Steward Leaders: [Non-profit Myths 6] Founders Control Boards

Posted by Matthew Thomas

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Since the end of September, we have been talking about the non-profit economy, and common myths operate within the public perception of non-profits. We've looked at the "free" business model as not just pertaining to non-profits. We have looked at six big myths: We have looked at "making money", and non-profits' responsibility for taxes. We've looked at how a non-profit can own a for-profit business. We looked at the deductibility of donations to non-profits. Last time around, we talked about how non-profits aren't the only organizations that can be designed to make the world a better place: "regular" businesses can, too.

Today, we address the sixth, and final, myth of this series. This myth is the myth of the permanent founder. Let's look at an example to see where this comes in to play.

A small group of colleagues and friends get together to form a non-profit to bring attention and solutions to a cause they care about. The most vocal spokesperson for the group becomes the Executive Director (ED); the rest become members of the Board. All of them contribute funds, time, and expertise to the non-profit. In compliance with best practices for non-profits, the ED is not a member of the Board, but present at all board meetings, with voice, but without vote.

Like what you're reading? Subscribe Now! All goes well for the first five years. By that point, the non-profit is up and running, and some of the original board members have begun to rotate off the board, bringing on new voices.

One of the new members of the Board sees an opportunity that they think the non-profit should take advantage of; the ED sees things otherwise - that this would be mission creep, a loss of priorities, etc.  A disagreement breaks out between the Board and the ED. 

The ED believes he is right, and because he gave of his own money to start the non-profit, feels slighted that the Board would de-prioritize one of the key aspects of the original vision, and move in a different direction. He pushes back on the board by talking to the remaining original members, and tries to get the new measure voted down.

The new measure passes, but the ED isn't done. He says this is a mistake, and that this violates the founding principles of the non-profit. (He had helped to select some of the very board members who now oppose him.) He urges those who disagree with him to step down. One does, and the board reverses course.

A few more years pass, and a similar situation emerges: this time, though it's the other way around. The ED has a new opportunity he wants to press. The Board sees things otherwise - that this would be mission creep, a loss of priorities, etc.  A disagreement breaks out between the Board and the ED. The ED believes he is right, and because he gave of his own money to start the non-profit, and continues to give heart and soul, underpaid, for the cause, feels slighted that the Board doesn't see this new opportunity as the natural result of the expanding vision. Once again, the ED pushes the board to see things his way. Most just put their heads down. Others drag their feet. One person begins active opposition to the ED.

The conflict drags on, and eventually a conflict management mediator is called in. They develop a set of mutually-agreed-upon priorities and procedures. But the founding ED sees this as appeasement, and begins to push back. The board, now emboldened by the mediation work, chooses to end their relationship with the ED and fire him - with a generous severance package (after all, they still like and respect him). They have decided it is time for a fresh start.

The ED is stunned. Never in a million years, he says, would he have thought this would have happened. The board is grieved, the cause is set back, and the ED, chastened, finds a new job eventually.

 

The myth that a founder can control a board, and therefore, dictate the terms of his or her own position, as well as who can be on the board and how they will vote, is built upon the experience of many when they deal with newly-established non-profits. Oftentimes, these are the dynamics that emerge. The founder is such a strong personality (as entrepreneurs must have) that the conflict seems all but inevitable. Most times, the board ends up getting more-or-less handpicked by the founder, and things maintain a sort of quasi-stasis for a long time. The founder outlasts many cycles of board members.

 (Related: Organizational Governance and the Bully in the Boardroom)

In the heady days of establishing a new organization to fill a need and promote a cause, it's hard to take the time to step back and get all the organizing documents and structures right. Design is not at the top of the mind, as form follows function. Nevertheless, good design from the outset can help dispel this myth that the founder can control a non-profit (much like the founder of a business might).

Designing roles into the first days of a non-profit reminds everyone that they are stewards of the cause, rather than owners. No one individual may privately gain from, or control a non-profit. Even when the founding board members and Executive Directors give deeply of themselves, that does not create the entitlement to control down the road. That just means they gave more than they were willing to give freely in those early days. Or perhaps they gave it freely in those days, but then began to feel used as the giving kept on going, perhaps with less enthusiasm. Whatever the case, good accountability and boundaries from the outset, designed into practices, attitudes, procedures, vision, and alignment can help avoid the rough scenario outlined above. That way, founders can do what they are good at: start things. Boards can do what they are good at: steadying things.

No one owns a non-profit; all are stewards. The myths we discussed over the past few weeks, we hope, will help steward leaders understand the dynamics of non-profits, whether they are part of one or view them from the outside.

 


 

What's your organization's story? I'd love to hear it. Feel free to call me at 1.877.771.3330 x20 or e-mail me by clicking the button.

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Topics: myth, nonprofit sector, steward leaders, Matthew Thomas, steward leader, non-profits, non-profit, steward leadership

Steward Leaders: [Non-profit Myths 4] Tax-Deductible Donations

Posted by Matthew Thomas

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Not every dollar given to a non-profit is necessarily tax-deductible.

 

Over the past few weeks, we have looked at some myths that operate within the public perception of non-profits. We've looked at the "free" business model as not just pertaining to non-profits. We have looked at six big myths. We have looked at "making money", and non-profits' responsibility for taxes. We've looked at how a non-profit can own a for-profit business.

 

Today we turn to a myth that is, perhaps, less complicated than the rest.

 

Not every dollar given to a non-profit is necessarily tax-deductible.

 

Like what you're reading? Subscribe Now! Essentially, there are two cases where donor dollars aren't entirely tax-deductible:

 

  1. Funds will be used for political lobbying purposes; and
  2. The value of a contribution for which goods and/or services are received.

 

For instance, if a donor attends a dinner to raise funds for a cause, typically the receipt will say that the value of the meal is a specific price, and the remainder of the ticket price is a contribution to the cause.

 

These are really the only two cases people commonly encounter. As long as one or both of those two things aren't in play, every dollar contributed to a non-profit is eligible for a tax deduction by the donor.

 

Nevertheless, contributions of $250.00 or more by cash or check still require contemporaneous documentation by the charity to the donor for to maintain an adequate IRS-valid paper trail for the deduction. Non-profits do well to keep their receipts regular and timely so that donors for whom the deduction is valuable continue to give.

 

(Related: Why clean financial reports are essential.)

 

As a donor, how do you handle tax deductions? As a non-profit leader, how do you manage donor deductions? I'd love to hear your story. Click the button below and we can set up a time to talk.

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Topics: myth, nonprofit sector, steward leaders, Matthew Thomas, steward leader, non-profits, non-profit, steward leadership