Can we all agree that board governance and oversight of the finances is important? It’s one of the most critical responsibilities of any board.
Then why are so many boards asleep at the wheel? Sometimes it seems like boards only pay attention to the budget when things go catastrophically wrong.
Of course at that point, it’s way too late.
Funny word isn’t it? Oversight. It can mean either “taking responsibility” or “oops.”
Clients galore talk about their boards using the “oops” version of oversight.
Nonprofit staff clients often complain to me, “My board can barely stay awake during budget presentations. They never asked a single question.”
But here’s the thing. It may not be entirely the board’s fault. The board may not entirely understand what they need to do. And you, the staff, may be communicating with the board all wrong.
Today, I will offer you some advice on what nonprofit leaders can and should be doing to get their board members to move from ‘oops’ to taking responsibility for the numbers.
And as a bonus, I will offer you templates you can freely download and adapt that I believe can really help when you have a failure to communicate.
WHAT SHOWTIME TAUGHT ME ABOUT NONPROFIT BOARD GOVERNANCE
In 1996, I spent a year on special assignment during my eight-year tenure at Showtime.
In the Finance Department. Ugh.
I am not a CPA, I don’t have an MBA. Honestly, I felt like E.T.
But somehow I was able to get business unit vice presidents to care about their monthly numbers. This was no small task.
I did it with a cover memo that told them just what they needed to hear to help them manage their money more closely, consider sales strategies, and raise red flags coming down the pike.
The key thing: I brought the numbers to life and I made them actionable.
Numbers are not an end. Numbers are a tool. They are a means to understand your business and a key lens through which to make important decisions.
And it is the staff’s responsibility to make the numbers really mean something to your most important stakeholders.
Here’s what E.T. learned and taught while on Planet Finance.
5 WAYS TO GET YOUR BOARD TO CARE ABOUT YOUR FINANCES
- Not Just the Treasurer
Your audience is the full board. You have to take responsibility to work with the treasurer to make the information meaningful and relevant to everyone including folks who may not be so financially savvy. You might have to avoid the use of big words. Note: “Balance sheet” might be two big words.
- It’s Not About Quantity
Assume they’ll only read the cover memo. Even if you are required to produce and distribute monthly statements that are multiple pages long. What do you need them to know? The cover memo is the single most important document you will provide to them – for monthly, quarterly and budget materials. More on that in a bit.
- Provide Context
The vast majority of board members work for big companies. Certainly bigger than your nonprofit. The expense numbers will seem small and inconsequential to them. They sure as hell aren’t to you. How can you offer a frame of reference that puts the numbers into a perspective that will cause them to sit up and take notice.How about a slide in a presentation that says “Smaller Size: Same Issues” – Show how your personnel costs of your $500K organization represent a similar % to the % of their mega-million budget.
- Focus On What You Need Them To Know
Yes you are obligated to provide them with lots of financial data each month. But you cannot bury the lede. They will not necessarily grab it themselves and your treasurer may not be thinking in terms of communicating financial information in a user friendly way. You have got to take the lead on this.Use headlines and infographics that cause numbers to stick. And please, use language a 15 year old would understand. Clear and simple.
- Your Staff Finance Person May Be the Wrong Messenger.
People who live and breathe numbers have ‘the curse of knowledge.’ They are so close to the numbers that they just assume that everyone understands the implications. So work closely with the person generating the reports. Talk through what the numbers mean. Again, how should it best be communicated so that it ‘sticks?’
3 LAST PIECES OF ADVICE
- Keep it simple – Don’t kill ‘em with numbers. Give ‘em the ones that count.
- Put the numbers in context – Numbers mean nothing all by themselves. What do the numbers tell your board about your opportunities, successes, and challenges? How can the numbers call your board to action?
- Give the numbers a good sniff test – Don’t always rely on the formulas or assumptions or calculations. Look at the numbers (in context). Do they make sense?
THE BONUS I PROMISED: 2 DOWNLOADABLE TEMPLATES
- Executive Summary Cover Memo to the Monthly Financials
- Financial Dashboard
To develop these templates, I reached out to my friend and colleague, Hilda Polanco, Founder and CEO of Financial Management Associates. Her firm builds fiscal strength for nonprofits.
FMA has also developed a separate site filled with all kinds of financial resources for nonprofits. Bookmark it: Strong Nonprofits
I wanted to give you something to work from. These may not be perfectly suited to your organization but you will definitely get the idea.
I strongly suggest that you forward these templates onto the Finance staff person, the board treasurer, or the ED (if you are a board member). Make these templates the topic of a Finance Committee meeting. Talk through what works and how to customize it for your specific needs.
The idea here is headlines, soundbites. You are offering them in the simplest form the most important financial information they need to know.
P.S. If you are an E.D., please do not use this instrument as a means to bang your board members over the head to raise money. Reference the instrument in a development update but there should not be a single bullet that explicitly calls out (I think the word may be “shames”) the board for being behind on its own fundraising goal. You can and should give props to a board member who secures a new gift in that month, or who hosted a successful event that led to an improved set of financials.