Professional Documents
Culture Documents
MANAGEMENT OF
NON-PROFIT
ORGANIZATIONS
2 Credits
Generic Elective - University Level
Prof. Gaurav
UNIT I
FUNDAMENTALS OF
NON-PROFIT
ORGANIZATION
• KEY TERMS
Some of the key terms covered in this chapter are:
• charity
• civil society
• cooperative
• faith-based organization
• foundation
• independent sector
• mutual society
• nongovernmental organization
• non-profit organization
• philanthropy
• public benefit organization
• social capital
• social economy
• voluntary association
• The term charity emphasizes the support these organizations receive from
private charitable donations and assumes a certain motivation on behalf of
both donor and recipient. But private charitable contributions do not constitute
the only, or even the major, source of their revenue; and many nonprofit
organizations are not “charitable” but advocate special interests or seek to
promote their members’ interests through lobbying.
• The term independent sector highlights the role these organizations play as a
“third force” outside of the realm of government (i.e. political power) and private
business (i.e. the profit motive). But these organizations are far from
independent, politically or financially. Politically, many are engaged in
advocacy, and board membership is typically drawn from local, regional, and
national elites; and in financial terms, they depend heavily on both government
and private business for revenue.
• The term voluntary organizations or sector emphasizes both the significant
input that volunteers make to the management and operation of this sector and
the noncompulsory nature of participation in terms of membership. But a good
deal of the activity of voluntary organizations is carried out by paid staff, and
not by volunteers, and many nonprofits have no membership base at all.
1. Trusts
Public charitable trusts may be established for a number of purposes, including
poverty relief, education, medical relief, the provision of facilities for recreation,
and any other objective of general public utility. Indian public trusts are generally
irrevocable. No national law governs public charitable trusts in India, although
many states (particularly Maharashtra, Gujarat, Rajasthan, and Madhya Pradesh)
have Public Trusts Acts
What is a Trust?
• Trust is a legal entity, formed by one party, in which assets are entrusted to
the second party by the first party, for the benefit of the third party.
• Herein, the first party implies the author of the trust or the Trustor; the
second party is called the Trustee.
• The Trustor entrusts the assets to the Trustee on the beneficiary’s (third
party’s) behalf.
• The subject matter of the trust is known as Trust Property, and the document
detailing the terms and conditions is called Trust Deed.
• Trusts are governed by the Indian Trusts Act, 1882 applicable throughout the
country with the exception of the state of Jammu & Kashmir.
2. Societies
Societies are membership organizations that may be registered for charitable purposes. They are
usually managed by a governing council or a managing committee and are regulated by the Societies
Registration Act which has been modified and adopted by various states. Unlike trusts, societies
may be dissolved.
What is a Society?
• Society is a group of persons who are mutually associated for the fulfillment of a common goal or
for serving a shared purpose, such goal or purpose may pertain to the advancement of any
literary, charitable or scientific work.
• Incorporation of a Society requires an association of a minimum of seven persons. The association
is formalized by the signing of a Memorandum of Association (MoA) which is filed to the Registrar
of Companies (ROC). In this way, the society is legally formed under the Societies Registration Act,
1860.
• The MoA contains the name and the stated objective of the Society. In addition, it also details the
names, addresses and professions of the members of the governing body which is formed by
governors, directors, council, and trustees among others.
3. Section 8 Companies
Under Section 8 of the Indian Companies Act, the Central Government may issue a license to a
limited or private limited company which:
• Has as its purpose the promotion of commerce, art, science, sports, education, research, social
welfare, religion, charity, protection of environment, or any such other object;
• Intends to apply its profits, if any, or other income towards promoting its purposes; and
• Intends to prohibit the payment of any dividend to its members.
• The missing profit motive and the prominence of substantive missions allows a great
variety of preferences, motivations, and objectives to materialize in nonprofit
organizations.
• Nonprofits operate in areas that are often “difficult”: social services for people with
disabilities, the socially excluded, and minorities; hospices and care facilities for frail
older people; international humanitarian assistance; advocacy groups; and local
community associations.
• The very existence of the nonprofit for is linked to the nature of services provided and
the fields worked in. These areas are riddled with externalities, and operating in them
involves trust and a concern for public goods.
• The “law of nonprofit complexity” refers to the intricacy of governing and managing
nonprofit organizations, and states that nonprofit organizations tend to be more
complex than business firms of comparable size.
• In terms of its environment (managing diverse constituencies, stakeholders, and
multiple revenue sources including donations and grants, fees and charges, and public
sector payments such as subsidies, grants and contracts), and its internal components
(board, staff, volunteers, members, clients, and users), any nonprofit organization of,
for example, 50 employees and 100 volunteers would easily surpass the complexity of
an equivalent for-profit firm of equal size.
• Many voluntary organizations contain three distinct components: mutual support,
service delivery, and campaigning. These components are weakly coupled and tend to
develop their own dynamic and internal culture over time.
• Nonprofit organizations are frequently several organizations or organizational
components in one. More generally, from a governance and management point of view,
a nonprofit organization is a combination of different motivations, standards,
challenges, and practices.
GOVERNANCE
• Governance refers to the process whereby elements in society wield power and
authority, and influence and enact policies and decisions concerning public life and
economic and social development.
• Governance is a broader concept than government, whose principal elements include
the constitution, legislature, executive, and judiciary. Governance involves interaction
between these formal institutions and those of civil society.
• Governance has no automatic normative connotation. However, typical criteria for
assessing governance in a particular context might include the degree of legitimacy,
representativeness, popular accountability, and efficiency with which public affairs are
conducted.
• Governance is different from management, which is primarily a staff function, although
in many smaller and medium-sized organizations both functions overlap. It is useful to
think of the board as the focal point of governance, and the chief executive officer as
the focal point of management.
• The governance of nonprofit organizations is “about ensuring that the organization has
a clear mission and strategy, but not necessarily about developing it. It is about
ensuring that the organization is well managed, but not about managing it. It is about
giving guidance on the overall allocation of resources but is less concerned with the
precise numbers.”
• Thus, governance involves the responsibility for the organization’s performance and
direction. Governance is primarily an organizational steering function and closely
related to the notion of stewardship.
• The board of trustees (or its equivalent) is the governing body of the nonprofit and the
locus of the governance function. The board represents the organization to the outside
world, in particular vis-a-vis legal authorities and the general public.
• In nonprofits, where no strict equivalents to “owners” exist, the board is entrusted with
the organization, i.e. they are the trustees.
• The task of the board is to make sure that the organization carries out its agreed-upon
mission “without the objective of making profit and with the promise not to
distribute organizational assets to benefit individuals other than the clients the
nonprofit was formed to serve.” All nonprofits, even associations, have a binding
legal commitment to this overall principle.
• Governance is about ensuring the fit between the organization’s mission and its
activities and performance.
• Research on board size, composition, and performance has generated some guidelines,
as has the attention of policymakers and umbrella groups. about the range of activities
board members are to undertake in discharging their duties:
• VOLUNTEER RECRUITMENT
In order to build a successful volunteer program, you’ll first need to find some volunteers to manage.
Volunteer recruitment is an ongoing process that includes promoting your opportunities, creating
and processing supporter sign-ups, and screening potential volunteers. Remember: you’re not just
seeking capable hands; you’re looking for invested individuals who care about your cause.
• VOLUNTEER EMPOWERMENT
Once you’ve secured your volunteers, you’ll need to ensure that they’re equipped and excited to step
into their role at your organization. Your volunteer empowerment strategy includes appropriately
placing volunteers into the best jobs, setting clear expectations, training and onboarding your
volunteers, and supervising them during the shift. Set your volunteers up to succeed—and they will!
• VOLUNTEER COMMUNICATIONS
The nonprofit-volunteer relationship isn’t a one-way street. To effectively engage volunteers, you’ll
need a communications plan that allows you to present important volunteer information as well as
respond to volunteer feedback and questions. Your volunteer management software can help by
centralizing communications and even automating some of your outreach.
The functions of NGO play a major role and have brought social change for promotion and
development of the society. It has proved that these organizations are working for various parts of the
world and are doing their work in serving the humanity and other good cause. It is important that the
members of the NGO are educated, inspired, enthusiastic and working in the interest and properly
carrying out the functions of NGO. Few of the roles of NGO are given below:
Women Empowerment
The performance of major functions of NGO has come a long way in working for women empowerment.
Few of the examples like fighting against sati, dowry, cruelty, other social menaces to educating
women, lowering the female feticide rate, employment to female, etc.
It is still giving their best in removing gender inequality .There are many foundations working for such
causes like Sewa, Agrani foundation, Eklavya, and Environmental Action Group etc.
Sustainable Development
This area needs the maximum attention because nobody is compromising their present needs and is
destroying natural resources to achieve their selfish goals.
Therefore, NGO is keeping an eye to all of this and coming up with control measures to prevent an
overutilization of natural resources which is the reason to environmental threats which later cause
health problems and natural calamities.
EFFECTIVE GOVERNANCE: THE ROLES AND RESPONSIBILITIES OF BOARD MEMBERS
ROLES OF BOARDS
Boards have 3 primary roles: to establish policies, to make significant and strategic decisions, and to
oversee the organization's activity.
Policy making
Effective execution of policy is necessary to fulfill the other 2 roles. Policies define focus and
differentiate responsibilities among the board, the management, and the medical staff. Well-written
policies lead to more efficient board functioning. Instead of having the same matter or very similar
matters on the agenda repeatedly, the board can develop a policy that covers the issue and leave
implementation of the policy to management. Boards have approximately 24 hours together each year,
spread over regular meetings. It is essential to use that time wisely. At the same time, board-level
policies should be reviewed regularly.
Decision making
Decision making involves making choices about the organization's vision, mission, and strategies.
Boards make decisions about issues that are strategic and significant, such as whether to enter an
affiliation agreement with another organization. As decision makers, boards can also delegate no
governance types of decisions to others—and would be wise to do so.
Oversight
Oversight is an important function, but boards must remember that the organization is theirs to
oversee, not to manage. Some boards cross the line and try to involve themselves in management.
Nevertheless, in the oversight role, the board is legally responsible for everything that happens within
the organization. In the area of quality, for example, the board's oversight role may include setting the
tone by stating that the organization is committed to quality; establishing policies related to quality,
such as credentialing; ensuring that mechanisms are in place, such as committees, to establish a plan
for quality; and monitoring implementation of the plan.
Board committees play an important role in the governance process. It is useful to periodically review
the structure and functions of the committees and to ensure that everyone knows what to expect from
them.
RESPONSIBILITIES OF BOARDS
Boards have numerous responsibilities: they oversee management, finances, and quality; set strategic
direction; build community relationships; establish ethical standards, values, and compliance; and
select a CEO and monitor his or her progress. The 2 most important tasks are selecting the CEO and
establishing the direction of an organization.
Although the management team develops the strategic plan, it is the board's responsibility to accept or
modify the strategic plan and to set the direction. The board considers elements in the environment—
such as growing competition and changing patterns of care—and develops a vision, a mission,
strategic thrusts, goals, and tactics that respond to the environment, all the while showing the
organization's values.
Financial oversight is a familiar job that boards usually do well. Boards ensure the use of financial
controls; ensure that funds are prudently invested, considering cash management, banking, and
contracting parameters; and establish policies related to budgets. Their goal is to protect the
community's assets. Oversight of the quality area often involves utilization and risk management in
addition to continuous quality improvement.
Attention to community relationships is a responsibility unique to not-for-profit institutions.
Inasmuch as board members have contact with the community, they can be sensitive to the
expectations and needs of its citizens and bring that knowledge to the board room. The focus is on all
those the organization serves: consumers, businesses, elected representatives, payers, and
collaborators. Boards are paying more attention to the quality of life in their communities.
When reviewing these responsibilities, it is important to note that the board as a whole, and not any
individual member, has the authority. Further, the board exists only when it is in session. The
committee is an appendage of the board, and the board can delegate certain tasks to a committee or
an individual, but otherwise an individual board member has no prerogative. Thus, it would be
inappropriate for a board member to walk in to a manager's office and ask to review the books or
demand certain changes. Such actions, in fact, can cause much disruption. The CEO is the full-time
agent of the board and is the only person directly accountable to the board.
SAMPLE PROCEDURES TO EVALUATE ENTIRE BOARD
The idea of “leadership” is the same across the private, public, and nonprofit sectors.
Good leadership is rooted in the ability to achieve growing and sustaining the engagement of
people to accomplish something extraordinary together.
It doesn’t matter which sector that leadership is taking place in as each requires people who have
been engaged and want to remain engaged for personal and group accomplishment. To name just a
few, the following should be a part of the leadership equation for leaders across all sectors:
– Methodical processes
– Clear goals
– Fair compensation and recognition
– Clear communication and respect
How that leadership plays out, however, has some unique aspects about it depending on the sector.
There is a huge importance of leadership in nonprofits, and there are some unique elements
associated with leadership in the nonprofit sector. A primary difference in nonprofit leadership is that
it takes both paid and unpaid people to fulfill the mission. Most for-profit organizations and most
governmental organizations engage their people initially through employment while most nonprofits
engage their people initially through voluntarism.
A nonprofit leader must operate from a different definition of equity than a business owner.
• Community equity is both financial and non-financial. There is a “social value” to the work of
nonprofits that can’t be calculated solely using a “financial value” equation taught in most
business schools. There is also an “in-kind” income stream that for-profits don’t measure which is
the “value” of people’s volunteered time, donated goods, and pro-bono expertise that a for-profit
would otherwise have to pay for in a vendor relationship.
• The nonprofit leader must provide a “social return” on investment as opposed to a “financial
return” that these same individuals would be seeking from an investment in a business. The
nonprofit leader has to engage people to not only create a positive “profit or financial bottom line”
for the corporation but must also work equally hard with people to show a measurable “social
bottom line or social profit” resulting from the work.
• What makes that difficult is that the nonprofit has less control over some variables in its impact
because it occurs in a community instead of inside a building or factory.
• These are just a few examples of the leadership outcomes that are different between sectors.
Leadership is a life-long learning process for any professional whether he or she is employed by a
corporation, by government, or by a nonprofit.
THE IMPORTANCE OF LEADERSHIP DEVELOPMENT IN NONPROFIT ORGANIZATIONS
• Every person involved with and in a nonprofit organization is participating in a dynamic. Forces in
politics, economics, and society are constantly affecting people’s lives and nonprofit organizations
are on the front lines of enhancing the quality of life for people in a certain way.
• Those ways include such things as enhancing education, helping people to stand proudly on their
own feet, benefiting from artistic expressions and experiences, protecting our wildlife and lands, or
successfully coping with a health condition whether that is physical, emotional, or developmental.
• The only real-time learning laboratories that people have to understand how to lead communities,
manage organizations dependent on voluntary contributions, and to advance society is through
nonprofit organizations.
• The most successful nonprofits have defined themselves as “learning organizations.” This means
leaders are willing to take the time to help everyone understand the complexities of social issues,
how to work effectively with diverse people, the best practices of nonprofit and community
leadership, and the business know-how to make prudent financial decisions that are made in the
face of human need.
• Many choose the nonprofit sector as a career because each knows a life-long learning opportunity is
in store as each pursues work that has been designed to make the world a better place.
CORE SKILLS OF SUCCESSFUL NONPROFIT LEADERS
Because every nonprofit organization is different, a single set of competencies is difficult to articulate.
1. Financial Management
2. Fundraising
3. Human Resourcing
4. Program Knowledge
5. Governance
6. Planning
7. Community Relations and Communication
Board members who claim that they do not need evaluation and Board training are like obese people
who claim that they do not need advice about eating because, after all, they are already experts at
eating. Experienced and highly effective Board members have learned that it’s critical to regularly
conduct short, practical evaluations of the quality of their Board operations and then to attend to the
results of those evaluations during the year. Evaluations need not take a long time — many times,
even 15 minutes a year from each Board member to complete a short questionnaire, followed by half
an hour to discuss results, can be transformational for a Board.
Timing to Do a Board Evaluation
A Board should evaluate its operations at least once a year. Don’t wait until new members have
learned more about the Board — that’s like waiting until you feel fine before seeing the doctor.
A very useful time for evaluation is early in the strategic planning process. Results of the evaluation
can be included as strategic goals in the organization’s strategic plan
Wide Variety of Board Evaluation Tools
Below, is a list of a variety of free Board self-evaluation tools. Aim to select a tool that asks at least as
much about the actual occurrence of activities on your Board as about how members feel about the
Board. It’s good practice to have a small team of Board members, for example, a Board Governance
Committee, review and select the best tool.
How to Use Board Evaluation Tools
It’s often best if each Board member completes a tool on his/her own, rather than together in a
group. Otherwise, any problems they have in their Board meetings are carried into how they do the
Board evaluations, as well.
It’s also best if each member can provide anonymous input to the evaluation questionnaire. Boards
can often get much more honest feedback that way.
Results of the evaluation should be included in a Board Development Plan. The status of the
implementation of that Plan should be a topic on the agenda of each Board meeting.