Jani’s Journal Issue 28: The Forgotten Middle Children in Nonprofits
8/20/2024
August 12 marked National Middle Child Day! Any other parents of middle children forget? 🙋🏼♀️
While I am not a middle child, I have been on both the “mission” side and “operations” side of nonprofits. At times, the operations team felt like I imagine the middle child does—the often-overlooked piece holding things together; neither as steady and mature as the original programs, nor as fresh and cute as the new services, but integral to the organization, nonetheless.
Even the Statement of Income reinforces the idea that operations functions (i.e. “overhead,” “administrative costs,” or “indirect expenses”) detract from the mission-related activities and services. But the National Council of Nonprofits notes,
”The assumption that overhead is ‘bad’ reflects a mis-appreciation of the reality of what it costs to deliver a nonprofit’s mission.”
This edition of Jani’s Journal celebrates the often overlooked yet critical functions in a healthy nonprofit: Human Resources, Quality Assurance, Finance, Marketing & Communications, Information Technology, Project Management, Physical Plant, and so much more!
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Jani’s Jackpot!
If you only have time to read one article, Jani’s Jackpot promises the ultimate payout!
🔗 Operating Models: How Nonprofits Get from Strategy to Results 🔗
This Bridgespan article highlights the importance of a well-defined operating model that ensures the essential functions of operations departments supporting organizational success. Bridgespan presents a case study of a nonprofit who reinvented their strategy and realized their need to reinvent their operating model to achieve their mission’s results. The outline important steps to ensuring your operating model aligns with your strategy:
Ensure the organizational structure, as reflected in an organizational chart and well-defined roles & responsibilities, identifies key operational units required for your strategy’s implementation and allows for collaboration & expertise sharing across departments.
Establish governance practices aligned with your strategy that outline how the organization identifies & manages priorities, allocates resources, monitors its work, makes decisions, and deploys talent.
Align your leaders, talent, & culture with the organization’s strategy to alleviate key challenges around the way people work together (or fail to do so).
Build the organization’s strategy-critical capabilities to ensure long-term performance. Consider capabilities needed for successful strategy execution in areas such as recruiting & talent development, data & technology, learning & innovation, and partnership development.
Human Resources
The Council of Nonprofits 2023 report on the Nonprofit Workforce found significant shortages, on average about 75% of respondents noted job vacancies, which negatively impact the organization’s ability to provide services and programs to their communities. Strengthening HR operations can help nonprofits attract and retain talent in a competitive labor market.
🔗 A Five-Step Guide to Improving Your Employer Brand 🔗
This MIT Sloan Review article outlines the importance of employer branding to position your organization as the best choice to fulfill prospective employee's’ needs among the organizations against which you’re competing for talent. Key steps include:
Identify the talent you need
Understanding your current brand perception
Define what sets you apart from other employers (your value proposition).
Effectively communicate your brand promise and value to potential employees
Keep your promises.
🔗 Onboarding New Employees in a Hybrid Workplace 🔗
Until recently, research supporting employers to navigate COVID-era remote and post-COVID era hybrid work arrangements was sparse. This Harvard Business Review article outlines new research specific to onboarding in the hybrid environment. Given Gallup’s research on the importance of the onboarding experience to retention, hybrid organizations should consider aligning their practices accordingly. Key findings:
Overall, a few days in-person increases satisfaction with the onboarding experience as well as perceived involvement of their manager and their work’s meaningfulness.
Organizations should take a person-centered tailored approach to onboarding depending upon the employee’s career phase.
Employees that are early in their careers benefitted from being in the office 60% or more for onboarding.
A word of caution: for experienced employees, being in the office more than 30% negatively impacted onboarding satisfaction.
Technology & Data
For over twenty years, McKinsey & Company has tracked key variables supporting organizational health and performance. While the causal relationship between organizational health and winning performance remains consistent, how employees are defining organizational health has changed in some key areas, including technology and data.
🔗 The Essential Components of Digital Transformation 🔗
“Digital Transformation” seems to be the buzzword of this decade. Most people think of transitioning to electronic record keeping and task automation, but this Harvard Business Review article highlights the broader scope. While Digital Transformation may begin with deploying new technology and digitization of information (data), to realize the full benefits of digital transformation, organizations can’t stop there. Using the newfound data to gain insight and make changes accordingly is what actually yields the improved results.
🔗 An Introduction to Data-Driven Decisions for Managers Who Don't Like Math 🔗
“Data and algorithms have a tendency to outperform human intuition in a wide variety of circumstances…Good metrics ‘are consistent, cheap, and quick to collect.’ But most importantly, they must capture something your business cares about.”
Anyone have sweaty palms yet? One of the more common areas in which I see nonprofit leaders lack skill, or more often simply confidence, is math. Whether your deer-in-the-headlights look is triggered by financial statements, retention and turnover data, or technology performance metrics, this Harvard Business Review article outlines key questions to help you better understand the data being presented to support data-driven decision making:
What was the source of your data?
How well do the sample data represent the population?
Does your data distribution include outliers? How did they affect the results?
What assumptions are behind your analysis? Might certain conditions render your assumptions and your model invalid?
Why did you decide on that particular analytical approach? What alternatives did you consider?
How likely is it that the independent variables are actually causing the changes in the dependent variable? Might other analyses establish causality more clearly?
Finance
McKinsey & Company’s research reinforces a trend nonprofits would be wise to consider: CFOs are increasingly seen as integral strategic partners focusing on long-term sustainability. While the finance department may seem like a non-essential function to target for a lean budget, the articles below outline the fallacy in that thinking.
🔗 Global Study Finds Fraud Impacts Nonprofits — What Can Your Organization Do? 🔗
Could your nonprofit afford to lose $639,000? According to the Association of Certified Fraud Examiners’ 2020 Report to the Nations, 9% of their fraud cases were experienced by nonprofits, and their losses averaged $639,000! Strong internal controls and financial oversight is part of the larger financial stewardship responsibility of nonprofit leaders and board members. This CliftonLarsonAllen (CLA) article describes six things your organization can do to mitigate fraud risk:
Encourage employees to speak up if unusual activity is noticed. Of all the cases in the study, occupational fraud was initially detected the most by tips (43%), and those tips mainly came from employees (50% of the time).
Review your current control environment. The goal should be to have at least two people involved in every transaction, and the person performing reconciliations should not have access to the assets being reconciled.
Create or update monitoring procedures for critical or high-risk processes, such as payroll. Monitoring activities can help identify suspicious activity early on and are critical when there is limited segregation of duties.
Develop vacation policies, enforce them, and assign work to someone else. Disruption is sometimes a good thing as it forces someone else within the organization to take over in their absence and provides an opportunity to detect malicious activity.
Invest in fraud awareness training for your employees at least annually so they are better positioned to help prevent and detect fraud both internally and externally.
Don’t go at it alone. Engage with independent auditors and consider a change in assigned auditor or firm every so often to combat complacency that familiarity sometimes breeds.
🔗 Nonprofit Embezzlement: More Common and More Preventable Than You Think 🔗
Think your nonprofit won’t be one of the 9%? This Blue Avocado article shares the stories of multiple nonprofits, both large and small, that lost thousands through embezzlement. Most often due to lax internal controls, embezzlement can be avoided by recognizing these common perceptions as the myths that they are:
“It hardly ever happens to nonprofits, so we don’t have to worry that much.”
“Mrs. X is the most dedicated, honest, sweetest person I’ve ever met.”
“Everyone who works here is really a good person.”
“We don’t have enough staff to have financial controls.”
“Audits catch embezzlement and fraud.”
🔗 Reporting & Operations: Internal Controls 🔗
OK, I admit to purposely scaring you a little to get you to pay attention to this last article. When I say “internal controls” does anyone get excited? No! People often try to avoid the discussion with some of the above myths. This Nonprofit Accounting Basics article outlines some straight-forward internal controls nonprofits can put in place to protect against fraud no matter how small (or large) the organization. Key areas to implement internal controls include:
Writing Checks
Cash
Payroll
Recording Other Transactions
Credit Card Transactions
Lockboxes
Sending Invoices & Tracking Receivables
Investments & Fixed Assets
Payables & Other Expenses
Revenues/Deferred Revenue
Financial Reporting
Leadership
McKinsey & Company’s Organizational Health Index research noted above has also demonstrated changes in the type of leadership driving successful organizations—towards empathetic and decisive leadership.
🔗 Mastering Decisive Leadership: The Keystone of Effective Execution 🔗
Many nonprofits have empathy on lock, but decisive leadership may be more difficult to master. Sometimes confused with from Authoritative Leadership, Decisive Leadership is about making and effectively communicating the right decisions at the right time which requires rather than simply controlling subordinates. This Business Fitness article describes how Decisive Leadership propels success and offers steps you can take towards becoming a more decisive leader:
Keep momentum even with incomplete information by swiftly making informed decisions that balance the need for thorough analysis with the risk of overthinking.
Cultivate a decision-making culture by empowering team members to make decisions, distributing responsibility and creating a dynamic, responsive environment.
Clearly communicate your vision, the reasoning behind decisions, and expected outcomes clearly to align the team’s efforts and eliminate confusion.
Focus on execution by turning strategic goals into clear, actionable steps that can be measured and improved upon over time.
Foster a resilient growth mindset by being open to feedback, willing to adjust, and learning from both successes and failures.
Combat indecision by establishing timelines for decision-making to avoid procrastination and keep the business moving forward.
Break down complex decisions into manageable parts and prioritize them based on their impact on the business.
Balance speed and caution by understanding the risks, and not fearing the wrong decision which leads to inaction. Decisive leaders take calculated risks to capture opportunities.
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As a fellow middle child, I couldn't help but chuckle at your spot-on analogy about operations teams feeling like the forgotten middle child in nonprofits.
Well said!