find the best role for them in the organization and see if we can move them off the board but into this other role, whether it be advisory, um, or whether it be in an, uh in an honorary position for being, you know, uh, something emeritus. So give them a fancy title. Ask them to show up at fundraising events, um uh, or to to speak to two foundations when you go out with them to do a pitch, maybe that’s where their strength is. And maybe there’s enough there of their passion for the mission and for the organization and what it does. While they don’t have passion for doing the work of a director in a strategic and diplomatic way, they may still have passion for the mission of the organization. And let’s try to take advantage of that, um, and use it in a way where nobody will use sort of the Asian mentality of nobody loses face right, like so everybody gets to keep their dignity and look good. But let’s try to take advantage of not having that person be disruptive on the board anymore. And if that person isn’t giving you much of a contribution in any way, then once in a while removal is an unpleasant but sometimes necessary option. And boards may have to decide that again. Uh, they’re going to ask somebody where they’re actually going to vote to tell somebody, um, that their services as a director are no longer needed, Um, but that has to also be done diplomatically. You have to be careful of alleging reasons for doing that because that could get you involved in a defamation lawsuit from that person if they’re upset with it and litigious so carefully.

[00:43:20.20] spk_0:
So this should be something that’s in the bylaws, then removal of a board member. Yeah, you need to have a documented process.

[00:44:17.09] spk_1:
I think that’s right, tony. A lot of, um, boards have eliminated that from the bylaws because you see that as a negative. But then they would default to the code, right, and they’re not going to usually look up what the code says about removal. It has to be done in a certain way, and in some cases it can get a little bit complicated. If you have a voting membership structure like for certain charities, they might have members who actually elect their board members. It’s more common in trade associations and homeowners associations things like that. But some charities have voting members, and removal, then becomes a lot more complicated. But having it having the procedure in your bylaws at least gives you kind of like the encyclopedia. Look at how to do this properly without feeling like it’s going to be too hard. We can’t do it and just live with it.

[00:44:26.89] spk_0:
I’m not familiar with this model you just described because you and you said it’s some five oh one C threes have elected board members. So

[00:44:28.78] spk_1:
yeah,

[00:44:29.71] spk_0:
so it has. The board has voted members on and can only remove them,

[00:45:22.59] spk_1:
actually the opposite way. So members elect the board members, so the members are responsible for electing and potentially removing board members. So you might think of that more in terms of like a union or a professional association or homeowners association, where all the homeowners elect the board. If they don’t like the board, they’ll remove them and put somebody else on to that board. So some charities are also structured that way. And that was to sort of been seen as a more democratic process of ensuring that the board stays responsive to what the members think. The mission is supposed to be, um, for smaller organizations. I generally don’t recommend it because it’s more costly. It’s much more difficult to manage and administer. Um, but nevertheless, I would say about 5 to 10% of the charities that we run into small charities we run into are structured that way.

[00:45:32.49] spk_0:
Not ideal, though, but they’re trying to be democratic. And

[00:45:36.99] spk_1:
that’s right.

[00:46:19.48] spk_0:
Okay, I see. All right. Well, that Yeah, that conversation to to hope that opening that conversation with the director to be removed is is hard. Maybe maybe the maybe the board member themselves themselves, uh, maybe the person. Maybe they can’t find the right pronoun. Maybe that person isn’t happy in the role either. That’s a possibility. It could be. You know, you could sort of open the conversation with it. Seems like, you know, this isn’t as you were suggesting, and I’m kind of putting a few things together. It seems like this isn’t quite the right role for you. You don’t seem happy as a board member. Uh, you know, you could open the conversation that way in trying to find something else to offer

[00:46:43.88] spk_1:
them. I think that’s a great way often to frame that that situation. I actually wrote an article for the nonprofit Quarterly. I think called something like 10 Reasons Why a director made gracefully want to resign from their organization, um, board. And so, yeah, framing it from their perspective and what they’re not getting is probably a good way to start it.

[00:46:59.58] spk_0:
I thought of something else before we wrap up. What do you think about junior boards, you know, maybe have an advisory role? There’s sort of a training improving ground for future board members, whatever you call it, might. It might just be the advisory board or something. But what do you think of that? That having, uh, that in your organization,

[00:47:26.78] spk_1:
I think you’ve done well. It works. Um, really Well, it raises potential future board members and gives you an introduction to the organization. Rather than bringing somebody straight into the board. They have a chance to be part of whatever you want to call it an advisory committee or, uh, the junior board. I would be careful with the name, depending upon who you’re planning to put on it.

[00:47:30.99] spk_0:
So junior board is not so good. All right.

[00:47:33.37] spk_1:
Unless it’s for, you know, unless you’re putting minors on it for advisory positions. Okay. Okay.

[00:47:44.08] spk_0:
But advisory, an advisory board advisory committee. And and it gets to be seen as a stepping stone for some folks to the board membership.

[00:48:04.17] spk_1:
Yeah, and to offer thought leadership from different perspectives. Um, so I think that’s good. But if you’re trying to increase diversity through an advisory border, Junior. But I would say Be very careful to make it not look like it is of less importance. And that’s why these people were put on that.

[00:48:54.37] spk_0:
Oh, yeah, right. Right. So all your yes, all your all the folks of color and other underrepresented groups are on the advisory board. Yeah, that’s well, that’s a sham. Alright, That’s right. Exactly. That’s inhumane. Alright. Yeah, I’m surprised you thought of that, Gene. You’re well. You see the good and the bad. All right, you’ve It’s not that you thought of it. You’ve seen it. You’ve seen it. I guess it’s It’s out there somewhere. All right. Thank you, Jeanne. Outstanding. Outstanding advice. Jeanne Takagi, our legal contributor. You’ll find them at nonprofit law blog dot com. You can find him at Columbia University if you’re a member of their student body in, uh, what is it? The nonprofit nonprofit management program at Columbia?

[00:49:01.07] spk_1:
Yep.

[00:49:07.17] spk_0:
Okay, so you’ll find him there. You also find him at neo law group dot com and you’ll find him at G T A K at G Tech. Thank you very much, Gene.

[00:49:12.87] spk_1:
Thanks, tony. Been a pleasure.

[00:50:05.17] spk_0:
My pleasure. As always. Thanks. Next week, I’m asking you to trust me. If you missed any part of this week’s show, I beseech you find it at tony-martignetti dot com. We’re sponsored by turn to communications, PR and content for nonprofits. Your story is their mission. Turn hyphen. Two dot c o. Creative producer is Claire Meyerhoff Shows Social Media is by Susan Chavez. Mark Silverman is our web guy, and this music is by Scott Stein. Thank you for that affirmation. Scotty, you’re with me next week for nonprofit radio. Big non profit ideas for the other 95% Go out and be great. Mhm