Financial Leadership. Julia Classen, Aurora Consulting

Transcription

1 Building a Culture of Shared Financial Leadership Michael Anderson, Nonprofits Assistance Fund Julia Classen, Aurora Consulting 1

2 Session Overview Define Financial Leadership Our Leadership Framework: Adaptive, Strategic, Technical Board Engagement Strategies Staff Engagement Strategies 2

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4 Board and Management Must Commit to Maintaining financial health to support mission-related goals Good planning as the foundation of stability Quality financial information Regular and consistent monitoring of financial status Responding to changes, opportunities, and setbacks with timely action Clear and reasonable roles and responsibilities for financial and other management aspects Transparency and integrity in financial decisions, practices, and information 4

5 Board and Management must lead by. Constantly look for opportunities and challenges that exist outside the organization Ensure the organization is guided by their mission, vision and values Create realistic strategies that are based in data and sound reasoning 5

6 Financial Leadership Nonprofit staff and board are appropriately engaged in organizational financial management in such a way that t orients decision-making towards sustainability Maintaining a business model that produces exceptional mission impact and sustained financial health (Barr and Bell) 6

7 Our Leadership Framework Adaptive (Heifitz and Linsky) Strategic Technical 7

8 Adaptive and Strategic Leadership Adaptive External influences that cannot be controlled or are outside of your current set of skilled responses It is the gap between aspirations and operational capacity that cannot be closed by the expertise and procedures currently in place. (Heifitz) Strategic Strategic Leadership provides the vision and direction for the growth and success of an organization. Skills and tools for strategy formulation and implementation 8

9 Technical Leadership Using expertise and good management to solve problems 9

10 Adaptive Adaptive, Strategic Budget Technical Program/Departmental Budget Cash Flow Analysis Organizational Mission/ Vision and Values Strategic Plan Business Model Profit and Loss Variance Report Baance Sheet Strategic, technical Board Board Finance Committee Executive Director Financial Director Program Staff 10

11 Questions Adaptive How might the challenges of the external environment affect our financial condition? What do we anticipate will affect our financial sustainability now, and 10 years from now? Strategic How do we create a financially sustainable business model that maximizes mission impact? What new policies, skills, expertise and strategies do we need to develop to maintain/achieve sustainability? 11

12 Financial Management Cultural Assessment Adaptability and Decision-Making Risk Awareness Use of Information Roles and Priorities See handout: Financial Management Cultural Assessment 12

13 Use of board committees Board Engagement Strategies Ongoing training, development, and orientation Financial reporting Budget review and approval Strategic planning Scenario planning development Defining the questions, what information is needed Examining the role of external stakeholders Analyzing risk tolerance 13

14 Financial Responsibilities of the Board and Staff Prepare and plan Comply with board direction and decisions Follow adopted policies Develop and use procedures and practices Monitor progress and make decisions within framework Provide accurate and adequate information Adopt strategic plans and goals Create and maintain an appropriate p governance structure Adopt policies for financial practices and activities Ensure adequate staffing Approve the annual budget, understanding assumptions, priorities, and risks 14

15 Basic Must Have Financial Information Organizational budget Approved by the board before the fiscal year begins Monthly or quarterly financial reports Income Statement compared to Budget Balance Sheet Audit report Required in Minnesota if revenues exceed $750,000 Auditor is hired by the board Verification of required reports IRS Form 990, other required forms and registrations 15

16 10-Step Budget Process Implement budget Determine timeline Agree on goals Document budget decisions Approve budget Board and/or committee roles Understand current financial status Agree on budget approach Review draft budget Develop draft income 16 budget Develop draft expense budget

17 What is Scenario Planning? Contingency planning Acknowledgement of unknowns and risks Formalized adaptability Proactive financial management 17

18 Scenario Planning Considerations What would trigger a change in course? Ability and willingness to incur a deficit Organizationally By program or cost center Ability to achieve a recovery surplus 18

19 Roles in Scenario Planning Internal Information External Information Budget Process Approved Budget All Staff Staff Leadership Board Identify risks and drivers Scenario Plans Staff Leadership and Board 19

20 Input into budget process Staff Engagement Increase budget Strategies transparency through understanding true program costs Budget responsibility Training and development Discuss mission/money matrix Scenario planning 20

21 Understanding True Program Costs Allocate income and expenses to appropriate cost centers Distribute indirect expenses in a reasonable manner Discuss and utilize the information! 21

22 Mission/Money Matrix 22

23 References Barr, Kate and Bell, Jeanne. An Executive Director s Guide to Financial Leadership. Nonprofit Quarterly, 12/25/2011. Link to article. Heifitz,R. and Linsky, M. (2002) Leadership On the Line, Harvard University Press. Creelman Research. Interview: Ron Heifitz: Adaptive Leadership. 2009, vol.2.5. Link to interview. 23

24 Thank you! Michael Anderson, Julia Classen,