Financial Leadership

One of the fundamental roles of a board is to mobilize an organization’s resources in a way that effectively and efficiently accomplishes the organization’s goals and fulfills their mission.   Yet, when the agenda approaches the topic of budgeting, leaders often find themselves uncomfortable or unconditioned to speak to the organization’s financial position.  With a gloss look on your face, you skim the numbers maybe looking for any negative variances that stand out but overall, you assume that the organization’s financial experts have accurately accounted for the resources. While having financial experts on your board or staff is critical, it does not dismiss board members from exhibiting financial leadership to fulfill their role.

Financial leadership does not require a board member to have a strong financial background or seek extensive coursework in the subject.  Rather financial leadership is understanding the simple fundamentals of budgeting that will allow the leader to assess the organization’s financial position and plan programs and services in a way that optimizes the use of its resources and fulfills its mission.  Further, with a foundational knowledge of budgeting, a financial leader will be able to ask the appropriate questions and provide input when working with the organization’s financial experts.

Belle and Schaffer in their Financial Leadership Guide for Nonprofit Executives identify five principles of developing financial leadership in an organization:

1. Move beyond mission-versus-money thinking
2. Cultivate financial leadership on both the staff and board.
3. View the nonprofit business as an interdependent set of programs and activities.
4. Recognize the relationship between strong infrastructure and strong programs.
5. Set a tone of financial accountability and transparency.

Working with organizations, we often see the need for many of these foundational principles in strengthening their ability to fulfill their mission, a few in particular.

In one organization, we saw an abundance of resources and plenty of opportunity to grow their programs and services to elevate member value in the face of a declining membership base.  In hesitation to mobilize resources, the board was not recognizing the relationship between investing in their infrastructure and strengthening their programs and services in order to build a solid membership base.

In other organizations without significant resources, we see a polarization that Bell and Shaffer depict as the mission-versus-money thinking.  Some board members and staff are super focused on accomplishing the organization’s mission through its programs and services, while others are fixated on ensuring the organization’s wealthy financial position. It’s a balance between the two that a financial leader must exhibit to avoid what Belle and Schafer further depict as a culture of scarcity or chasing the money.

Financial leadership requires both a great understanding of your organization’s programs and services as well as its infrastructure and financial position.  Achieving your mission in an efficient and effective way will only occur with a balance of the two.  Cultivating a culture of financial leadership in your organization, one grounded in accountability and transparency as Belle and Schafer emphasize, will not only strengthen your organization’s financial well-being but undoubtedly move it closer towards its vision.