Steward Leadership of Financial Pinch Points

Posted by Matthew Thomas

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matthew-thomas-2I have worked in a number of settings recently where it appears that the different aspects of the enterprise's operations are in competition with one another for resources. For instance, a service organization constantly wrestled with balancing the needs to pay staff against the expenses of running programs and maintaining a facility. As part of its mission was to reach out beyond itself in support of other organizations, the funds needed to do this also competed with the staff, programs, and facilities. Each part of the organization felt the financial pinch.

Like what you're reading? Subscribe Now! We have discovered that many service-oriented enterprises (across sectors and industries) wrestle with these balances between staffing, programs, facilities, and outreach. Balancing these four areas is part of active steward leadership, and steward leaders face this acutely in their role as managers on behalf of owners. Pinch points like these can hurt the entire organization when the different parts are set in competition. We are often called in to work to resolve the organizational pain this causes.

In these settings, we find the balance easier to maintain if the following is true:

  1. FivewaystofindFinancialBalanceLeaders budget forward from income, rather than backward from current expenses.
  2. This planning leaves room for margin so as to be able to maintain core operations despite fluctuations in cash flow.
  3. Plans tie programs and facilities together as a cost since most programs require facilities to house them. (Travel costs are also included here.)
  4. Growing organizations (or those intending to grow) maintain at least 15% in outreach funds against the other two areas.
  5. Leaders recognize that staffing will almost always be a greater portion of the remainder (vs. facilities and programs), even in volunteer-oriented organizations. However, if the program / facility portion is less than 10% overall, the organization may either be over-staffed or have under-developed programs and potentially deferred maintenance on facilities.

When we conduct our financial health assessments, we find that the balance between these areas can fundamentally shape the organization's outcomes. Steward leaders who want to meet the ownership goals for their enterprise continually look toward the capacity of their enterprise to meet them. Keeping these areas all in balance can improve both short- and long-term outcomes and impact.



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Topics: becoming a steward leader, financial confusion, Financial Leadership, steward leadership, Financial Health

Reflections from #CLA14 for Organizational Leaders

Posted by Matthew Thomas

Two weeks ago, I had the opportunity to present a workshop called “Overcoming Four Financial Confusions” at the Christian Leadership Alliance Kingdom Outcomes conference #CLA14.This annual conference offers great speakers, powerful training and continuing education experiences, and broad opportunities for networking with many Christian nonprofit and church leaders. If you are a Christian nonprofit or church leader looking to network with other leaders and learn from a variety of experts in fields that strengthen your leadership, CLA’s conference is the place for you. Check out their website here for more information on the conference they have planned for next year in Dallas, TX.

In our workshop two weeks ago, the material I presented covered the “4 Financial Confusions Infecting Nonprofit Leaders” e-book by Design Group International CEO Mark L Vincent. (You can get your free copy of the e-book by clicking on the button below. The original series of articles is here.)

4 Financial Confusions Get the free e-book

The feedback from the 100+ people at the workshop indicated that the Four Financial Confusions are alive and well in executives of churches and nonprofits, no matter the size. A number of CFOs from a variety of ministries were in attendance, and indicated that while, of course, they understood these confusions, often times their CEOs, Pastors, and boards did not, and this creates organizational tensionabout how to move  forward. Several of the CFOs expressed that their organizational leaders often accuse them of a lack of faith because of their preference for using their accounting expertise to manage ministry’s finances. Having sat in both seats – as an executive and as a CFO, I have lived that tension from both sides, and I can certainly relate.

matthew-thomas-2In larger churches and faith-based non-profits, executive and financial roles, responsibilities and procedures are often well developed – by necessity, to maintain their optimal size. Nevertheless, the tension about the role of the financial leader vis-à-vis the rest of the executive team often still exists. Sometimes this is a personality conflict between the types of personality underlying visionary leaders and the typical accounting types; but many times it goes deeper than that: often it is truly a difference in theology of finances between the CFO and their financial staff on the one hand, and the CEO and the rest of the organization on the other. This tension is one we hope to address in future resources and articles.

In small- and medium-sized churches and non-profits, this tension exists alongside the additional complications of less role differentiation and often less developed financial procedure and process. These added complications often make it even more difficult to find the clarity to move their mission forward than for larger nonprofits.

For those organizations, we would like to offer two additional resources. The first is our Financial Roles Map, a resource developed a year or so ago that can help enterprises of all sizes determine the roles they need to fill – even if several must be filled by the same person to start with. It is available below.

Financial Roles Get the map!

The second is a brand-new resource, the Four Financial Confusions Workbook, that helps leaders working through the Four Financial Confusions material with examples and exercises to gain clarity around how they might move forward organizationally. It contains basic curriculum material tuned toward group process that works alongside the Four Financial Confusions e-book. We would like to provide it to our readers free, for a limited time. Click the button below to get your copy!

Get the Four Financial Confusions Workbook

Together, the three resources presented in this article can give you the capacity to strengthen your mission by clarifying your perspective on money and its management. We hope these resources are useful as you continue the valuable work you do.

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Topics: financial management confusion, financial confusion, Financial Leadership, Matthew Thomas, financial confusion of nonprofit leaders

Financial Leadership: Do You Have to Get There All at Once?

Posted by Matthew Thomas

Amidst the Fiscal Cliff conversations in Washington, DC, organizations are asking about their own financial outlook. Equities markets dropped nearly 4% in the first half of November, after dropping nearly 2% in October. Uncertainty is high.

communication negotiationThe American government has negotiated itself into an all-or-nothing deal-making, deal-breaking situation to work out questions of revenue, expenses, deficits and debt. However, this approach is often not the right approach for an organization running chronic deficits. (Most organizations cannot borrow money as cheaply and as plentifully as the US Government, so that is not typically as much as an issue for organizations as it is for governments.)

Most organizations’ financial woes did not erupt overnight, and will not necessarily be solved overnight, either. Unlike the US Government, the negotiations typically do not have to create all-or-nothing negotiating positions.

Organizations running chronic deficits do have to exhibit fiscal discipline to get healthy – revenues should exceed expenses for any organization. However, strategically using assets to generate new sources of revenue can help an organization reach true health. The results of strategic asset use are not immediately knowable, but should be clearly measurable.

Therefore, it makes the most sense to make fiscally-disciplined decisions for the short term while using assets to do new things. This means you won’t get there all at once – which is probably where the “Fiscal Cliff” will end up, too.
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Topics: Financial Leadership, Matthew Thomas, financial management, Organizational Leadership, Design Group International, Fiscal Cliff