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The Nine Ways Non-Profits are Different

The Nine Ways Non Profits are Different

A CompassPoint Nonprofit Services study completed in 2001 highlighted the profile of executive directors. Some of the key findings were:

  • 50% of executive directors bring management experience from the for-profit sector and public sector
  • 51% of respondents had 4 years or less in the job.
  • About 50% would not continue in the job after tenure
  • The top two reasons for taking the job were the agency’s mission and an opportunity to give back to the community
  • The biggest challenges in the job are finance anxiety and fundraising
  • The agency’s executive directors who experience the most stress have budgets of $500,000 to $1 million
  • The top three sources of training and support for executive directors is their management teams, peer networks and workshops/ conferences
  • The top need in terms of “more money” was for staff salaries, benefits and reserve funds.

There are some differences in the way non-profit organizations approach the world compared to business corporations. Here are the nine most common differences and how those differences impact the role of the executive director.

1. Passion for a better world

Many people join non-profit organizations because they have a belief, optimism and the desire to make the world a better place. The challenge for the executive director and board of directors is to make sure the passion for a better world does not lead to a misallocation of resources and a lack of focus on results.

2. Conflict resolution

On a personal level, the desire for a better world can result in participants developing a rigid view and a sense of righteousness to the extent that they become political and confrontational. This challenges the executive director to be aware of this dynamic and develop conflict resolution skills to address this behaviour.

3. Atmosphere of scarcity of resources

Because non-profits have traditionally been underfinanced, this creates a reality and a mentality of being under financed and the executive director as well as outside advisors and consultants are often resented by staff and board members because there is a belief that that these senior people should be working for free.

4. Outcomes are hard to measure

Executive directors and boards need to develop plans that articulate what success looks like and how to measure it because there is no profit motive.

5. Policy boards

Boards of non-profits can create problems if they try to supplant the staff running the daily operations. Boards should create a “policy focus” by looking at the long-term benefit. While the staff and volunteers focus on the day-to-day decisions. The executive director has to make sure the board is clear which “hat” they are wearing (e.g., board vs. volunteer).

Executive directors often incorporate board governance training or use of consultants to help boards see the difference between effective supervision and micro-management.

6. Dual bottom line: financial versus vision/mission

Non-profits often have a mentality that financial success and staying true to the vision and mission are mutually exclusive. Having a surplus at the end of a financial year is often considered the ultimate sin. The road to the vision may mean the non-profit needs to navigate years of surpluses as well as years of deficits. The challenge is for the board, and the executive director is to ensure the organization can and does hold sufficient reserves to deal with the fluctuating demands for funds.

7. Third party fundraising

Donors may have their own agendas and try to influence the organizations they support. The executive director has to be very strategic in her/his actions to insure that the “tail does not wag the dog.” The executive director needs to be clear what the “non-negotiable” elements are and be prepared to walk from donors who cannot respect the non-negotiable elements.

8. Mixed skill level of board and staff

Some people are kept around out of kindness, and others are appointed for reasons other than their skill to perform their tasks. Individuals need skills to do the work or else they will inadvertently sabotage the overall effort. Therefore, the executive director often has to budget more time and resources for training or more support for certain roles than in a for-profit corporation.

9. Bias towards informality, participation and consensus

The executive director has to work toward consensus and allow more time for consensus building than in business environments. They also have to have a fallback if consensus can’t be reached. The executive director often has to live with decisions that contain undue bias in order to keep things moving along. Business people on the board often find this approach confusing and frustrating.

The differences that non-profits face often become most noticeable during strategic planning sessions. Therefore when using outside advisors and consultants, the executive director would be wise to ensure that all participants understand the environment and how consensus is reached in the organization.

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