Financial Empowerment: More Money for More Mission: An Essential Financial Guide for Not-for-Profit Organizations

Citation

Cassell, K.A. and Mercado, M.I. (1999), "Financial Empowerment: More Money for More Mission: An Essential Financial Guide for Not-for-Profit Organizations", The Bottom Line, Vol. 12 No. 1. https://doi.org/10.1108/bl.1999.17012aad.002

Financial Empowerment: More Money for More Mission: An Essential Financial Guide for Not-for-Profit Organizations

Financial Empowerment: More Money for More Mission: An Essential Financial Guide for Not-for-Profit Organizations

Peter C. BrinckerhoffJohn Wiley & Sons, Inc.New York1996

Keywords Empowerment, Non-profit organisations, Performance improvement, Working capital

This book also deals with the world of nonprofit organizations. Brinckerhoff brings to this work his considerable expertise as an internationally known trainer, author and consultant to not-for-profit organizations. His previous book, written in 1994, Mission Based Management, and the aforementioned book, both published by John Wiley & Sons, are used in over 50 undergraduate and graduate programs in nonprofit management. The purpose of this work is to assist nonprofits to "do more and better missions through becoming and remaining financially empowered." To be financially empowered means to have the money to pursue the mission with flexibility and high quality service. According to the author, most nonprofits in the USA are woefully undercapitalized, employees underpaid and activities are over-scrutinized. Becoming financially empowered requires a different mindset in which management styles, cash management, investment policies and contracts with major funders will have to change. In addition, both the staff and the board must seriously consider the long road to financial empowerment.

The book is written for senior staff and boards of directors. Its purpose is to assist them in strengthening their nonprofit organizations from the largest university and/or healthcare complex to the smallest human service agency. The author is of the opinion that financial empowerment is important for the following reasons. First, by becoming and remaining financially empowered an organization can fulfill its mission betterand be more responsive to the ever-changing needs of your constituents. By being financially empowered a nonprofit can develop its own solutions to new problems this week, this month and not have to wait until funders send out requests for proposals. That is to say that nonprofits will be able to attack some of these issues with their own money. Second, by being financially empowered the nonprofit is much more competitive in attracting high quality staff to provide high quality services. In addition, the organization can also attract funders who will want to purchase its services while knowing that the organization is not going to fold up tomorrow. Thus, having working capital is a key competitive advantage. Third, when the organization is financially empowered, there is a stability in which senior staff are freer to manage than to merely administer. In other words in nonprofit organizations that are underfunded, senior management spend so much of their time putting out financial fires that they do not have the time or energy for strategic planning, good needs assessment and or to develop good marketing strategies. Nor is there capital to invest in good staff training necessary for high quality service. Basically, financial empowerment should translate into a better-run organization with more focus on its mission and less focus on its survival.

Brinckerhoff's book is based on the following core philosophies. First, those nonprofit organizations, whether they are in performing or fine arts, education, literacy, religion or human services, are mission-based businesses. The mission, not profit, is the bottom line. Consequently, nonprofits need to act like a business, pay attention to the bottom line, pay increasing attention to customer satisfaction and good service, hire and retain the best staff, and do all the things that businesses do so well. Just because nonprofit organizations are tax-exempt does not mean that sloppy management practices should prevail. Second, no one gives the organization a dime because it earns all the money, which it receives. When the organization gets a grant or a donation, it is expected to perform a service and deliver good value for the money received. Nonprofits are not charities. The organization has an economic value above and beyond the social value it provides. The organization has a payroll, buys supplies and equipment, and uses services. It adds to the economic activity of its immediate community and of the community as a whole. The author points out that both the staff and the board have to understand that just because the organization receives grants, contracts and donations does not make staff and board beggars.

The author's third core philosophical guideline is that being a not-for-profit organization does not mean that the organization is prohibited from making a profit. In the USA, under section 501C of the Internal Revenue Code, tax exempt corporations are established to pursue educational, social or religious purposes "not-for-profit." However, nowhere in any Federal or state regulation and in any Federal or state statute does it say that "not-for profit" organizations cannot make a profit or that it is illegal. The only stipulation is that the profits cannot go directly to the benefit of the staff or board. It is important to note that the tax exemption is from paying taxes on mission related activities that turn a profit. Brinkerhoff goes on to say that funders, whether they be federal, state or foundations, want you to believe that you cannot make money so that they can pay you less. He applies this philosophy all through the book as he discusses starting new businesses, dealing with bankers, financial reporting, marketing, public relations and dozens of other applications of the central philosophical theme.

Each chapter of this book starts with an Overview intended to give you a brief summary of the contents of the chapter. Each chapter not only gives many illustrations and examples but also suggests ideas for immediate application to nonprofit organizations. He concludes each chapter with a brief "recap" of the salient concepts and points covered in the chapter. This book has two kinds of chapters, i.e. context setting chapters and working chapters. Context setting chapters are the first and the second ones in which he lays out his philosophical foundations and presents the eight characteristics of empowerment. His working chapters include the following examples: The Outcomes of Empowerment (Chapter 3), How Much Money Will You Need? (Chapter 4), New Sources of Funding: Business Development (Chapter 6), and Financing Your Empowerment (Chapter 8). Chapter 12, Financial Empowerment for the CEO, is directly targeted for CEOs as they analyze the issues surrounding empowerment. Chapter 13, Financial Empowerment for the Board of Directors, discusses the role of the board, the actions that only they can take and the information that they should see.

We highly recommend this book for those responsible for the ongoing existence of nonprofit organizations. This is not to say that what Peter Brinckerhoff has stated is easy or quick to accomplish. However, be assured that the attainment and maintenance of financial empowerment will open up a new set of mission capabilities as well as responsibilities that go along with that empowerment. This book gives you the tools and the how and the why. If you want your organization not only to continue but also to have the funding to expand its mission, this book must become required reading.