NonProfits - Building a Foundation on Firm Ground.

Now that the decision has been made to form a nonprofit entity the formal structure of the organization must be put into place and the planning process must begin. The founders of the new organization should hold an organizational meeting to confirm the mission statement, adopt a name, name board members and officers, and adopt bylaws.  Remember to document all these points in the meeting minutes!  Soon thereafter the board of directors must approve a strategic plan and an organizational budget.  These steps are critical in order for the new entity to set out in an organized and focused manner. 

Mission Statement
There are almost as many opinions on how a mission statement should be written as there are mission statements themselves.  The consensus is that a mission statement should be clear, concise, and convey the purpose of the organization.  In terms of a nonprofit organization we believe the mission statement should also convey the compassion driving the people who are committed to the organization.The mission statement defines the organization. While founders, board members, volunteers and employees will move on, the mission statement is embedded in the organization.  If the mission statement is altered, the organization in its current form ceases to exist.  The mission statement conveys to the public, funding sources and regulatory agencies who the organization is and what it is about.Given the criticality of the mission statement, the founders of the organization should spend time and effort to ensure that it conveys the essence of the societal need the organization wishes to accomplish.

Choose a Name
Similar to drafting the mission statement, choosing the right name for the organization is critical.  The name should be identifiable with the mission statement and provide a visual element.  Keep in mind when choosing the business name that you will probably need to adapt a logo surrounding it.  From a legal perspective you must register the business name and ensure it is not in use by another entity.  Your name must also identify the entity type such as using the word “incorporated” or abbreviations such as “Inc.”

Recruit a Board of Directors
The board of directors is the guardian of the organization’s mission.  First and foremost board members must understand and be passionate about the mission.  However, equally important is their understanding of their stewardship responsibilities.  Some states require that directors be named in the articles of incorporation, while others allow the owners/incorporators (those filing the paperwork) to appoint directors at the initial organizational meeting. The required number of directors and any additional requirements for director eligibility varies based on state law.

When searching for board members keep in mind that a strong board is critical to your success.  The board is responsible for keeping the organization focused on its mission, fundraising and providing expertise and networking that moves the organization forward.  Consideration should be given to varying the skill mix on the board or perhaps having committees that report to the board. For example, a finance committee may be put into existence that is chaired by the board Treasurer.  The Treasurer may be a CPA and is a board member while the finance committee consists of finance professionals that solely assist on the financial end of the operations and are not full board members.  The committee approach is an alternative to the traditional board structure.  The size and structure of your board will be dependent upon the size and nature of your organization.

Create Bylaws
Bylaws outline the rules of conduct and authority for the board of directors and officers.  They are critical.  Without them, board meetings would be disorganized and chaos would rein.  It is important to have a set of bylaws that are customized to your organization and are clearly stated.  A canned document that is printed from a web-site and then filed away is not helpful.

Bylaws should include the purpose of the organization, the frequency of board meetings, the terms of the board members, how elections will be conducted, what constitutes a quorum, and how bylaws should be amended.  Bylaws may also refer to other documents such as financial control and procedural manuals.   The key is to customize a set of bylaws that will enable the board to operate in the most efficient and effective manner.

Draft a Strategic Plan
Once an organization has an established mission statement, a strategic plan should be outlined. A strategic plan is an entity’s road map for accomplishing its mission. Strategic plans address short and long-term periods and short and long-term goals and objectives. It is a plan of action to accomplish defined objectives. The following is a list of items which may be reflected in an organization’s strategic plan:

• Specific goals the organization is aiming to accomplish within the next year, two years, and five years.

A list of the individuals who will be responsible for accomplishing each defined goal. These individuals may be board members, employees, volunteers, and the like. Often, the accomplishment of a specific goal is dependent upon the work of many. It is important that overall responsibility be assigned to a specific individual to coordinate such a global effort. A central coordinator ensures work is not duplicated and promotes communication among individuals working toward a single objective.

A list of specific action items or a detailed plan which outlines how each goal will be accomplished and a time frame for completion. This should include defined milestones to track performance. The development of such a list or a plan may be the responsibility of the individual responsible for ensuring a particular goal is achieved.

A monitoring and measurement mechanism to periodically assess and communicate to pertinent parties whether the organization is on track to meet the goals outlined within its strategic plan within the defined time frames.

Budgeting is extremely critical to nonprofit organizations, especially those with funding problems. This is because even the slightest budget variance can result in the organization having to discontinue needed services. Essentially, the budget is the application of dollars and cents to the strategic plan. The budget plays a vital role in the planning process for both profit-motivated organizations and for nonprofit entities. For example, the board of directors cannot make a decision as to whether services should be expanded or cut back unless it knows how much money is going to both flow into and out of the organization in the near future.

While budgeting is not an easy process, it is one, which is well worth the efforts of all nonprofit organizations. The greater the time and efforts expended to compile an accurate and relevant budget, the more useful and effective it will be. Note that going through the motions to create a well-written document entitled “annual budget,” which is then filed away until the end of the year, is not an effective budgeting technique and provides the organization with little benefit. The budget should be a dynamic tool that is updated on a regular basis to meet the needs of the organization and to guide it down the road toward continued financial success.