This blog post discusses 5 challenges that new nonprofit executive directors often face.
The nonprofit profession does a good job of providing training on various topics such as fundraising, strategic planning, and grant writing. But there is very little long-term individualized coaching and mentoring to help first-time EDs address challenges.
I started my business, Mission Possible Strategies because I wanted to be the mentor and coach that I wish I had had as a first-time ED. I want to help you face these 5 challenges as a new nonprofit executive director.
Challenge 1: Financial Concerns
In your first year, you might need to bring some financial concerns to the board, even if an accounting firm has audited the agency every year.
Most people don’t understand what the annual audit really means. Many board members think that if their agency gets a “clean” annual audit, their financial oversight duties are complete.
When people refer to a clean audit, it means the auditor has issued an unqualified opinion; in other words, in the auditor’s opinion, the financial statements are free of “material” misinformation.
But what constitutes materiality is up for debate. As a former auditor, I know that people outside the accounting profession might be surprised to learn that auditing requires a great deal of judgment, not just calculations.
I once took over an agency that had been getting “clean” audits for years, but there were unused grant funds sitting in the bank (which had to be returned).
As the ED, it’s important for you to learn to properly read the financial statements. (Click here for a short accounting course for nonprofit leaders.) Make sure a CPA is on your board. If possible, form an internal audit committee.
And don’t make the mistake of holding back uncomfortable information from the board to protect your staff or other board members. This might make you vulnerable to criticism down the road.
Challenge 2: Letting Staff Go
You might need to let staff go when you take over as the new ED.
If this is your first management role, you may have no experience in firing people. This can be a traumatic experience. If you have gotten a certificate in nonprofit management, the course probably didn’t discuss HR issues in any great detail.
Before firing an employee, it is important to do some advance planning. Consider the following issues:
- how to deal with the workload performed by the fired employee
- the effective date of the termination
- what to tell coworkers about the action
- how to ensure that the employee will not take sensitive files and other materials
- what to tell the employee about health and life insurance continuity benefits
- separating personal property and organizational property
- how and when to terminate e-mail addresses and passwords
- severance pay and other benefits to offer
- whether any letter of recommendation will be provided
Although board members shouldn’t be involved in the ED’s decision to fire an employee, it’s best to check the bylaws and the policies and procedures manual.
And check on how things have been done in the past. Board members may have been involved in hiring and firing staff and might be caught off guard if they are not consulted first.
Challenge 3: Outdated Infrastructure
You might find the infrastructure is outdated when you take over as the new Executive Director.
I once took over an agency that was using Excel as the donor database. This was only ten years ago. Every time someone made a donation, the staff would have to enter that person’s name, again and again. As you can imagine, it wasn’t easy to find the year-to-date contribution for each donor at the end of the year.
If your database or financial system is outdated, don’t try to fix it without hiring additional outside help. Otherwise, you will get behind in your other duties, such as public relations and community networking. Board members who complete your evaluation at the end of the year may not understand the extra hours you put in to fix the database, which kept you from doing presentations to the local Rotary Club.
Challenge 4: Non-participatory board members:
When you take over a nonprofit, you might find board members have multiple reasons for serving on the board
Some are required to sit on the board by their employer. Sometimes there are reserved seats on boards; for example, there might be a reserved seat for someone from the local county board of supervisors.
These board members may not feel obligated to make an annual donation or serve on a committee. This can create uncomfortable relationships with other board members.
Make sure each board member has signed a document that outlines the expectations for ALL board members at their orientation session.
Challenge 5: Your annual evaluation:
You might find that the board hasn’t been conducting an annual evaluation for the ED.
When I interviewed executive directors before I started this podcast, more than 60% of them had not received a performance evaluation in the last two years.
As an ED, you probably won’t get constant feedback from board members. You’re going to have to showcase your own successes. Board members really can’t do this because they aren’t, or shouldn’t be, involved in the daily operations.
Keep a folder of every accomplishment DURING the year, no matter how small. Don’t wait until year-end when it’s time for your performance review to gather this information.
YOU will have to make sure that your performance review happens each year. Look out for yourself in this regard.
Make sure that you and the board set annual goals based on the strategic plan and your job description at the beginning of the year. Then tie those goals back to your performance evaluation.
It’s also good to have an employment contract that your personal attorney has reviewed, even if you live in an at-will employment state, for your own protection.
Summary: There will be many challenges in your first year as a nonprofit executive director but you can handle them! Click here for my guide 4 Tips for Running Your Nonprofit Without Getting Run Down.
