Non-profit Board Evaluations Help Address Problems Common To Non Profit Companies

There are many businesses organized to help people rather than make money. These organizations are known as non-profit organizations (NPOs) or not-for-profit organizations. People often make the mistake that non-profit organizations are not allowed to make a profit on any of their ventures. That is false. NPOs can generate a profit, but the money is not distributed to owners or shareholders of the organization. Rather, profit that is earned must be channeled back into the organization to further its goals.

For example, a non-profit organization that is designed to help youth organizations may actually have a store where it sells merchandise for a profit. The proceeds of the store, then, are channeled back into the organization to pay for youth programs, insurances, and even wages.

Much like some businesses, non-profit organizations are often run by a board of directors. Just as businesses need to have checks and balances to keep the business operating smoothly, so do non-profit organizations. Legally, NPOs are required to meet certain guidelines and practices to maintain their non-profit status. Non-profit board evaluations can help ensure an NPO meets these requirements.

There are three common issues that a non-profit organization faces. One of these is known as capacity building. Non-profit organizations do not get funding for their programs the same way a for-profit organization does. Their funding is based on donations from the public, such as taxes for a government agency or donations from individuals or businesses for other organizations. If they do not receive enough donations, they will have to cut their programs, employees, or other services.

In addition, most employees of NPOs are paid less than their for-profit counter-parts, which makes employee turn-over a huge problem with non-profit organizations.

A second issue with NPOs is what is known as Founder’s Syndrome. This is a situation where the founder of the organization is highly vested in the organizational structure the way he or she started it. Thus, the founder is not open to suggestions for change, improvement, or transitions from the board or employees.

Finally, a third issue is that of resource mismanagement. Because the NPO is not a public company, they may not have the right procedures in place to discourage fraud. Moreover, since profit is not the driving force behind the company that provides accountability, employee service and quality may suffer.

These three issues can be addressed with a non-profit board evaluation. Such an evaluation would entail having an independent company analyze the NPO and the board and make recommendations for improvement.

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