The social sector has been in the news lately for the increasingly dynamic environment in which nonprofits function, amidst the growing regulations and compliances. Under the circumstances, social purpose organisations (SPOs) require more than their regular ounce of passion, grit and resourcefulness to make meaning of the work they do and showcase impact on the ground. The work of an SPO focuses typically on core development issues where they support the larger government machinery or address those emerging societal needs that fall through the cracks but are critical for the people of that particular geography. SPOs often have to maintain a delicate balance between funder expectations on quick SRoI (Social Returns on Investment), while staying true to the ‘purpose’ and ‘outcomes’ for which they exist, in an environment of ‘deficit’ perpetuated by the challenges and constraints of the ecosystem. Here the critical role that an effective leadership can play for the nonprofit cannot be stressed enough.
So, what does it take for an SPO (social purpose organisation) to truly leverage its presence and existence for the greater good? What are the critical issues that the board leadership of a nonprofit has to grapple with? The question might sound obvious, but it is worth exploring. The answer may be viewed through two lenses: regulatory or mandatory and outcomes-based.
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Strategic Vision and Planning: Nonprofits are bound by statutory obligations they are mandated to comply with. In addition to having a clearly defined vision, mission and medium to long-term goals, it is equally important for the organisation to outline a complementary strategy to achieve the same. This is not a one-time activity and research indicates that organisations that keep revisiting their strategy at regular intervals and are responsive to their ecosystem are successful in achieving desired outcomes and stand a much better chance of scale and growth. Equally important is to keep a sharp focus on the on-field activities that define the work of the nonprofit, in line with the organisation’s vision and mission.
At times, a nonprofit may be found struggling to stay true to its charter, which defines its goals and purpose, mainly due to the larger existential challenges related to survival and sustainability. As a result, they may encounter diminishing brand recall and value and may struggle to effectively communicate their purpose of existence. The disconnect may creep in over time, especially when leaders get pulled into sustaining the organisation and increasingly fail to stay connected with the ground reality. Often, the leader might have to spend significant time ‘managing’ the board as opposed to ‘leveraging’ its strength. When clarity of purpose takes a backseat, it may also lead to muddling of roles and responsibilities, resulting in the team losing focus and accountability due to an unclear roadmap.
Statutory/ fiduciary responsibilities: Fiduciary responsibilities are the foremost priority for any social sector organisation. As important as the work, it is equally important for the leadership to give due importance to compliance, stay within the confines of fiduciary rules and sustain the ethical and moral health of the organisation. Not having a clear understanding of the laws governing nonprofits may also lead to a lack of understanding of the canons that govern SPOs. This, coupled with a misguided sense of moral high ground regarding the transformative work they do, sometimes clouds the reasoning of the leadership. A small transgression for the larger good can lead to undermining the impactful work it does.
Effective Governance Structures: As part of its effective organisational governance, it is the board’s direct responsibility to establish and enforce a code of conduct for the organisation and ensure that it is strictly adhered to. This does not just act as a deterrent but helps the organisation to operate smoothly and percolate best practices of effective governance across the ranks. Organisations must also be vigilant and avoid any conflict-of-interest situations within that might undermine the basic tenet and purpose of the nonprofit. Lack of oversight in matters of organisation policies can lead to unpleasant precedents detrimental to the health and credibility of the organisation. Board leadership must ensure that the head of the organisation is fully supported in implementing measures towards proper oversight and adherence to rules.
Risk management policies: Certain acts of an SPO can either jeopardise its tax-exempt status or otherwise harm the organisation’s viability. Everyone within the organisation, irrespective of their role or position, should be made aware of potential violations. This should be fortified with sound risk management policies to report and investigate alleged wrongdoing. Failure to comply can potentially damage the credibility of the organisation, including loss of its nonprofit status.
Managing Internal Conflict: Even the best of teams may at times have differences of opinion on ways of handling any implementation-related challenge or any other aspect of organisational work. Having effective conflict resolution procedures in place helps to avert situations from spiralling out of control and destabilising the rhythm, albeit temporarily.
Performance Assessment: Optimising the resources at its disposal, making judicious use of scarce resources and planning for contingencies are ways in which nonprofits can secure themselves against a turn of adversity. This sounds very reasonable, but in reality, it is extremely challenging to cap expenses. This stretches the financial bandwidth of the organisation. Often founders have to play the delicate balance of purpose over resources without being really cognizant of the tipping point. There need to be mechanisms, benchmarks and metrics of performance to assess the health and performance of the organisation.
Communication and Transparency: This works at two levels – internal and external. Clarity in communication and transparency are important building blocks to embrace a culture of trust within any organisation. It is also understandable that many organisations may not be comfortable sharing too much information about their work for fear of it being duplicated. This is a concern for every nonprofit. However, in the current times, there is a general trust deficit with regard to nonprofit entities. Under the circumstances, reluctance or failure to divulge details of its functioning, may be misconstrued and lead to further loss of trust in the organisation. This is a game of perception which needs to be played carefully. The organisation is well within its right to choose what and how much to divulge. Drawing the fine line between transparency and confidentiality is critical to the way the nonprofit will be perceived.
To conclude, the organic growth of any organisation in the social sector is natural and relatable. But not losing sight of the larger picture comes with practice and patience. One way for the organisation to ensure this is by consciously infusing diversity in the board leadership and bringing in members with a diverse set of perspectives, skills and expertise. The board should not hesitate to ask the founder/leader tough questions. Similarly, the latter should not shirk away from the uncomfortable questions surrounding growth, sustainability, scale, outcomes and impact. Effective leadership strategies can help make this shift and convert every issue into an opportunity leading to growth and sustainability of the organisation. Nonprofits may sometimes feel they are in a fishbowl and have to operate accordingly. However, a well-thought-out structure and a forward-moving plan ensure that the board leadership is able to avert or contain many of the challenges it faces.
The government, on its part, has been making attempts to streamline the sector into a functioning and interconnected ecosystem so that it can shed its age-old image of being ‘unorganised’. One example of this would be platforms like the Social Stock Exchange, which presents a wonderful opportunity for nonprofits to raise funds and leverage for advocacy in the spirit of transparency and greater collaboration. Attempts like these are aligned with the principles of effective governance and sound leadership strategies.
Reference articles:
- https://www.truist.com/resources/wealth/foundations-endowments/article/five-key-governance-issues-your-nonprofit-needs-to-address
- https://sederlaw.com/common-governance-issues-that-non-profits-face/#:~:text=Failure%20to%20Establish%20and%20Enforce,what%20is%20not%20acceptable%20conduct.
- https://www.nseindia.com/sse
