You might have heard this one at the board table, “we cannot make a profit.” Or, the always popular, “anybody can do the ED’s job.” These are the myths that are promulgating boards across the country. As George Orwell once said, “myths which are believed intend to become true.” If that board table could talk, here are the top ten myths it would tell us:
- “We cannot take political positions or lobby.”– Nonprofits can lobby, and given the industries or professions they represent, it is common practice. Even 501 (c)(3)’s can engage in public policy. IRS states that, “Organizations may, however, involve themselves in issues of public policy without the activity being considered as lobbying. For example, organizations may conduct educational meetings, prepare and distribute educational materials, or otherwise consider public policy issues in an educational manner without jeopardizing their tax-exempt status.”
- “Records are open to anybody.”– The only public records required to be provided to the public is the IRS 990 informational return, the IRS determination letter and the form 1023.
- “When I get on the board I’ll fix the organization.”– It is not one person’s role to “fix” the organization but the entire board’s fiduciary responsibility to ensure the health and stability of the organization in order to deliver relevance and value to its members. Putting in place a strong strategic plan is the first step in the process along with strong leadership.
- “Anybody can do the ED’s job.”– This is a common misnomer as the association management profession is a profession. There is a set of competencies that is required of this professional that is similar to a CEO leading a for-profit business. The key is for the Executive Director and the Board to understand the balance of the board and staff relationship. Boards govern, staff manages.
- “We cannot make a profit.”– A non-profit organization can make a profit. The 501 (c) designation is provided by the IRS and exempts an organization from federal income taxes as long as it’s activities does not inure benefits to any private shareholder. The activities of the nonprofit are focused on furthering a profession, members of a chamber, real estate professionals, doctors, etc.
- “Nonprofits should not have significant savings.”– Not only should nonprofits have savings, it is the duty of the board to ensure the health of the organization by establishing a reserve account, which should be at least 6 months of budget. Some nonprofits have more than this. For example, Harvard University, a nonprofit educational institution, has an endowment of approximately $35 billion. The ultimate question is, “how do we use this money, that has come from our members, to provide further value to them by enhancing or increasing benefits, programs and services?” A reserve fund by itself is not meaningful but a plan on how to use it is what makes it invaluable.
- “People can attend our meetings.”– Nonprofits can hold closed meetings and are not required to open them to the public or membership. This is regularly confused with state and local governments that must hold public meetings.
- “Minutes are public record.”– Minutes of a nonprofit are not public record. Only the 990-T information return, IRS determination letter and the form 1023 are public records.
- “There is no need for a strategic plan, we have been fine without one for the last 30 years.”– The board acts as a fiduciary of the organization and should set the strategic direction of the organization. The strategic plan breaks an organization out of the status quo and allows it to continuously improve and adapt to the changes in the marketplace. Every organization needs to implement a plan not only for the present but as leadership turns over, there is a sustained direction that comes from the wisdom of those before them.
- “We don’t need performance measures, we are doing just fine.”– This is always a curious comment as the question then to this board member is, “how do you know you are doing fine and what are you benchmarking against?” Setting performance measures allows a board to understand how the organization is doing but also allows it to discontinue programs that are not performing. Finally, there is not one nonprofit that can operate in a silo and not understand what the competition is doing. Setting performance measures and breaking out of silos is crucial to its survival.
The next time you hear one of these myths, challenge it on your board and ask questions before it is accepted as truth. “Myths which are believed intend to become true.” Debunk them before they are truth.