Non Profit Quarterly

Info You Can Use: Non-Profits and Loans

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If you didn’t catch it, in June Non-Profit Quarterly had a good 101 guide on when it is appropriate for non-profits to take out loans.  Most times you hear about non-profits and loans it is once the non-profit is in financial trouble and deep in debt.  The discussion of constructive use of loans by non-profit arts organizations is relatively rare.

In my own experience, conversations among arts administrators usually touches on earned revenue, fund raising/sponsorships and grants.  I have never heard anyone talk about using loans to fund an initiative. This might be, as the NPQ article suggests, there is a stigma of failure associated with taking out a loan. Or it might be simply that we are so used to worrying about falling attendance, lack luster fundraising and onerous grant writing that no one really thinks to mention loans.

In addition to discussing the times it is and is not appropriate to seek a loan, the article notes that there are no “one-size-fits-all” loans so organizations can negotiate terms that suit their needs.  They also provide a general sense of what answers and materials you might expect to be asked to provide as part of the loan process.

 

 

How Dare You Refuse That Money?

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Really interesting story out of Australia via Non Profit Quarterly. The Arts Minister has asked the Australia Council to develop a policy penalizing arts organizations who refuse private funding based on idealistic or political motivations.

Refusing funding from tobacco companies is mentioned in a couple instances, but this was brought on by artists in the Sydney Biennale objecting to its association with a company involved in a controversial detention center used to house asylum seekers.

Senator Brandis responded to that by saying, “What I have in fact asked the Australia Council to do is to develop a policy so that it would be a condition of the receipt of Australia Council funding that the arts organisation concerned not unreasonably refuse or unreasonably terminate private sponsorship.” When pressed on who would be responsible for deciding what is to be considered “unreasonable,” Brandis replied, “I don’t frankly have a fixed or dogmatic view about whether it should be the Australia Council or whether it should be the Minister or whether it should be some third party arbiter.”

We can only hope that the option adopted is not the current Minister. Brandis has since said that while it was reasonable for arts companies or festivals to reject corporate funding if they had concerns about a sponsor’s financial credentials, it was unreasonable for them to refuse sponsorship on political grounds.

While the funding model in the United States is different than that of Australia and the amount of support U.S. arts orgs receive from government sources is comparatively small compared to private and corporate support, I can easily see a similar rhetoric being used politically in the U.S.

“X Theater has been on the public dole (equal to 2% of its budget) for years and they are perennially saying they are in financial straits. But just last year they refused a donation from Y Company (seeking to charity wash its reputation after that last scandal), even after they offered to double their usual donation. Where do they get the nerve to ask the people of this great state for more of their hard earned money after refusing Y Company’s generosity?”

To a certain extent, refusing money from tobacco companies might be easy because there has been a decades long nation wide campaign about the problems brought on by smoking. With other companies, issues like environmental damage and sweatshop like conditions with low pay may be mitigated by widespread employment and improvement in the general standard of living, causing more ambiguous views about refusing support on ethical grounds.

I think it would be difficult to pass a law or rule to this effect in the U.S. because it is easy to see how that there will be no end of trouble. (How can such a poor school afford to refuse Playstation’s sponsorship in return for painting their gym and cafeteria with the logo?!)

Just merely employing the rhetoric to equate arts organizations refusing private funding with the unemployed refusing a crappy job can be damaging enough.

Info You Can Use: Save The Charity, Save Your Company

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I loved this story on Non Profit Quarterly about a Maine restaurant which actually revived its business when it started holding all you can eat fundraisers for charities.

…the eatery thought of the weekly all-you-can-eat nights with suggested donations flowing to charity as a way to attract new customers. “It worked almost immediately and it revitalized the business,” Benedict said. “We would have gone out of business if we didn’t change the way we did business. Giving back is the first thing we did, and it worked.” She says that a total of $635,000 has been raised since 2009 for local charity organizations and individuals.

It is great to hear that a business saved itself by helping charities in the community. It could be a model for other communities and businesses.

However, the restaurant hit a snag when the state attorney general started to investigate whether it was licensed as a charitable solicitor.

My first reaction was disappointment because the restaurant was doing such good work, but the truth is that there is a lot of fraud and deception perpetuated by companies acting as charitable solicitors. So unfortunately, despite an abundance of good intentions, companies need to be careful about providing assistance to charities in a similar manner.

The Council of Non-Profits has a link to the first chapter of a book about the licensing required for charitable solicitation by 40 states. The chapter provides a good introduction to the issues involved and resources for finding out more about the requirements in your state. I was able to go right to the pertinent sections of my state code and find who is exempt from filing with a couple mouse clicks. (Unfortunately, it doesn’t appear the restaurant would be exempt in my state.)

The Founder’s Curse

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We here at Butts In The Seats blog, (okay, me), are not afraid to admit when we may have been wrong. This summer, Elizabeth Schmidt, wrote a piece on Non-Profit Quarterly challenging the myth of the Founders Syndrome.

There have been times in the past when my posts have played into the notion that Founders tend to hold their organizations back in various ways. As Schmidt enumerates:

The label seems to be applied if one or more of the following symptoms are present. The first is a sense of grandiosity—that the organization is the founder’s, and it exists to serve his or her ego (or pocketbook). The second is an inability to delegate—poor management on the part of the founder. The third is an inability to make a smooth transition from the founder to new leadership. And the fourth is an unwavering dedication to the original vision for the organization.

Schmidt makes the common sense observation that you don’t need to be a founder to exhibit these characteristics and gives a few examples of non-founders who have damaged their organizations by manifesting them. She also notes that being normal human beings, not all founders possess these traits, nor do they suddenly become infected with these inclinations upon deciding to found a company.

She notes the inability to plan a smooth leadership transition is so widespread it is more of an organizational failing than attributable to the influence of a single individual.

The worst in Schmidt’s mind seems to be the fourth stereotype of not allowing the organization to evolve beyond the original vision.

“This symptom is particularly disturbing, however, because it has the potential to squelch necessary dialogue among the stakeholders of the organization. To say, as soon as a disagreement arises, that the party who conceived of the initial mission suffers from founder’s syndrome, severely handicaps that party’s standing in the discussion.”

Schmidt acknowledges that there is always some basis in truth to the anecdotes that form these generalizations about founders and it is likely that many organizations have encountered troubles for just these reasons.

However, she points the lack of research providing evidence that this is a particular problem for founders. The only study she found that attempted to collect empirical data concluded that there was ““considerable truth to some of the rumors and stories about founder’s syndrome.” However, Schmidt feels the following data does not support this assertion and is at best, inconclusive.

-Founder-led organizations tended to have smaller budgets.

-Term limits for board members existed in 31 percent of founder-led organizations and 49 percent of non-founder organizations.

-Eighty percent of founder-led organizations held at least quarterly meetings, compared to 87% of non-founder organizations.

-Three-fourths of the respondents in both groups thought either the executive director or the board chair was the most influential person during a board meeting, but founder-led organizations were more likely to say the executive director was the most influential.

-On the other hand, founder-led organizations were more likely to have reviewed the mission in the past year than organizations led by non-founders; they were more likely to attract full board participation at meetings, and they were more likely to set and mail the board agenda ahead of time.

I haven’t read the study she references, but on the face of the data, I would probably lean toward saying non-founder organizations employed better governance practices. Still Schmidt makes a strong argument about resisting the inclination to automatically dismiss a founder as the source of problems for a company and instead evaluate all elements potentially contributing to the organization’s weakness.