CPAs can make sure nonprofit leaders are leading
The leadership capacity of a nonprofit or exempt organization is extremely important. These organizations often play a critical role in the community, and the organization's leadership capacity will determine whether or not the fundamental purpose of the organization is effectively articulated and will drive the quality of its strategies. Articulation of purpose and quality of strategy motivate the internal and external supporters of an organization, which is critical to obtaining the financial resources needed to sustain the organization and retain highly qualified staff.
The evaluation of nonprofit leadership can be difficult because it requires a little bit more of a forward-looking perspective, unlike for-profits where historical perspective and past financial results can be used as a benchmark. Whether you serve on a nonprofit board, advise a not-for-profit, or volunteer your time serving a community organization, following some of the points below can provide insight and guidance regarding the leadership capacity of the nonprofit organization.
Evaluation of the board of directors is a good place to start:
The board should encourage leadership training for the executive.
Clear goals need to be established for the executive, and they must deal with expected outcomes.
The board should insist on a high-performance culture that is outcomes-driven.
The board should provide the time and support necessary for the executive to practice leadership.
The next set of points highlight the role of the executive, and his or her leadership capacity:
The executive must ensure fidelity to the mission of the organization through measurable or visible ways.
The executive should receive leadership training, and should be recognized as a leading voice in the area with which the agency is identified.
The executive must be aware of the trends in his or her field, and provide concrete examples to staff that will motivate them to move forward.
The executive must encourage trust among the stakeholders in measurable or visible ways.
The executive must develop effective and measurable strategies for furthering the mission.
The last set of points that will help you assess leadership capacity concerns the organization's staff:
The direction of the organization must be clear to all staff.
The staff must be challenged and encouraged as they pursue the movement of a mission toward social impact.
Creativity must be encouraged and rewarded.
There should be a widespread perception that the executive "lives the mission" and models the appropriate behaviors.
Four highly regarded leaders in the nonprofit sector were interviewed to obtain their thoughts and views regarding the key issues relating to nonprofit leadership.
Kenneth C. McCrory, CPA, CVA, CFE, mentioned several key issues relating to the leadership of nonprofits and how CPAs might relate to them. McCrory is co-founding partner of McCrory and McDowell LLC in Pittsburgh, which offers a broad array of ser-vices targeted toward both for-profit and nonprofit organizations. From a CPA perspective, considerations of nonprofit leadership are not so much related to audit practice, but rather fall into the category of general business and management.
As such, McCrory emphasizes the need for understanding the board's role with regard to policy and the executive's role concerning operations. The chair, for example, has a significant role in the support and protection of the executive, and the prevention of the board straying into management functions. He also emphasizes the mission-driven aspects of a nonprofit and the need to be careful about setting goals that do not reflect the social purpose of the exempt organization. A final point made by McCrory is the need to understand the leadership style of the executive, which will help promote effective communication.
Walter Smith, PhD, is executive director of Family Resources, an agency with the mission to prevent and treat child abuse by strengthening families and neighborhoods. He says the cause-driven nature of nonprofits makes it essential that the leader fundamentally believes in the importance of what he or she is doing. A leader will convince people to follow by demonstrating a sincere passion for the cause and get everyone on the same page because he or she believes the "mission is bigger than we are." Every aspect, including how money is managed, should reflect the mission, and the staff need to be continually aligned with the mission by reinforcing the message of what the organization stands for and why it is in existence. Other points made by Smith include the following:
Values should inform leadership and leadership should inform values.
Outcomes should show up in conversations.
The agency should make a difference in the community.
Agency leaders must focus beyond internal operations.
Saleem Ghubril, executive director of the Pittsburgh Project, is a well-regarded nonprofit leader in Pittsburgh. The Pittsburgh Project is a community development organization that serves vulnerable residents through an array of youth development programs, homeowner services, and community outreach. Effective nonprofit leaders, according to Ghubril, should do the following:
Envision the highest aspirations.
Constantly invoke the vision and the ultimate purpose of the organization.
Align the leadership with the organization's direction.
Uphold the dignity of those served by the organization.
Live the purpose and values of the organization.
Marilyn Sullivan is executive director of Bethlehem Haven, which aids homeless women by providing them with supportive housing and helping them achieve self-sufficiency. Sullivan believes a strong infrastructure is needed to support leadership. This infrastructure should include explicit expectations, clear goals and objectives, and support. She also believes leaders should focus on strategic thinking, looking at the bigger picture and "around corners" to better position the organization for the future. Other points that Sullivan says are critical include the following:
Leaders need to be aware of life-cycle issues relating to the organization's programs.
Leaders must ensure that appropriate policies and procedures are in place and are adhered to.
Leadership, it should be made clear, is not the same as management. Too often, the two are confused. A useful distinction between management and leadership can be found at the online encyclopedia, Wikipedia: "management has to do with power by position; whereas leadership involves power by influence."
The line between the two is not always clear. One thing that is clear, however, is that excellent leaders do not always make excellent managers; nor do excellent managers always make excellent leaders.
There are some who are natural born leaders, but leadership skills can be learned and developed through appropriate training. Please note, there is not just one effective leadership style.
Some leaders are "nice people" and some are not; some are extroverted and some are introverted; some are egocentric and some are self-effacing.
While leaders may have different leadership styles, there are four general attributes that effective leaders do have in common:
Leaders communicate effectively. Leaders are able to be clear regarding the aspirations or vision of the organization, and thus motivate people to work together to achieve that vision and honor the organizational mission.
Leaders lead by example. Leaders display the behaviors they expect everyone in the organization to exhibit. This certainly includes ethical behavior, but it also includes a willingness to pitch in and add the extra effort to achieve the desired result.
Leaders are strategic. Good leaders develop strategies that make the organization effective and move the organization steadily forward.
Despite the fact that effective leaders display a variety of personalities, styles, and interests, they usually manifest similar behaviors:
Leaders focus on the organization's mission and continually seek meaningful outcomes.
Leaders foster a culture of high performance, concentrating on the value that individuals are adding to the organization and not personal feelings of likes and dislikes.
Leaders can recruit individuals who are smarter or more talented than they are without fear of being overshadowed.
Leaders are genuine as individuals, and behave in ways that are consistent with their moral and ethical principles. This is an important element in building trust, without which one cannot be an effective leader.
While nonprofit organizations often have a number of stakeholders - such as funders, recipients of services, and communities at large - among the most important stakeholders are the employees of the organization. This group makes up, to the largest extent, the cadre of followers whom the executive leads.
A good leader will professionally nurture these followers. To do this, the leader should possess sufficient self-awareness to promote effective communication and professional relationships, provide encouragement and support through mentoring, build trust by living the organizational mission, and encourage high performance by implementing a fair and equitable system of evaluation that includes rewards for achievement. A good leader prepares his followers for the future by providing opportunities for growth, allowing for mistakes, and mentoring.
Good leadership is a necessary condition for ensuring the sustainability of a nonprofit organization. The operations of an organization could be flawlessly executed, but the organization could fail because of the wrong strategy or lack of support for the leader. Failure to adequately respond to changes in the environments in which a nonprofit organization functions is a sign of poor leadership that will eventually lead to the demise of the organization.
Drawing from my own experience working with different types of nonprofit organizations, the main impediment to the practice of good leadership is the lack of specific, leadership-related goals and objectives. Boards of directors often do not provide the executive with clear leadership expectations. Therefore, if the executive is uncertain about his or her expectations, creating a high-performance organization where leadership is practiced throughout the organization is extremely difficult.
If you are a CPA who serves on the board of a nonprofit, or if you give your time at the grassroots level of participation, make sure your nonprofit of choice is on the right path. Evaluate the leadership and offer advice if you can. You can only benefit the program you care so much about.
Benjamin Hodes, PhD, is dean emeritus of the School of Leadership and Professional Advancement and founder of the Nonprofit Leadership Institute at Duquesne University. He is also principal of the consulting firm Hodes and Associates. He can be reached at email@example.com .
Reprinted with permission from the Pennsylvania CPA Journal