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Good News Bad News for Boards & EDs

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Listen up, nonprofit leaders! I’ve got good news and bad news.

I’ll start with the bad: according to Harvard Business Review’s April 2013 issue, corporations share many of the same governance issues that nonprofits do.  It’s both disheartening and comforting to know that good Board leadership and governance is hard to create, manage and sustain in any sector.

The good news is that the issue – and specifically the article “What CEO’S Really Think of Their Boards” – offers some sound advice for both Directors and Executive Directors/CEOs.

First, the article suggests that Directors:

  1. Focus more on the risks that are the most crucial to the future of the organization. Don’t shun risk or see it in personal terms.
  2. Do their homework to understand the issue/industry the organization addresses.  And, stay consistently plugged in.
  3. Bring character and credentials, not celebrity, to the table.
  4. Do more to challenge strategy constructively.
  5. Make succession less, not more, disruptive to operations.

 

One of the most powerful revelations presented in the article came from former SEC chairman and Aetna CEO William Donaldson: “The Board is a social entity.  And the human beings on it – they act like human beings do in groups. The longer individuals are there, the more allies they have, the more they have their dislikes, the more irrational they become in terms of personal conflict.”  He’s amazed that more work has not been done to illuminate “the social contract within a board.”

Donaldson’s comments underscore two key similarities – and often functional roadblocks – in corporate and nonprofit Boards: ownership and the importance of relationship.  Directors of public corporations do not own the companies they are directing.  They sit in their Director roles in service to the shareholders of the company.  Nonprofit Board members also do not own the organizations they lead and are in service of their stakeholders (or beneficiaries of the nonprofits programs and services).

Regardless of the sector, Directors must put aside personal agendas when they step into a Board meeting and abide by the social contract they hold with one another and their shareholders/stakeholders.

The article concluded by identifying three key takeaways:

  1. The entire organization will get more value if the partnership between the CEO and Board is strong.  If governance isn’t working, it’s everyone’s job to figure out why and to fix it.
  2. Most boards aren’t working as well as they should.  Although governed by bylaws and legal responsibilities, interactions between CEOs and Directors are still personal, and improving them often requires the sorts of honest, direct and sometimes awkward conversations that serve to ease tensions in any personal relationship.
  3. The best leadership partnerships are forged where there is mutual respect, energetic commitment to the future success of the organization, and strong bonds of trust.  Great boards support smart entrepreneurial risk taking with prudent oversight, wise counsel and encouragement.

I encourage you to share this summary in your next Board meeting packet and set aside some discussion time to explore everyone’s thoughts and reactions to the article’s findings.  Perhaps doing so could present you with a wonderful opportunity to strengthen your partnership and refine your collective focus for the rest of 2013.

If you would like to read the entire article, please feel free to stop by Spokes.  And, as always, if your organization would like a little extra encouragement, coaching or assistance in facilitating these sometimes daunting conversations, Spokes is here to help.  Just call – 805-547-2244!

Nonprofit Tax Filing Requirements

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Most of you will already be familiar with the time frame for filing your organization’s non-profit returns with the IRS and the Franchise Tax Board.  These forms must be filed no later than the 15th day of the fifth month after the fiscal year end.  For example, if your entity’s fiscal year ends on December 31st, your filing is due on May 15th.  The filing requirements have changed over the past few years, and the filing requirements are different for the IRS than they are for the Franchise Tax Board.  For 2012, the filing requirements are as follows:

IRS Requirements

Form to File
If your gross receipts are:
990-N 
Normally equal to or less than $50,000
990-EZ
Normally less than $200,000 and total assets are less than $500,000
990
Equal to or more than $200,000 or more and total assets are equal to or more than $500,000

FTB Requirements

Form to File
If your gross receipts are:
199-N
Normally equal to or less than $25,000
199
Normally greater than $25,000

All non-profit organizations must file one of the above returns.  If you qualify to file forms 990-N and 199-N, these are postcard filings that can be done very easily online.  If you need more information you can check the IRS or Franchise Tax Board websites, or contact your tax preparer.

Speak and Be Spoke(n)!

So, tell us!  Do you have any lessons learned to share with your fellow nonprofits regarding tax filing requirements?

Lessons from Greg Hind

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“Ever tried, ever failed.
No matter.
Try again, fail again,
Fail better.”
–Samuel Beckett, Westward Ho!

Although this quote comes from a Samuel Beckett play, it could easily (albeit mistakenly) be attributed to Philanthropist & Entrepreneur Greg Hind. Greg successfully started 6 companies and filed numerous patents that have helped revolutionize the athletic sportswear industry. All of his business success, however, came with its share of failures – products that didn’t sell, materials that didn’t function and a partnership that went awry.

Most recently, Greg played an instrumental role in launching the newly restructured and redefined Spokes business model. And, like all new adventures, we’ve faced our share of toe-stubbing and stumbles as we learn to “walk” our new path.  Greg, who was every bit as generous to Spokes in his mentorship as he was with his financial support, never let me become disheartened when we had a “fall.”  In fact, he delighted in it.  And, I’ll tell you why.

Greg once told me how, when his sportswear business was booming, every phone call he received was another organization asking him to be a guest speaker and share his strategies for success.  And, yet, when the same business suffered a major setback, his phone was silent.  He found it ironic that it was in the process of recovering from a failure that he truly honed his management skills.  That was the moment when he had the most to offer other aspiring entrepreneurs, but no one thought to ask.

I think of that story often when I’m facing a challenge.  Greg taught me not to let the stigma of failure keep me from what will be my best learning opportunities.  It is a value that we have adopted for the entire Spokes organization and seek to extend to our members. And, so, with great excitement, I am pleased to celebrate Greg’s legacy with the inaugural publishing of our new HINDsight column.

In every HINDsight column, we will invite individuals to share a failure that they have experienced within their work, what they learned and how they recovered.  Our goal is to remove the stigma attached to failure, share the wealth of learning and experience that exists throughout the members of the nonprofit sector and create a network of support to help each other recover from our stumbles.

We hope you will join us in honoring Greg as we break a few spokes, repair them and roll forward as better, healthier and stronger nonprofit professionals and organizations.  The ride may be bumpy, but it will be inspiring!

Nonprofit Property Tax Filing Requirements

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It’s never too early to start planning for the next tax season. Why? California law will prescribe a yearly tax on your organization based on property as it exists at 12:01 a.m. on January 1st.  All entities, unless granted an exemption by the County Assessor’s Office, are required to file the annual property tax form “Form 571-L Business Property Statement” with the County Assessor’s Office.  This form is due every year on April 1st but is still considered to be timely filed if sent by May 7.  On the Form 571-L, entities are required to declare all business property owned as of January 1.  Examples of business property include supplies, equipment, buildings, building improvements, etc.

Nonprofits are required to file the Form 571-L until the Assessor’s Office has specifically granted them an exemption.  In order to qualify for an exemption from the Assessor’s Office, the entity must submit the appropriate documents to the assessor’s office (i.e. exemption claim form, articles of incorporation, tax letter designating the organization’s non-profit status, etc).  This is a one-time process to be granted with the exemption.

Once the assessor determines that the nonprofit organization is a qualifying religious, church and/or welfare organization and is eligible for an exemption, there is a simplified annual filing process in which the entity will be assessed with a zero tax bill.  The annual filing due date for this type of filing is February 15th. If you have any questions you can call the Transfer Exemption department of the Assessor’s office at (805) 781-5643.

Speak and Be Spoke(n)!

So, tell us!  Do you have any tips to share with your fellow nonprofits regarding how to file for property tax requirements?

You Can’t Change the Tire When Driving 65 MPH

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My Board President, Jami Fawcett, and I attended the Community Foundation’s Annual Professional Advisors Luncheon recently, and were rocked by special guest speaker Kat Taylor. She is the true vision of an individual who does charitable work with a business mindset. She and her husband, Tom Steyer, are Founding Directors of One Pacific Coast Bank and TomKat Ranch Educational Foundation, have been involved in numerous nonprofit organizations, and is very active in social business, public benefit and philanthropic ventures.

During her talk she made a statement that resonated with what Spokes aims to do everyday. She said “you can’t change the tire when you’re driving 65 MPH.” It is so easy for nonprofit and for profit organizations to get caught up in driving full speed toward their goals that they just can’t put the brakes on to analyze and implement the day-to-day operational changes so essential to their ongoing growth and success. While our clients are moving their nonprofit 65 MPH, it’s our job to help put the spokes in place so that they can be more efficient in their actions.

If you want to keep moving at 65 MPH, let Spokes be your pit crew and we’ll work together to get you back up to speed.

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