After the initial session with persons interested in a nonprofit career, I find it helpful to immediately immerse them in recent information and research about today’s nonprofit sector and the increasingly important role it plays in our society.
Though highly educated and possessing solid work skills, most persons I work with come to me with an understanding of the nonprofit sector that I refer to as the 'older paradigm.' It is important to update them on the nonprofit sector and the sophisticated work it carries out locally, nationally, and globally.
They also need to get a dose of reality at this stage. Though their passion for seeking meaningful work is a key indicator of potential success in transitioning to a nonprofit career, it can easily blind them to the realities of nonprofit work. Multi-tasking, heavy workloads, and lower compensation (relative to business and government) are key sources of burnout for current nonprofit leaders and executives. I ask people to take time to reflect on these issues and the risk involved in the decentralized nonprofit sector, which is predominantly made up of small organizations with operational budgets under $500K. It is this dose of reality that often causes people to think twice, and I don’t see some of them again.
At this stage, I also introduce them to other ways in which they can contribute at a high level with a nonprofit organization—and gain great satisfaction—withoutbeing a fulltime employee. Serving on a board of directors is one such option.
In the nonprofit sector, the volunteer board of directors is legally in charge of the operations of the nonprofit and research shows that the more effective board an organization has, the more successful it is. This is why the Center for Nonprofit Management hosts a low-cost workshop series to train new or emerging nonprofit board members. Called BoardWALK, this series is offered in partnership with the United Way for Southeast Michigan and the Detroit Executive Service Corps. For more information about its seven workshops, visit ltu.edu/management/nonprofit_training.asp.
To update people on today’s nonprofit sector, I start with developing a common definition of what we are talking about.
There are many commonly used terms to describe the nonprofit sector, such as ‘nonprofit,’ ‘not-for-profit,’ ‘charitable organization,’ ‘exempt organization,’ and ‘public charity.’ Also, there are many types of nonprofits, such as hospitals, museums, universities, food banks, religious organizations, the Red Cross, United Way, etc.
What they all share in common is that they are legally established nonprofit corporations authorized under Section 501(c)3 of the Internal Revenue Code as 501(c)3 nonprofits. As 501(c)3 nonprofits, they are all legally bound to carry out a public purpose and share a very unique tax advantage (beyond their tax exempt status): contributions to the nonprofit are deductible by a donor on their federal and state income tax returns.
Nonprofits offer a wide variety of publicly beneficial (if not essential) programs and services in our communities. Researchers commonly categorize 501(c)3 nonprofit organizations into the areas of their interest::
- Arts, culture, and humanities – Includes museums, symphonies, theaters
- Education and research – Includes private colleges and K–12 schools, research institutions
- Environmental and animals – Includes zoos, bird sanctuaries, wildlife and land protection organizations
- Health services – Includes hospitals, public clinics, and senior and nursing home facilities
- Human services – Includes housing/shelter/food, programs low-income clients
- International and foreign affairs – Includes overseas relief and development assistance
- Public and societal benefit – Private and community foundations, civil rights organizations, and civic, social, and fraternal organizations
- Religion – Includes all types of houses of worship and their programs
In the three-county area of Southeast Michigan, as of 20041, the nonprofit sector consisted of a total of 2,446 public charities with expenditures of approximately $15.3 billion. The breakdown by type of most of them is:
- Health services – Total: 379 with annual expenditures of $11.7 billion
- Human services – Total: 846 with annual expenditures of $1.7 billion
- Education and research – Total: 401 with annual expenditures of $.5 billion
- Arts, culture, and humanities – Total: 207 with annual expenditures of $.2 billion
Another reality check for people is to view the latest compensation studies of CEOs and staff at charitable nonprofit organizations. An example of a national study is the 2008 CEO Compensation Study by Charity Navigator2. Some of the findings of this salary survey of CEOs are:
- The top leaders of the 53,241 charities in America evaluated by Charity Navigator earn an average salary of $148,973, representing a 2.55 percent increase from the prior year.
- For the Midwest region the average salary of a nonprofit CEO in 2008 was $140,795, a 3.36 percent increase.
Regardless of the type or size, at some level, all nonprofits share common management functions, competencies, and legal requirements, which clearly make them unique from business and government enterprises.
The common management functions shared by 501(c)3 nonprofits are:
- Fund raising/Grant writing – the systematic seeking of charitable contributions and grants
- Governance – Lead by a voluntary board of directors
- Nonprofit Financial Management – Management of various revenue sources in from grants, charitable contributions, and earned income
- Nonprofit Programs Outcomes – Success is measured by, at least, dual bottom lines: mission and financial
- Public Policy – They have unique legal restrictions on lobbying
- Volunteer Management – This essential skill for nonprofits represents the heart of the charitable nonprofit sector!
As I said previously, employment and careers in the nonprofit sector are not for everyone. The important passions that drive the sector to achieve and have made it what it is today can sometimes blind organizations to sound, sustainable management. But, increasingly, it is the right place for a growing number of persons to pursue a meaningful professional career.
What do you think about the management of nonprofit organizations today? What is your experience? How are you connected to it: volunteer, donor, board member, employee? All of these roles are essential in today’s nonprofit sector. But, they do need to be managed effectively.