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Nonprofit performance evaluation: Leadership (part 1 of 6)

Author: Paul Penley
Date: 04.04.2012

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Where do you start when evaluating the health of a nonprofit organization?  Incessant headlines about dishonest educational programs, irresponsible board governance, misleading cancer charities, and corrupt first responder foundations remind us a little assessment can go a long way.  But most of us don’t have time for detailed due diligence.  So where do we begin a cursory evaluation of nonprofit infrastructure and impact?

I’d recommend a standardized 6-step process for evaluating nonprofit performance. I’ll explain the first step this month and the remaining 5 steps in the months to come. The 6 steps involve 30 standards for nonprofit performance arranged in the following categories: (1) Leadership, (2) Financial Management, (3) Sustainability, (4) Leverage, (5) Strategy, and (6) Impact. 

Board Governance

Good leadership as we define it is all about having a contributing board, a committed staff, and a savvy CEO.  The board can be the donor’s best friend or worst nightmare.  You don’t know until the organization experiences either a financial crisis or a leadership crisis.  To make sure an organization’s board has some degree of health to its operation and composition, ask these 5 questions:

  • Are there more than 5 Board Members?
  • Are there 2 or more Board Meetings per year?
  • Are there Board Committees to focus on organizational issues?
  • How many board members are related to the organization’s CEO?
  • Is the nonprofit CEO also the Board Chairperson?

The answers to these 5 questions about board governance should be (1) yes, (2) yes, (3) yes, (4) none, and (5) no.  Too many organizations don’t assign specific tasks for board members to oversee (committee responsibilities), let the CEO play the board chairman role (thereby negating any true accountability), and mix family members into the board makeup.  The wrong answers to these cursory questions about board composition should quickly raise red flags.  

The board should be the donor’s advocate.  If an organization can’t meet the basic standards behind these 5 questions, I wouldn’t have confidence in the internal leadership accountability and active board governance necessary for a fiscally responsible organization.  If you want to go one step deeper, ask an organization for 3 years of board minutes.  That will give you an inside at look at whether or not the board plays a balanced and strategic fiduciary role or plays the extreme roles of a laissez-faire board on the one hand or micro-managing board on the other.

Leadership Team

Without an on-site observation, survey or series of interviews, it is difficult to gauge the leadership qualities that a successful CEO and senior management team need.  A cursory evaluation that proposes to evaluate the leadership team must settle for analyzing a few health indicators.  Three health indicators that can be analyzed from a distance are: (1) strategy, (2) realistic self-assessment and (3) staff turnover rate.  The (1) strategy that the CEO and senior staff members develop and share with the board will be treated  an entirely separate evaluation category.  I will address it in a few months in a post about Organizational Health Indicator #5: Strategy.  Here I will explain the relationship between a sound leadership team and an organization’s (2) self-assessment and (3) staff turnover rate.

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Keywords: nonprofit evaluation, charity evaluation, giving wisely

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PhContributeBy Paul_Penley  
Location: Colorado Springs, Colorado
Country: United States

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