Beyond the checkbook: Empowering nonprofit boards

Webster’s New Universal Unabridged Dictionary defines a non-profit as, “not established for the purpose of making a profit; not entered into for money”. Although this is an accurate definition, I prefer the one provided by Wikipedia, the free online encyclopedia, which defines a non-profit as, “an organization whose primary objective is to support some issue or matter or private interest or public concern for non-commercial purposes.”

I like the Wikipedia definition because it tells us what a non-profit is, rather than what it is not, without connecting its purpose to monetary gain. Although a non-profit organization is not established for the purpose of making a profit, it is allowed to realize a profit. And, as long as 100% of the profit goes back into the organization it is still operating as a legal non-profit entity.

This is important because many non-profit stakeholders mistakenly think it is acceptable for a non-profit organization to operate in the red. This concept is puzzling since most non-profit board members are experienced business leaders who understand that an organization cannot consistently operate in the red and continue to function. In fact, if most board members where honest, they would never invest in a for-profit company that performed as poorly as many non-profit organizations.

The truth is management of a non-profit organization and a for-profit organization is very similar. Both business models are driven by revenue, they require long-term strategic planning for growth and they must skillfully manage the organization’s budget to ensure longevity and lasting success. 

If you sit on the board of a non-profit, do you examine the financials? How involved are you in the long-term planning and strategic direction of the organization? 

Don’t you think its time for non-profit board members to do more than write checks and attend events?

 What do you think, we want to hear from you?