This post was originally published on npENGAGE
Over the years, my experience in a variety of financial leadership roles has led me to the following hypothesis: nonprofit finance is critical to mission success. Whether determining how financial resources are spent or raised, clarifying organizational priorities, or building leadership—in many ways, finance determines mission success and impact.
Completing the Circle
With mission success comes financial success and, ultimately, long-term organizational sustainability. The virtual circle, where finance and mission are inextricably linked, will ensure that a nonprofit can maintain long-term sustainability with continued financial and organizational success. This is undoubtedly important to your nonprofit and to the societal impact of your mission.
The better and more effective your programs are, the stronger the case for finding adequate revenue streams to support short-term needs and long-term goals. The buildup of capital—primarily unrestricted net assets—that can be invested in programs, administrative strategies, and development is generally an optimal outcome. The returns on these mission investments are measurable over time.
Inside the heart, mind, and soul of the nonprofit CFO
Given the integral connection between financial and organizational success, I wanted to dig deeper into the nonprofit CFO role. I wanted to look beyond the normal job description of the role to understand it on a more personal basis. Responsibilities such as running the audit, preparing the fiscal year budget, paying bills, telling finance committees what the numbers mean, and identifying what’s at risk are all important. But I thought there must also be a different way to understand the nonprofit CFO role.
All of this introspection led me to further dig into the nonprofit CFO’s soul, mind, and heart to ask:
- What lasting legacy does the nonprofit CFO want to create?
- What gives them intellectual satisfaction and makes them successful decision-makers?
- What makes them proud to come to work and be part of a team?
Three definable CFO roles took shape as I continued to be lost in deep holistic thought: the Builder, the Strategic Decision-Maker, and the organization’s Cultural Trendsetter.
The Builder: Leaving a Lasting Legacy
As a CFO, the Builder role allows us to determine the identifiable building blocks of organization and mission success, which often outlives our tenure in the organization. Ultimately, the Builder’s goal is to enable the organization to control its mission destiny (at least over those matters that it can control).
The Builder CFO takes pride in many strategic, analytical, transactional, and systems contributions, but three areas are most relevant to mission success. The Builder constructs a:
- Sustainable financial structure that meets mission needs, goals, and aspirations over time.
- Sustainable and dynamic business model that finds the necessary revenues and efficiently and effectively manages expenditures over the fiscal years.
- Sustainable financial function and organizational infrastructure that will support and contribute to organizational success.
Tip: Build up and prioritize diverse revenue streams with multiple funding sources to cover core and innovative program costs. Work collaboratively and creatively to pursue new sources of earned revenues—government funders, foundations, events, major donors, board of directors, and individual donors.
Make the compelling case that investments in development, staffing, leadership, and unrestricted net asset revenue streams will help achieve mission goals. Proactive, strategic planning and informed cash management maximize momentum and tell forward-thinking financial stories.
The Strategic Decision-Maker: Paving the Way for Mission Success
To ensure the fiscal year financial and mission stories go as planned, the CFO cannot be a passive bystander; he or she must be an active participant and Strategic Decision-Maker who pushes the organization along the right path to financial and mission success.
This role is a test of the CFO’s professional judgment, logic, analytical capacity, and ability to solve problems. There are four areas where the CFO’s role as Strategic Decision-Maker are of existential importance:
- Meeting short-term and long-term financial goals
- Managing cash effectively
- Investing in the mission in a timely manner
- Increasing development capacity
Tip: Commit to making timely investments that lead to positive outcomes. Decisions should not be predicated by cash on hand. Identify cash reserves, fixed assets, and designated investments to keep the business office ahead of the Finance Committee curve.
The Cultural Trendsetter: Building Bridges Across the Organization
As a Cultural Trendsetter, the CFO creates an environment in which finance and program are aligned, integrated, and transparent with one another so that both are working to achieve mission success. This role enables the CFO to feel part of a team as a leader, partner, and participant in the important work of the nonprofit.
The Cultural Trendsetter:
- Establishes and nurtures mutually beneficial relationships
- Emphasizes transparency and clarity of bottom-line impact to build trusting relationships
- Effectively communicates finance and mission goals
An enjoyable partnership between the executive director, board of directors, and CFO is one of trust, where the CFO, given their seat at the leadership table, offers the solutions and drive necessary to achieve collaborative, mutually understood mission goals. As a trusted strategic advisor to the CEO, department directors, and the finance committee, the Cultural Trendsetter CFO fosters partnerships which inexorably push the organization forward.
Tip: Create mutually beneficial relationships across the organization. Structure relationships that are mutually beneficial for all parties and will ultimately benefit the organization as a whole in the long term. One of the questions that you should always ask when you’re interacting with your program and development teams is, “How can finance help your department grow and maximize impact?”
“The Whole is Greater Than the Sum of its Parts.”
The successful fulfillment of these roles—the Builder, Strategist, and Cultural Trendsetter—hinges on understanding the nonprofit’s needs, aspirations, and impact. In other words, the goals and strategic motivation of the finance function should be a reflection of what the organization wants to do, when it wants to do it, and how they should do it in order to have the greatest impact.
Ultimately, it is incumbent on the nonprofit CFO and on the financial function as a whole to make mission success happen. It’s a lot of pressure, but a nonprofit CFO who is motivated to meet the challenge and opportunity will play a critical role in securing a lasting legacy for the organization.
ABOUT THE AUTHOR
Russell Pomeranz has thirty years of experience leading the finance and administrative departments of nonprofit organizations with missions related to social services, education, the arts, and think tanks. Pomeranz started his own consulting firm, The Claverack Advisory Group, to focus on the critical connection between the nonprofit finance function and organizational programmatic, strategic, and financial trajectories. Before establishing a consulting practice, Pomeranz was COO/CFO of the Vera Institute of Justice, director of finance at the Council on Foreign Relations, and CFO at Spence Chapin Services to Families and Children. He served as business manager of the Maret School, where he taught geometry, and served as adjunct assistant professor of public administration at NYU Wagner. He has served on the NPCC Nonprofit Excellence Awards Selection Committee for the past several years.
Pomeranz is chair emeritus and current treasurer of Workforce Professionals Training Institute (WPTI), president emeritus of the Columbia County Historical Society, and treasurer of JobPath NYC. He also serves on the board of several other nonprofits. He has been published in The New York Times, Chronicle of Philanthropy, Wall Street Journal, and CPA Journal. He has a degree in economics from Haverford College and an MBA from the University of Michigan.