Information useful to people starting a nonprofit organization.

Ready for Summer Update: The Nonprofit Startup Summit 2018

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It’s been a while since I posted here, but things have been busy. (I know, excuses, excuses!) Here’s to hoping I can get a few more posts out over the summer.

Way too often, when people set out to start a nonprofit organization, I find that they have a great idea that will certainly benefit the community, but they often don’t realize the full amount of work that’s needed to successfully put this idea into practice. In fact, when I ask founders what they think about having actually started a nonprofit when they are a few years into it, they often say they wouldn’t have done it if they knew what they were getting into. I don’t believe them. From what I’ve seen, their passion for their cause is very great, and they would simply have found a way to pull off their project in a more pragmatic way. What these founders often need is a simple reality check at the outset, some common sense advice.

So today, I’m focusing on an event I’ve scheduled for June 14 here in Portland, Oregon. I don’t usually focus on an event like this in these blog posts, but for those in the Portland area, it will be a great way to get a lot of useful information, so I’m making an exception to my usual routine and spelling out what will happen at this summit.

The Nonprofit Startup Summit 2018 is a joint venture between the Nonprofit Startup School and Michael Jonas from Rational Unicorn Legal Services. This is a one-stop shop where you can learn about the many facets of starting a sustainable and effective nonprofit organization. Various professionals from several disciplines will give presentations in their respective areas. The theme is “Combining mission-driven passion with logistical reality.” 

Often when people set out to start a nonprofit they assume much of it will be pretty simple and straightforward. My blog readers know different. There are a lot of things to consider, a lot of bureaucratic steps that need to be taken, and many “behind the scenes” tasks that need completing, or the nonprofit will face some severe but all too common mistakes down the road. This event is designed as a reality check for people who are ready to move forward.

But it will be fun. I promise! There will even be delicious food and live folk music at lunch!

I will be giving an overview of the entire process for starting your nonprofit, as well as introducing several of the presenters. Besides me, the presenters will include:

  • Michael Jonas, Attorney and Owner of Rational Unicorn Legal Services. Michael will be talking about legal issues for nonprofits.
  • Carla Axtman, Vice President of Communications of Prospect. Carla will cover how to tell your new nonprofit’s story.
  • Stanley Carpenter, Nonprofit Banker for Beneficial State Bank. Stanley will cover the important things a new nonprofit needs to consider when opening a bank account.
  • Stephen Brooks, Co-Founder/Co-Manager of Charitable Partnership Fund. Stephen will talk about fiscal sponsors and incubators, that is alternative ways to start your nonprofit organization.
  • Erin Zollenkopf, Nonprofit Accountant/Partner of Susan Matlack Jones & Associates. Erin will speak on “Keeping Track of the Money: What New Nonprofits Need to Know”.

Here are the details, you need to know to attend:

Saturday, June 16, 2018
McMenamins Kennedy School
Check In: 9:00 am
Event: 9:30 am – 3:30 pm
$25 (Includes entry and lunch)

Live folk music at lunch will be performed by Complimentary Colors.

Please visit our Eventbrite site for tickets and to RSVP.

Lunch will be buffet style. We will make best efforts to have both gluten free and vegan options. If there are any other specific allergies, please let us know as soon as possible after RSVPing so that we can accommodate accordingly.

Feel free to share this with anyone who might enjoy attending. Remember though that space is limited so RSVP as soon as possible to reserve your spot!

I look forward to seeing many of you on June 16th.

It’s Update Week!

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This blog is about starting nonprofit organizations. I try to post useful information most every week that startup nonprofiteers will find useful, and there are dozens of people reading my blog, (literally dozens! maybe even scores!), and sometimes I get actual feedback from a few of you. Please keep it up.

Because of this feedback, I’ve recently gone back and updated a couple of earlier posts, and I thought this week, I’d just recap what those changes are, since people may not know to go back and check.

There’s a new and improved Nonprofit Startup Flowchart!

Almost immediately after publishing my Nonprofit Startup Flowchart, I started seeing things that should be added. The first version of the flowchart never explicitly suggested that nonprofit founders should meet with leaders from other nonprofits. This is an absolute must, because it’s the only way to really understand how your group will fit into the ecosystem. It also gives you a reality check about working with whatever population you’re serving. Nobody knows that like the people already doing it.

Also, the older version of the chart didn’t clue you in on the fact that creating a nonprofit could require giving up control. If you want to “own” the new organization, you should probably start a for-profit business instead. The updated chart makes this clear.

Finally, a colleague suggested that I include something about considering the issue of equity throughout the process. Now there’s a notice that at each step the founder should consider who will benefit from any actions taken and who will be burdened. For instance, when you meet with other nonprofit leaders you may learn that you’re about to compete for funding resources that could negatively impact the population already being served. This kind of thing needs to be taken into account throughout the process or you may inadvertently do more harm than good.

Those changes requires a new image of the chart, and a little re-arranging. Check it out!

Form 1023s don’t take as long as they used to!

When I wrote about the problems introduced with the IRS’s form 1023-EZ, I didn’t mention that the longer form 1023 is usually about as fast as the shorter, cheaper form. It’s quite possible now that only a few weeks will elapse between the time you submit the longer form and when you get your decision from the IRS. Nevertheless, it’s important to understand the long form, rather than take shortcuts!

Do you know someone who’s thinking about starting a nonprofit organization? Please share this article with them.

Get a notice when a new post arrives. This happens weekly on Mondays (or sometimes Tuesdays). Subscribe to these posts by clicking here and filling out the simple form. People who do can get my complimentary ebook about starting a nonprofit organization.

Also, please like and/or follow the Nonprofit Startup School on Facebook or follow the Twitter.

The Nonprofiteer’s Code

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When you’re starting a nonprofit organization, you gotta have a code.

Medical doctors know they must “first, do no harm”, Superman stands for “truth, justice, and the American way”, Spider-man understands that “with great power comes great responsibility”, and even the criminal Omar from The Wire only robs from other criminals, and never from “civilians”.

People in nonprofit organizations also live by a code, but all too often, they haven’t consciously spelled it out. Nevertheless it exists, and it breaks down (like the Man of Steel’s) into three parts:

  • Care
  • Loyalty
  • Obedience

Maybe, I’m showing my age when I say that sounds kind of “square”, but this code is actually really useful, so I want to take a close look. These three items are often called the three duties of fiduciary responsibility. (“Fiduciary” means a duty or obligation to act in the best interest of another person or institution.) I prefer to think of it as the nonprofiteer’s code. Let’s take a look at each piece, and remember this code applies to you as a founder, but also to your board members and anyone who works for your nonprofit.

Care

Taking care means you’re not going to haphazardly run the nonprofit. Instead, you’ll be careful, cautious, and reasoned as you do your work. For you board members it means they aren’t just signing up to show their support. They’re actually going to come to meetings, be prepared, and make an effort to understand how the nonprofit operates. That is, no one is asleep at the wheel.

Loyalty

Loyalty means that you put the nonprofit first whenever you’re making decisions about it. This is why there needs to be a solid conflict of interest policy in place. You and your board and everyone making decisions for the organization should disclose anything that appears to be a conflict, and be ready to step out of the room when some decisions are being made. All people have competing interests in their lives, and it’s important to prioritize the organization when you’re wearing you nonprofit hat.

Obedience

Obedience is the part that seems to rub a lot of people the wrong way. Essentially, it means follow the rules, whether they be national laws, state regulations, or the requirements outlined in your organization’s bylaws. Many people who start nonprofits are trying to change society and find that a lot of unnecessary rules get in their way. But in theory, these rules exist to enforce the duties of care and loyalty. These rules include things like requiring that you keep proper records and review the operations of the nonprofit on a regular basis. It’s mostly common sense stuff, even if a little tedious at times. Even if you take issue with some of them, this part of the nonprofiteer’s code means you’ll follow the rules in order to uphold these responsibilities.

It also means you’re operating the nonprofit for its specifically chartered purpose and not some other reason, no matter how beneficial. All this can be a bit complicated, and it requires a reasonable effort to understand what all the requirements are.

Put together, these three pieces aim to ensure that the resources your organization collects are being used to support the good work your organization was created to achieve. That means, you can use this code to help guide the decisions you make and the actions you take as you do your work.

So, if you’re struggling with a difficult decision as you pull your nonprofit together, try thinking about how to honor each part of this nonprofiteer’s code.

Do you know someone who’s thinking about starting a nonprofit organization? Please share this article with them.

Get a notice when a new post arrives. This happens weekly on Mondays (or sometimes Tuesdays). Subscribe to these posts by clicking here and filling out the simple form. People who do can get my complimentary ebook about starting a nonprofit organization.

Also, please like and/or follow the Nonprofit Startup School on Facebook or follow the Twitter.

The Short Shelf Life of the Scrappy Nonprofit

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A lot of nonprofits describe themselves as “scrappy” and often take pride in this identity. I’ve worked in a few of these, and actually enjoy that environment, but there’s a cost at maintaining a scrappy culture in the long term.

First, what do we mean by the term scrappy? A post in a facebook group I participate in described it this way: “getting the most out of every available resource, everyone wearing a lot of hats, using a DIY version of anything instead of a professional version, etc.” That definition sounds right on target to me.

I remember a phase we went through when I worked at Free Geek (a nonprofit computer refurbisher I helped start). Very early on when we were still all-volunteer and had very little money, we’d scrawl a list of our needs on a large used whiteboard near the entrance. We called this the “Needful Things List”. It might say “pens, paper, screwdrivers” or something like that. Sure enough we would get donations of these items, and put them to the best use we could. Often though, the pens wouldn’t quite write, the paper was the wrong size and needed to be cut to size, and the screwdrivers would be worn out. Without cash we figured out how to make do with these substandard items because they were free. Or we did without altogether. For a couple years we stacked our reusable computers in piles all over the warehouse floor because we didn’t have the money for shelves. Piles would fall over causing the potential for injury, and I have seen an actual printer avalanche.

That’s scrappy!

Any “best practices” advice you get when starting a nonprofit will tell you to ensure you have your infrastructure in place before you start offering services. Such resources will also tell you to select a diverse and talented group of people for your board and not to populate the board with your friends and family. They would also have you pay a living wage to a dedicated and well chosen staff, and many other things that are all really good ideas and excellent advice to follow.

When you can.

The problem is that unless you’re pre-funded, your nonprofit will run short on resources (mostly time, money, and/or social connections). This means that you’ll face a choice: give up on your nonprofit or take some shortcuts and compromise on these best practices. (And you will opt for the shortcut.)

So when you start a nonprofit organization, it’s very likely you’ll go through a scrappy phase, which leads to an odd phenomena. A few years down the line, you will likely believe that the shortcuts you took are the reason for your success, because, well, they were necessary shortcuts to take after all, and you’ve been doing it that way for some time now to no ill effect.

That is the wrong lesson to learn.

When Free Geek started getting a steady stream of income, we left the “Needful Things List” in place. We continued to rely on these donations and refrained from budgeting for things like basic supplies. As a result, we spent a fair amount of time testing and throwing away pens that didn’t work, reusing paper and dealing with the subsequent jammed printers, and bandaging up volunteers’ fingers when they poked themselves trying to use faulty tools. This all seemed normal to us. It’s just the way we did business.

This led to some major inefficiencies which meant fewer computers refurbished and fewer program participants trained, in short, a less effective organization. But we were blind to that fact for a long time. After all, weren’t we saving money by taking these shortcuts? Wasn’t that part of our recipe for success?

Nope. It was just that we took a calculated risk because we didn’t have many other options, and we got lucky. Then we failed to evolve beyond that phase for a while — though we eventually made the change.

It was a counter-intuitive process to realize that we needed to spend a little pre-budgeted money on some basic items in order to save a lot of time and be a more effective organization. But after some work we did just that. We eventually invested in shelving and a tool and supplies budget. We continued to receive free donations, but we also had a reserve of known working items, so we didn’t need to rely on substandard equipment all the time. This led to increased efficiencies, and the organization became more effective.

Taking short cuts on supplies like might seem trivial, but the effect is larger than you might think, and the principle applies in all sorts of other ways throughout your organization. If your shortcuts sidestep some best practices, it’s best not to forget that the shortcuts are temporary and the best practices should remain a longer term goal. Keep an eye on that prize, or your organization will suffer.

The scrappy stage of your nonprofit startup is just a phase, often a necessary compromise that serves to establish a more sustainable organization. That phase has a limited shelf life. Holding onto it beyond its usefulness can undermine your organization’s effectiveness.

So, remember this is an ongoing process. Take baby steps. Improve where you can. Don’t fall into complacency. Read cautionary tales from other nonprofits. Learn from their mistakes. Continue to improve and grow.

Do you know someone who’s thinking about starting a nonprofit organization? Please share this article with them.

Get a notice when a new post arrives. This happens weekly on Mondays (or sometimes Tuesdays). Subscribe to these posts by clicking here and filling out the simple form. People who do can get my complimentary ebook about starting a nonprofit organization.

Also, please like and/or follow the Nonprofit Startup School on Facebook or follow the Twitter.

Introducing the Nonprofit Startup Flowchart

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Starting a nonprofit organization properly has many steps, and there are several variations on how to do this right. This complexity scares many people away from trying, and more problematically, encourages many to simplify the process and skip steps. I find it helpful to look at the whole process from a 10,000 foot perspective in a visual way, so I’ve created this high level flowchart that outlines the basics. Work through it, and your chances of starting a sustainable nonprofit organization will increase, or perhaps you’ll decide not to start the nonprofit saving time and maybe even avoiding some damage to the community.

Here goes. Explanations below.

Who benefits and who is burdened?*

The flow chart outlines several steps, many of which you’ll repeat long after your organization has been founded. At each step, there are common questions you should ask, and the most important one is probably “Who benefits from this, and who will be burdened by it?”

For example, when you establish an animal shelter, the animals and the community would benefit, but other animal shelters may find themselves competing with you for grant money or other resources. Establishing a homeless shelter or a drug rehabilitation center will benefit your program participants, but can be seen by your neighbors as a problem. Not understanding these realities will mean you could be blindsided by unexpected resistance to your work.

Is your idea beneficial?

Nonprofit organizations exist to benefit the community in some way.

Work through who in the community your organization will benefit. What service will you be offering them? Clarify this by stating the problem you are trying to solve or address and then state your solution to that problem in a very basic way. This should help you generate a short list of programs you intend to run. Articulate why these programs will create the change you want to see in the world by drafting a theory of change. Describe your vision of the organization and your community once it is up and running. Examine all this work to uncover your values and put them in writing. Step back and examine all the above, and draft your mission statement.

That’s a lot of work, but at its end, you should be able to answer the question “Does my idea clearly and significantly benefit society?” If the answer is no, don’t start a nonprofit.

Many for-profit businesses benefit society. For example, a grocery store distributes food to the people in a neighborhood. A nonprofit has to demonstrate that the benefit it offers is above and beyond what a typical for-profit business provides. The grocery store may not be affordable to the poorest in the community, but a food pantry might fill in that gap. You are looking for a clear and significant benefit, not just a common one.

Is your idea viable?

For a nonprofit organization to do its job, it needs to actually work. Having an idea that is good for society doesn’t automatically mean the idea will attract the resources necessary to function in a sustainable way.

How will you provide your services to the community? Write down a list of the activities you need to perform in order to support these main services. This tells you what support systems you need in place to provide those activities. What other resources will you need to do all the work? How much will your resources, programs, and support activities cost? Where will the money come from in order to pay for that? Will you need volunteers? Where will these people be recruited? How will you train them? Which work will your organization do, and which will be outsourced to other organizations? Those other organizations are your partners. Who are they, and why will they work with you? Once you’ve got a solid understanding of all that, you can sketch out your business model.

If your business model is viable, you’re ready to move on. If it’s not, you’re not ready to start a nonprofit.

Get feedback from other nonprofits*

Meeting with nonprofit leaders already established in your community will help you assess if your idea is realistic or not. It’s extremely important to take the time to meet with people already working in the nonprofit space. These folks can give you a valuable reality check about your idea, and help you figure out how much work is involved. You may also learn how tight resources are in your particular field. A new nonprofit entering the picture can be seen as a collaborative partner, or someone who is competing for grant money, volunteers, and clients. You need to understand how the presence of you nonprofit organization will fit into the ecosystem.

Is this an unfilled niche?

If another nonprofit is already serving the community by offering the same or very similar services, your nonprofit might cause more problems in the community than it solves. You might find yourself competing with the established nonprofit for resources (typically volunteers and funding). This dynamic can undermine your efforts as well as the efforts of the established group.

Meeting with nonprofit leaders already established in your community will help you survey the nonprofit environment you will be working in. Pay close attention to the value you are offering and to the segment of the community you are serving. If both these pieces match what another organization is already doing, you are not in a unique niche.

You should identify a community segment that is not being served and/or identify a service that is not being offered to them. If you can’t do that, do not proceed. Work with an existing organization instead.

Will others sign on? If not, find out why not and rework your idea

If you’ve gotten this far, your idea is well thought out, and your services are needed, but isn’t it possible that you might be a bit biased? The real test is whether other people agree with you enough to actually sign on and start contributing.

You need to begin recruiting people to your cause. You’re looking for a variety of people: volunteers, advisors, experts in your service area, those familiar with the segment of the community you will serve, people who will complement your own strengths, and more.

If people are not willing to step up and help, then it’s possible your idea doesn’t resonate with them. It’s also possible that the first person you need to recruit is someone who can communicate your idea better than you can.

If people are not interested in helping, ask them why? Tactfully determine whether they think the idea is faulty or impractical. Sometimes people are already over-committed. (Ask them for others who might be good recruits.) Don’t jump to conclusions based on a single person’s response. Rather, look for patterns after you’ve reached out to a large number of people.

In the end, if you can’t get people involved, you need to go back to your original idea and start reworking it. Either your idea is not as beneficial as you thought, you’d be competing for resources against existing organizations, or something about your idea is unrealistic.

If you’ve attracted a few people, but not a critical mass to move forward, get your supporters together and analyze the issues together.

It’s critical that you understand that starting a nonprofit is a group effort, and that the organization you’re creating belongs to the whole community. It’s not your baby, and you are giving up control over it. If you can’t let go, start a for-profit organization instead. That will allow you to do things the way you want to. If you can step back and share the organization, you might find that more people want to help out.

But when there is a problem, take a long, hard look at it, fix it, and start again from the top.

Get a fiscal sponsor

Sometimes you won’t know if your idea is viable or not. Other times, you’ve attracted a few people, but not enough of them, maybe because your idea is difficult to grasp in the abstract. If only they could see the idea in action, maybe then they’d sign on.

Finding a fiscal sponsor is a great way to start your work and figure out if it’s viable before committing to legally forming a corporation and seeking tax exemption. It’s like being able to test out versions of your idea to see what works.

In this option, the fiscal sponsor acts as the main organization (and all the resources belong to that sponsor). Your idea is played out as a project of that parent group. You will discover if your idea works out through experimentation. The fiscal sponsor takes a small percentage of any cash donations in exchange for managing the books and dealing with the IRS for you. It’s a way for you to get to work without tackling a large chunk of the bureaucracy up front.

Can you give up control?*

A nonprofit organization is a group effort. It requires the cooperation of many people. It is specifically required to benefit the community rather than any owner. This means you are not entitled to anything even though you put in a great deal of effort to make everything work.

For example, you will need to set up a board of directors to govern the organization. If you move forward into a staff position, usually filling the role of executive director, this group will be your boss. The board has the power to set goals for you, discipline you, and even fire you. If you are not willing to give up this kind of control, you should consider setting up a for-profit business instead. A for-profit organization allows you more control over how you run things, and there’s no rule that a for-profit can’t benefit society.

If you do give up this control, you’re faced with a paradox. Even though the board is your supervisor, you will likely find yourself managing them. In a way, they are like any other group of volunteers doing a specific job for the organization. They’ll need to be reminded of commitments, educated, rewarded, etc., and doing that will be your job. Can you live with this paradox?

Fish or cut bait

Moving forward from this point, you’re about to cross a line and commit to things that will be hard to undo. It’s important to assess your own stamina and be realistic about your personal energy level.

Look at your vision of the future, and think about what a typical day, week, and month would look like when your organization is up and running. What’s your role in all that, and are you still willing to do it? Also, take a second look at all the work that needs to be done in order to get that far. What’s your personal role in that work?

If you find you don’t have the wherewithal to move forward, touch base with the folks you’ve started talking to, and back out before you make extra work for yourself and for all of them.

Establish a board & policies

A nonprofit has no owners. Rather, it operates on behalf of the community at large. It’s therefore necessary to establish a group that oversees the organization in the public’s interest. This is the board of directors, and its members need to understand what they are signing up for. At the most basic level, every board member has to understand the three main duties of loyalty, care, and obedience they need to fulfill.

The first order of business for the board will be to meet, elect officers, and establish the basic policies for running the organization. Creating these policies is an important foundation for the group, but learning how to discuss the issues and make decisions is also crucial. Establishing your board of directors and these policies is the first step in formalizing your organization.

Form a legal structure

If you don’t have a fiscal sponsor you will need to establish your legal structure. Nonprofits start out as some sort of corporation established by a state government. This structure establishes the group as an artificial person in the eyes of the law, offering some protection to those involved. The corporation is allowed to open bank accounts in its name, and do other business independently from any individual.

There are different types of corporation that vary from state to state, and you need to establish the one that’s compatible with your nonprofit’s purpose.

An easy and important first step is to get an Employer Identification Number (EIN) from the IRS, which works like a social security number for your corporate entity.

Seek tax exempt status

If you don’t have a fiscal sponsor you will want to seek a proper tax exempt status from the IRS. The rules here are national in scope, rather than state by state. While there are other options, most people think of a 501(c)(3) which is IRS-speak for a charitable, educational, or religious organization. When your organization gets this status, it no longer needs to pay many of the taxes that a for-profit business would have to. Additionally, contributions made to your organization are generally tax deductible for the donor, and having this status opens the doors to some foundation or government grants, which could be an important part of your income strategy.

Establish support systems

Back when you were determining if your idea was viable or not, you listed out the work you would need to do, and what support systems you needed in place to do that work. Now is the time to actually establish those support systems.

If you don’t have a fiscal sponsor, you’ll need a bank account and an accounting system. Depending on your organization’s needs you may also need to invest in information technology, volunteer management systems, fundraising platforms, and other common systems. Without forecasting which of these are essential, you’ll find yourself scrambling once you try to deliver services while unprepared. If you do have a fiscal sponsor, they may be able to help with some of this.

Get to work!

Once all the above is done, it’s time to move forward. Go back and read your mission statement. Review your values and vision. Get re-inspired to start the real work, now that you know you’re ready to start.

Good luck! I hope this tool is helpful in your quest.

*Note: This post was updated on September 30, 2017. A new image of the flow chart was added, and the steps were rearranged to match it. New steps and corresponding paragraphs were added, and are marked with an asterisk.

Do you know someone who’s thinking about starting a nonprofit organization? Please share this article with them.

Get a notice when a new post arrives. This happens weekly on Mondays (or sometimes Tuesdays). Subscribe to these posts by clicking here and filling out the simple form. People who do can get my complimentary ebook about starting a nonprofit organization.

Also, please like and/or follow the Nonprofit Startup School on Facebook or follow the Twitter.

Nonprofit Lessons in the Wizard of Oz

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You know the story. Dorothy is whisked away from her grey and dusty home in Kansas to a colorful land where she goes on a quest accompanied by three magical companions. Along the way she has many challenges and adventures, but successfully completes the quest and returns to her home. Oddly, this tale provides some insight when starting a nonprofit organization.

I write this as a fan of the fourteen books written by L. Frank Baum, and the the 1939 movie starring Judy Garland. In a previous life I read all those books aloud to preschoolers, and I’ve watched and studied the movie since well before I began to work with nonprofit organizations (and that’s a long time). In fact, for several years my business card read “Richard Seymour, That Man Behind the Curtain”.

Other people have written about how in this tale, Dorothy embodies the spirit of a good manager, coordinating the strengths of a team to accomplish a common goal, while understanding and using each member’s motivations. Each of the four companions wants something for themselves, but together they also share the common goal of retrieving the broomstick of the Wicked Witch of the West. They even need to improvise and change plans along the way. That’s a great analogy for managing fledgeling nonprofits, so I wish I’d written something like that. But here I’d like to focus on the members of her team, what each one brought to the table, and why it’s important to balance these attributes when you set out to establish a nonprofit organization.

When you start a nonprofit organization you will need the passion found in the Tin Woodman, the analytical intelligence that the Scarecrow embodies, and the guts to move forward represented in the Lion. These are qualities you are looking for as you build your team of co-founders. Let’s look at them one by one.

The Tin Woodman

In my experience, people who start nonprofit organization have passion in spades. Frankly, the process of establishing a nonprofit organization is bureaucratic and complex enough that without passion, no one would bother. Later on, as the nonprofit organization settles into a routine, however, passions may diminish. Sometimes, it can even feel as if the soul of the organization has gone missing in action.

But early on, this is seldom the problem, and the passion is what fuels the startup and gives it a real meaning. However, with every strength comes a weakness, and the problems related to this passion are usually ones where it is so excessive that founders can be blind to a lack of viability in their idea. They move ahead without thinking things through, and the organization can fail early because of a lack of foresight. If the organization has actually started work before the failure, this collapse usually comes with a heavy dose of burnout.

The Scarecrow

Fortunately, young nonprofits also attract some pretty level-headed and intelligent people. The Scarecrow tries to figure out how things can actually get done. Will this work? What if we tried a different way? What’s the best way to accomplish our mission? These people help formulate plans, and are great at outlining strategies, complete with milestones and target goals.

But just as all heart and no head leads to irrationality and collapse, all head and no heart has its downside. The most rational plans often don’t energize people. People do the work, but without a burning passion, they begin to “phone it in” without a real sense of purpose. Organizations that fall into this pattern see a lot of turnover as people look for meaning in their lives elsewhere.

My own problem is that I find myself analyzing everything, and never being able to prove that any course of action is the right one. “Analysis paralysis” takes over. I can be a very good scarecrow, and usually need to find a tin woodman to work with me. Yet, even when you get both, you can find yourself not being certain about the right way to move the organization forward, overthinking everything. You need a way to stop processing everything ad nauseum and take action.

The Lion

The lions in your organization are the people who are just itching to get started. Without them the organization can stagnate, but if you let them take complete control, you might find yourselves jerking wildly between various goals, constantly starting new programs and projects. The latest thing to come up in discussion might take precedence when  a well-reasoned, on-mission strategy is called for.

When managing a nonprofit startup, it’s important to get a sense for when it’s time to let the lions out and get to work. Since even the best plans have flaws (often undetected until you start the work), moving forward and accomplishing something (anything) provides the scarecrows and tin woodmen with valuable information. Your startup team can’t really learn if they are on the right track until they start navigating down that track.

Another way to put that is that the lions give the tin woodmen in the organization a sense of forward motion, and they give the scarecrows real data to work with. Without the lions, the scarecrows and tin woodmen debate philosophy in their ivory towers while addressing the mission less effectively than they should be.

So you need tin woodmen, scarecrows, and lions to make your nonprofit work and truly become an organization that learns and adjusts as it goes.

An Aside on Imposters and Confidence

It’s worth noting that neither Dorothy nor her three companions starts with any confidence in their own strengths. This is kind of related to a phenomenon called “imposter syndrome” where people don’t believe in their own capabilities. In the story, it is not until Dorothy and her companions  meet the Wizard (who understands he’s an imposter) that they finally realize their hidden strengths. (In fact, it’s not until they actually meet him a second time.) Just as Dorothy learns she could have gone home whenever she wanted, the Tin Woodman discovers that his heart works just fine, the Scarecrow learns he’s really rather smart, and the Lion unearths a wellspring of courage he didn’t know he had. Each of these hidden strengths is put to use and without them their quest would have failed.

I guess this just points out that you can’t judge people entirely by their self-assessment. Many people are Wizards, overselling their abilities, but just as many are like the companions on the Yellow Brick Road, unsure of themselves and ripe for an opportunity to grow. Find some tin woodmen, find some scarecrows, find some lions, and create a team of co-founders that can pick a destination, plan a route, re-evaluate as needed, learn more about themselves, and accomplish something good together.

Do you know someone who’s thinking about starting a nonprofit organization? Please share this article with them.

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How to Hire Your First Staff Person

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When you start a nonprofit organization it might be that you need no staff because it runs solely on volunteer labor. In these types of organizations, the board of directors usually takes a very hands on approach, and the work is accomplished before or after your day jobs. These organizations can be very effective at a small scale, but if your nonprofit needs to scale up to get its work done, you’ll be hiring staff people sooner or later, and not every nonprofit founder has done that. So what I’m offering here is essentially a recipe for making your first hire.

Hiring your first staff person can be a challenge if your whole experience with hiring people has been you applying for jobs and hoping to be hired. Now the tables are turned. How do you do this? Where do you begin?

This isn’t necessarily the only right way, so help me out by sending me your suggestions for improvement. This recipe outlines a basic process, but there are clearly more steps that come before (like deciding what jobs you need to hire for) and after (like getting your first hire fully onboard with your organization’s work). I’m assuming you’ve already decided that you need to hire someone and that you know what the person’s basic job will be.

So let’s begin.

Make a good job description

A good job descriptions includes a job title that communicates a general idea of what the job is about, a list of the job duties, the “must have” qualifications, some “nice to have” qualifications, and instructions about how to apply. Think about when you want to stop taking resumes, when you want to interview people, when you’re thinking you’ll hire, and when you’d like someone to start. Include as much of this as possible, but allow yourself some flexibility.

It’s also important to include the wage or salary or at least a range that you’re able to pay. I really want to emphasize that listing a salary range can save a lot of time, especially if you’re unfortunately unable to pay a market rate. This is respectful of other people’s time as well.

To get an idea of what to include for a title, duties, and qualifications, look at several other job descriptions as if you were applying for a similar job. The job duties drive what qualifications you will need to list, and the list of qualifications will be used a lot later on in the process. Get a few others to take a look at this important document before moving on. Take some time on this step, since it’s the basis for everything else.

Pay special attention to the basic contact information and logistics. Do you want a resume? A cover letter? Do you want it in a specific format (for example Microsoft Word or PDF)? Check any links you include before posting.

Advertise that job

Plan on leaving the advertisement up for long enough that enough people will see it. You want  a good pool of candidates to choose from. Check with your local nonprofit association to see where the best places are to advertise. This could depend on the type of job you’re posting. In some cases, you might host the full job description, instructions, and such on your own website, and only post a paragraph elsewhere, pointing to the official post. This allows you to tweak the instructions in a single place if you need to. (But please, try to think everything through and post a complete and appropriate job ad on the first try.)

Define your method of ranking applicants

Take a good hard look at the qualifications you’re asking for. This is the basis of how you’ll decide who is the best candidate. The qualifications should be based on your ideal candidate’s knowledge, skills, and abilities. This could include things like college degrees or certifications, but think about if these are really necessary. Including a degree or certification that is unnecessary puts up barriers that might exclude someone who is actually qualified but hasn’t had the good fortune to be able to achieve those degrees.

Start a spreadsheet where you list each of the qualities you’ll be considering. These should all come from the job description you’ve already worked out.

Collect applicants

As you receive applications add them to your spreadsheet. Also keep a paper or electronic copy of their cover letters and resumes.

It’s time to start applying your criteria. I like giving each candidate a 1-5 rating for each of the criteria listed. If you’ve posted a deadline, you may want to wait until then to evaluate all the candidates at the same time. If you are expecting a lot of candidates, you might want to do them as they come in.

Once you’ve got a critical mass of candidates, you can look at the numbers and begin to sort the people into three categories: Nope, Maybe, and Interviewee. This should get added to the spreadsheet.

Nopes are people you’ve decided you would not hire based on a lack of qualifications. It’s good to communicate with these folks as soon as you’ve made this decision. Send them a nice “Thanks for applying” email where you tell them you’re moving ahead with other candidates.

Interviewees are people you want to interview, because they stand out based on your criteria. I like numerically ranking each applicant on each of the criteria, calculating a score for each, and flagging those with the highest marks as Interviewee.

Maybes are in between. You’d interview them if your first picks drop out, but only if that were to happen. Aim for the fewest number of maybes as possible, but avoid interviewing more people than you can manage.

Schedule the Interviews.

Don’t schedule more interviews than you can handle. This affects where you draw the line between Interviewees and Maybes.

Try to reach everyone you want to interview. When you contact them some candidates may no longer be interested. Perhaps they found another job in the meantime. Change their category to Nope and note they withdrew. Thank them for their time and move on.

If you run short of people, take a second look at your Maybes and promote some of them to Interviewee. One of my best hires started out as a Maybe, showing that my initial ranking is imperfect.

Conduct the Interviews

Try to be consistent in which questions you ask (generally). Feel free to follow up based on their answers. There are certain questions you should avoid in order to avoid unintentionally breaking the law by discriminating on age, race, sex, etc. After the interview, do a second ranking. Note strengths and weaknesses of each candidate.

It’s good to have someone sit in on the interview with you. This gives you a more rounded perspective on each candidate. Ideally, your hiring team is two or maybe three people that attend all the interviews. Too many people can be intimidating to the candidates, but you may want a few more people involved for a higher level job.

Re-classify, Select, and Check References

After the interviews, select your first choice, second choice, and so on. Only pick people who will actually be able to do the job. Anyone else should be converted to a Nope at this point. Record your final rankings in the spreadsheet. After re-classifying someone as a Nope, send a polite rejection letter (as above). The sooner you tell someone they are out of the running the sooner they can get on with their life. You should never have a Maybe that you have interviewed. You should only have Nopes and First Choice, Second Choice, etc.

Notify

The order in which you notify people can help you avoid some serious missteps.

  1. Call your first choice with a job offer. If they need time to think over it, agree to a specific timeline, and wait that out.
  2. Only after receiving confirmation from your first choice, notify everyone else. This leaves second place people in the running in case something doesn’t work out with your first choice.
  3. If they don’t accept the offer, move on to the second choice, and work your way down the list, offering each person the job (as above) until you get an acceptance or run out of options.
  4. If you’ve exhausted all your choices, look at who is left on your Maybe list. Take the best of these and schedule interviews. Start the process over from there.
  5. If you find yourself with no hires, and all you have left is Nopes, it’s time to re-think the job, perhaps tweak it, perhaps advertise in different venues, perhaps work with a professional HR consultant or recruiter.
  6. When you’re all done, double check to ensure that everyone who applied gets a brief, professional, and polite email making it clear that they are no longer in the running for that job. Any remaining Maybes will not have been contacted until this point, but do communicate with them.

This process is one that has worked for me in the past. Ask another seasoned nonprofit hiring veteran, and you’ll get a different process. If you’ve been through this and have suggestions for improvement, please leave a comment on the blog or send me an email. I’ll try to incorporate suggestions into future versions of this post.

This process seems like a long and complicated one, but it’s worth it to do the job well. It’s way more efficient and effective than hiring the wrong person for the job and dealing with that mistake for a long time.

Do you know someone who’s thinking about starting a nonprofit organization? Please share this article with them.

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What the Heck is a Theory of Change?

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Most organizations I have worked with never bothered to develop a formal theory of change for their work, but every group has had one — even if it’s unstated and informal. When you start a nonprofit organization, it’s worth your time to spell this out explicitly. Doing so is not that difficult, and it helps out in so many ways.

What the heck is a theory of change anyway?

A basic theory of change is just a list of simple statements showing a cause and effect relationship between the work you do and the outcomes you want. If we do X then Y will follow causing Z to happen. This is usually stated briefly and accompanied by a graphic that illustrates the point and a brief list of the assumptions you have made along the way.

There is a lot of information on this elsewhere on the internet, including several videos on YouTube (like this one), and these are worth reviewing, but it might be easiest to start with a simple example.

Let’s say you’re working on nutrition for low income students in a school. Start by asking why you are doing this. You might say “because this helps students concentrate on their school work”. Why is this important? Because it will improve their graduation rate leading to better employment opportunities. Why is that important? Drill down and explore through contemplation and discussion. After some thought, you can produce a theory statement something like this:

“If we provide nutritious meals for low income elementary school students, this allows them to concentrate on their school work, leading first to better grades, then a higher graduation rate, followed by better employment opportunities, and eventually this will contribute to their rising out of poverty.”

It’s helpful to chart this out like:

  • Provide nutritious meals to students ->
  • Students improve focus on schoolwork ->
  • Higher grades ->
  • Higher graduation rate ->
  • Better employment opportunities for graduates ->
  • Rise out of poverty

That was just off the top of my head so pardon any naivete. In a real situation, several people would participate in developing this document. As a founder, you may be developing this on your own early on, but as you bring new people into your group you will want to get their input,  use that input to enrich and improve upon your own ideas, and develop a better understanding of the way in which you intend to work together to improve the world. Steps you haven’t thought of could get added, and the model will improve. (We’ll use my simple sketch for illustrative purposes, however.)

Each step on this chart implies a couple of things. First, there’s usually a way to assess the data at each point. The students’ grades and graduation rates jump out as obvious data points. Second, there are assumptions you are making, like the health of the student is improved by nutritious meals and that improved health will affect the students’ study habits. These can all be summarized in a table.

Step Measuring Tool Assumptions
We provide nutritious meals to students Nutritionist evaluates meals Improved health through nutrition will lead to better schoolwork habits
Students improve focus on schoolwork Teacher observations of students Schoolwork habits are a primary cause of low grades
Students’ grades improve Students’ report cards Higher grades will lead to an improved graduation rate
Students’ graduation rate increases School’s graduation rate report to school board Graduates will have better job opportunities
Graduates’ job opportunities improve Unemployment rate and entry wages Better jobs will reduce poverty
Graduates earn more real income Income adjusted for inflation

What do you do with this theory of change document?

There are several upsides to having this formally spelled out.

  • In the beginning, you can check your mission statement (or statement of purpose) against your theory of change. The two should not contradicts each other.
  • You can use the measuring tools to evaluate how well your work is going. This can reveal false assumptions which usually means that one of your assumptions is wrong. This would point to ways for improving your work (and adjusting the theory of change).
  • This document can be used to spell out to others how your work will benefit society. This can be invaluable in attracting co-founder, board members, volunteers, and contributors.

Some of your assumptions may be untestable, but you still list them out. If this is the case, you are looking for supporters that share these assumptions. (Think about religious organizations that are trying to do good, or organizations that focus on more abstract outcomes like “building character”.)

And always remember Seymour’s first rule of theories:

“The difference between theory and practice is that in theory there is no difference, but in practice there is.”

That is, this is just a document that gives your work some focus and direction. Your actual work will enlighten you as you perform it. This real world experience should help you improve this useful tool as you go.

Do you know someone who’s thinking about starting a nonprofit organization? Please share this article with them.

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Who to Pick as Your Co-Founders

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Nobody starts a nonprofit solo. By definition an organization is a group of people, and the reason you want to work in a group is that you’re trying to do something that a single person can’t pull off on their own. So you need an initial team of people to start your nonprofit organization, but who do you pick to be your co-founders?

To emphasize the importance of this question, note that as your organization gels, you’ll find some of these people move into roles on your initial board of directors, others may be hired as paid staff, and some will remain on as key volunteers, so selecting the right people can have a long lasting positive effect. So again, what kinds of people are you looking for as you’re starting out?

First thing: Are they on board with your mission, values, and vision? In the earliest stage, the first people you bring on will help you shape these critical pieces, but at some point you will settle on the direction you want your organization to take. Then you will need to find people who support the mission, share the vision, and are committed to the values. This will be the basis for working well together as your organization grows.

Second thing: Do they bring in a needed skill? Starting a nonprofit organization is a multidisciplinary effort. Ideally, you want to recruit people with a variety of skills. You might want to consider recruiting

  • someone who understands nonprofit law
  • someone with a background in accounting (and nonprofit accounting is its own beast)
  • someone who knows how to raise funds
  • someone who has run a business
  • someone with an expertise in the organization’s niche (homelessness, puppies, beer education, whatever your nonprofit is about)
  • someone with a human resources background or a volunteer recruitment and management background

That’s just a start of course, but the point is there are a variety of skills you’re looking for in addition to the mission-match.

Third thing: This is the most often overlooked part, but don’t recruit clones of yourself. Each of us has our own personality quirks. Some of us are more extroverted while others are more introverted. Some of us are logical like Mr Spock while others are more intuitive like Dr McCoy. Some of us take quick, decisive action while others carefully deliberate before acting. Each of these traits is a strength in the right context, and each trait has its own unique downside as well.

When starting a nonprofit organization, don’t recruit clones of yourself. Click To Tweet

It’s important to recognize this, because it’s natural for many folks to see their strengths and be blind to their weaknesses. Let’s say you take quick, decisive action. You’re likely to see that as a strength, especially if it’s worked in past situations. You might then feel like you want to work with others that take the same approach. But these same quick decisions can make other group members feel like they’ve been sidestepped and cause dissention or disengagement in the group. So, if you’re a quick action person, you should probably find a deliberator to compliment your strength (and mitigate your weakness).

See what I did there? I asserted that your strength is also your weakness, but don’t get scared away by those weaknesses. They’re just the flipside of your strengths.

Sometimes when people focus on their weaknesses they start to have a very negative view of themselves, and if your group gets into that headspace, it might make the work way less fun to do. So it’s often better to think about your personal set of strengths, and looking for people who have complementary strengths. By taking this approach you are indirectly addressing the weaknesses without getting bogged down by them. This line of thought leads to one of my favorite tools, the StrengthsFinder *.

I like it because it lists 34 different strengths a person might have and helps you identify your top five. For instance, the test listed my five strength areas as strategic, ideation, analytical, achiever, and learner. This seems to be true, because when I was managing people, employees would often come to me with day-to-day problems, and I would immediately try to find the underlying issue, how it affects our strategy, how we can address it institutionally, etc. My mind is usually on the big picture, and it can mean I don’t actually solve the problem they brought up. That means I’d be better off if I worked alongside someone who connects more emotionally with people and focuses a bit more on the here and now. We’d keep each other in check.

So, find someone who’s in support of your mission, vision, and values, and look for a mix of skill that will benefit your nonprofit, but don’t stop there. Look for a healthy mix of personality traits and find a way to work with them.

If the StrengthsFinder isn’t your cup of tea, consider an online Myers Briggs test or something like that. In the end the same principle holds true. You’re looking for a complimentary set of people, not a herd of identical clones.

Footnote:

There’s a reasonable cost involved with taking this test, but I think it’s worth it. (Nobody paid me to say that.) The book can be purchased new for about $30 and it allows you to take the online test once. You could share the book, but others would need to purchase access to the test for about $20. You might save a few dollars by finding a used version of the book, but in that case make sure the access code in the back is sealed, so you can use it. I did this and got the test for about half price.

Do you know someone who’s thinking about starting a nonprofit organization? Please share this article with them.

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Nonprofit Startups: Two Sides to Every Coin

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When you start a nonprofit organization things can seem quite simple at times. You have an idea and gather a group of like-minded people to work on that idea. Everyone pitches in and helps in some way, whether it’s working on small day-to-day tasks or making strategic decisions about the direction of your organization. Usually it’s the same people dealing with the trivial and the big picture, and while you may be lucky enough to have some experienced folks on your team, it’s just as likely that you’re making things up as you go. Don’t worry. That’s perfectly normal.

And as a founder, you’ll probably find yourself wearing multiple hats. Specifically, you’ll need to be the visionary strategic thinker who is not afraid to steer the organization in a radically new direction when needed, and you’ll be the person who makes sure the myriad daily tasks are getting done. Your feet are firmly rooted in the ground while your head is way up in the clouds. And that also normal while your organization is forming. You need to be both.

As your organization grows, however, you’ll attract experienced people and learn from your own successes and mistakes. You’ll find it’s useful to start specializing a bit, having some people focus on certain aspects while de-emphasizing others. The most fundamental divide will be between operations and governance. In established nonprofits, operations (the day-to-day stuff) is executed by paid staff and volunteers. The governance work (including strategic planning and high level decision making) is handled by a board of directors, usually made up of volunteers, who work closely with the executive director (ED). The ED in turn oversees the paid staff and volunteers.

Assuming your organization gets to that point (not all do), this gives you as the founder a particular choice. Will you move forward as the leader of the governance arm of your organization or as the leader of the operations arm? Practically speaking, is your next position going to be the chair of your board of directors or the executive director? As your organization grows you really can’t (or shouldn’t) do both, so you have to choose which to take responsibility for and which to let go.

This letting go bit is important to emphasize. A properly run nonprofit organization needs the checks and balances that this division provides. The governance role of the board is to look at the big strategic picture without getting mired in the details of the day-to-day work. This allows them to make decisions that could change the direction of the organization. People embroiled in the front line work often can’t get the perspective needed to change the organization’s direction when needed, and so they need to be challenged by the folks with a big picture perspective. On the other hand, people surrounded by the actual work of the organization often have the best understanding of what works on the ground. So there’s a need for solid communication between the two sides of this nonprofit coin. The ED helps provide this, and in many organizations there are other ways both sides can understand each other’s’ perspectives before acting.

But still, you will need to choose, and typically this choice needs to be made when you hire your first staff and your “hands on” working board begins to change to a governing board.

Nonprofit founders need to choose between joining the board or joining the staff. Click To Tweet

On the one hand, you can choose to be the staff member, often with the title of executive director. This is usually accompanied with a paycheck, which is nice and in fact might be the deciding factor in your decision. But in this case, you also step down from your role in governance. You will need to work closely with the board, and in many ways, you’ll discover that the board, as a group of volunteers, needs to be managed like your organization’s other volunteers. You’ll need to understand the board members’ motivations, their strengths, their weaknesses, and so on. You’ll need to help them keep track of their commitments and provide them with whatever resources they need to complete their work. But in spite of all this management work in relation to the board, you need to remember what you have given up. You are not their boss; you’re their support system. It’s their job to supervise you, and that means they should be giving you direction and feedback, and the bottom line is they have the right to fire you. That is, if you choose this role, one possibility is that you can create an organization, attract a core team to run it, pour all your blood, sweat, and tears into it, only to lose it entirely based on someone else’s judgment.

If you choose the other path, you’ll take a position on the board of directors, perhaps as its chair. In this scenario you’ll work with fellow board members to hire the ED, and manage that person’s performance. Beyond that, you don’t get a say on how things get done. You don’t hire the other staff. You don’t decide implementation details for your programs. Instead, you look at things from a 10,000 foot view. You approve the creation of new programs and the shelving of old ones. You review, tweak, and approve the budget, but the ED figures out how to spend each line item. You set the ED’s salary and decide whether they deserve a raise and if the organization can afford it. You hold ultimate fiduciary responsibility to guide the organization on behalf of the public. It’s also likely that your time serving on the board will be limited by your bylaws provisions about term limits.

In a well-run organization these two sides work closely together, but they must remain separate.

As a founder of a nonprofit organization, have you thought about which role you want to take on, and what you’re willing to give up? I’d love to hear what your plans are. If you’ve already navigated this transition, I’d also appreciate hearing how it went. Please comment on the blog post, or shoot me an email.

Do you know someone who’s thinking about starting a nonprofit organization? Please share this article with them.

Get a notice when a new post arrives. This happens weekly on Mondays (or sometimes Tuesdays). Subscribe to these posts by clicking here and filling out the simple form. People who do can get my complimentary ebook about starting a nonprofit organization.

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