Enterprise Risk Management, a New Frontier for Nonprofits

By | COSO, ERM, Nonprofit | No Comments

How well does your nonprofit measure risk? Risks occur in almost every aspect of business. Managing risk is part of a leader’s job. Enterprise risk management, or ERM for short, offers opportunities to both mitigate and manage risks as well as seize opportunities that present themselves to your organization.

ERM Defined

ERM embraces elements of internal controls, the Sarbanes-Oxley Act, and strategic planning. It also echoes the marketing SWOT analysis (strengths, weaknesses, opportunities and threats) by exposing weaknesses and threats and enhancing opportunities and strengths.

ERM evolved as a method to assess risks in a complex business environment. It applies equally as well to nonprofit organizations as it does to for profits, helping senior leaders assess risks and respond appropriately once all of the risk factors and influences are known.

COSO Recommendations

The Committee of Sponsoring Organizations and Treadway Commission (COSO) recently released a new ERM framework. To use it effectively, COSO recommends the following:

  1. Compare your current ERM practices to the five components and 20 principles of the framework, Enterprise Risk Management — Integrating With Strategy and Performance.
  2. Identify opportunities as they pertain to specific principles that might add the most value and might help your organization manage risk better.
  3. Watch out for and identify areas of potential risk. Potential areas of risk are typically new items added to a system, such as new software, new regulations, new programs or other major changes. Anytime there is significant change, there is risk.
  4. Evaluate the alternatives. If you have identified and evaluated alternatives, you can mitigate risk by having a second or third option to turn to in the event that the first is too risky.
  5. Examine the business context of the risk and reward. If the reward outweighs the risk, it may be time to act.
  6. Note connections. Business decisions rarely stand in isolation and are frequently interconnected. Some risks may have a domino effect, imparting additional risks or openings for risk in other areas of the business. Conversely, closing gaps and mitigating risks may have positive impacts. Understanding these impacts is vital for good management.

Frameworks Can Free or Limit

Does the ERM framework feel freeing or limiting? Some leaders claim they can manage just fine without a risk management framework such as ERM while others find it helpful.

Why do some leaders find frameworks stultifying rather than freeing? It may be because they automatically think in terms of such frameworks without consciously applying them to the decision-making process. For example, an experienced nonprofit leader may think ahead to the risks of a potential new software purchase without consciously examining them and applying them in a framework. He may come to a swift decision regarding rewards versus risks without ever saying the words risk management. This may look like instant decision-making to his colleagues, but it’s actually a skill that’s been honed through practice.

Think of an Olympic gymnast; she makes the balance beam look absolutely effortless. Yet it wasn’t always effortless. At some point her career, she had to take the first steps out onto the beam. She made mistakes and she tumbled to the ground. But over time, with continuous effort, practice, coaching and study, she’s mastered a routine that earns a gold medal.

Seasoned CEOs, CFOs, and other top organizational leaders are akin to Olympic athletes. They’ve mastered the craft of decision making and so it looks effortless.

For those who are still learning such craft, studying and practicing decision making frameworks such as ERM can help you become a gold medalist of risk management too.

For more information on the COSO framework, see Enterprise Risk Management: Integrating with Strategy and Performance.

Welter Consulting

Welter Consulting bridges people and technology together for effective solutions for nonprofit organizations. We offer software and services that can help you with your accounting needs. Please contact Welter Consulting at 206-605-3113 for more information.

What Distinguishes High Impact Nonprofits? Experts Weigh In

By | Corporate Culture, Nonprofit | No Comments

What distinguishes high impact nonprofits from average ones? The Stanford Leadership Study, spearheaded by researchers Bill Meehan and Kim Jonker, identify seven factors which they call the “engine of impact.”

These seven factors include:

  1. Mission
  2. Strategy
  3. Impact evaluation
  4. Insight and courage
  5. Organization and talent
  6. Funding
  7. Board governance

There is no one critical factor, but rather all seven must work together to propel the nonprofit forward – hence the term “engine of impact.” With a combination of all seven factors working in concert, nonprofits can serve more people and achieve their mission on a grand scale.

Only a Handful Meet the Criteria for High Impact Nonprofits

There’s good news and bad news when it comes to the engine of impact. The bad news is that only about 20% of all nonprofits believe they meet the criteria of a high impact nonprofit. The good news? Among the remaining 80% who fail to meet the criteria of high impact nonprofits, there’s plenty of room for growth, and many are well on their way to achieving it.

One core concept the study posits is  the importance of external audits or evaluations. Among the nonprofits surveyed, only about 40%  utilize external evaluations. .

What Is the Impact Engine?

These seven factors encompass many overarching concepts that set strong nonprofits apart from struggling ones. Mission and vision, for example, provide leadership and guidance not just at the top, but to all who work at the nonprofit. With a strong mission and vision statement, nonprofits can guide, organize, and adjust their work to fulfill the mission and ensure that all work they undertake supports their mission-driven environment.
Funding is another example of a broad concept that has specific, measurable impacts. Funding, talent organization and board governance  comprise the fuel that keeps the engine of impact turning. Without enough fuel, a car sputters and stops. So too, a nonprofit without adequate funding, poor funding management, and poor governance and organization cannot achieve success as a strong nonprofit.

What Are Nonprofits Doing Right?

Among the nonprofits surveyed during the study, several key findings emerged.

  • 56% of the nonprofits in the study had Board Governance in place, with Funding close behind at 52%.
  • 50% of nonprofits had systems in place to evaluate their impact, which is more positive news. Without such an evaluation, it is difficult to assess areas of focus for the future.

Where did nonprofits fall short?

  • Just 35% had a stated strategy in place
  • 18% lacked a clear Mission statement
  • 17% lacked insight and courage, two elements that enabled nonprofits to take a long, hard look at their work, evaluate its success or failures, and make improvements for the future.

How Does Your Organization Measure Up?

Before you decide where your organization fits in this evaluation, the study’s authors have put together a free online quiz to help you assess your nonprofit. Take the quiz, then return to the Welter Consulting website for more information and articles to help you build your nonprofit impact engine.

Take the Next Step with Welter Consulting

After completing the nonprofit impact engine survey, how does your organization measure up?

Most organizations will find one or more areas in which they could improve. That’s nothing to panic about. Instead, it provides ample opportunities for change and growth.

Once you’ve identified key areas with room for improvement, it’s time to get to work. If you’re unsure where to start, contact Welter Consulting. Welter Consulting bridges people and technology together for effective solutions for nonprofit organizations. We offer software and services that can help you with your accounting needs. Please contact Welter Consulting at 206-605-3113 for more information.

Managing Millennials: The Myths, the Realities, and Somewhere In Between

By | Accounting, Millennials, Nonprofit, Technology | No Comments

Ah, millennials…you either love them or loathe them. However, you won’t be able to avoid them for long. That’s because millennials, defined roughly as those born between 1977 and 1995, represent the largest demographic ever, even outstripping the famous Baby Boom of the 1960s.

Millennials carry with them a lot of baggage, especially in the realm of workplace myths. For example, some myths that surround millennials are that they’re good with technology, independent, and lazy.

The truth is, of course, that some millennials fall into this categorization and others are defying it. Here are the facts about managing millennials and how older generation X and Y leaders can ensure a happy, productive workplace when managing millennials.

 First Job, New Skills

Although millennials may like to work independently and may work best on their own, they still need coaching. Many millennials skipped over the afterschool jobs that older generations experienced, and they went straight from high school to college and college to careers without having any workplace experience.

Ringing sales at the local department store or slinging burgers at a fast food restaurant may not seem to correlate to working in the accounting department of a nonprofit. However, those minimum wage jobs that many older generation workers experienced as their first jobs taught valuable life skills that millennials never experienced. Showing up on time, learning customer service skills, and learning processes and procedures may not have been part of their life experience.

Do not assume that just because your new junior accountant has a college degree she understands how to work in a group, take direction, or follow procedures. She may need coaching on basic workforce behaviors. Set expectations and provide clear guidelines.

Pairing an experienced worker with your new millennial hires may also help. They may resonate with the partner or buddy system better than formal training programs and get more out of it.

Basic things like: how to dress for a business meeting, how to behave in a corporate setting, and even the importance of returning messages on time may all be new skills for your millennial employees. Take nothing for granted and consider them a clean slate with a lot to learn until they prove otherwise. They aren’t being rude; they just haven’t been taught a lot of the basics that older generations assume were learned along the way.

Millennials Are Loyal

One myth that we’d like to put aside is the myth that millennials are disloyal. The truth is that they can be loyal employees if the organizations they work for treat them right. To a millennial, that means appropriate work-life balance, challenging assignments, and valuing input. Millennials will remain at a nonprofit organization for three years or longer if they find their ideas, opinions, and talents are honored and used appropriately.

Tech-Dependent

Lastly, there’s a myth that millennials are tech-savvy. In actually, they are tech-dependent, and that’s a whole different story. Tech-dependent means they rely upon their devices to the point that they feel they can’t work without them. We may feel we can’t leave the house without our watch; they feel they can’t leave the house without their iPhone.

Millennials may not be technically savvy: Meaning that they may not be able to solve computer problems, understand how to integrate an API into the back end of an accounting program, or any of the myriad other technical problems we encounter in our work days. They do, however, know how to use their devices and rely upon them for many basic things.

Consider this when communicating with millennials. They may turn to their text messages first rather than their office phone lines for messages. They may rely upon instant messages, texts, emojis or other methods of communicating rather than picking up the phone and speaking directly to you. It’s not that they don’t value direct communication. It’s just not their first inclination.

Every generation interacts differently in the workforce. We are all, to some extent, molded and shaped by the life experiences and culture we grew up in. Millennials are no different. Understanding their rationale, knowing where they have knowledge gaps, and meeting them halfway goes a long way towards helping them acclimate into your workforce and becoming productive contributors.

 

Welter Consulting

Welter Consulting bridges people and technology together for effective solutions for nonprofit organizations. We offer software and services that can help you with your accounting needs. Please contact Welter Consulting at 206-605-3113 for more information.

Feeling – and Dealing – with Being Overwhelmed

By | Abila, Accounting, Accounting Software, Budget, Cloud, Corporate Culture, Fiscal, MIP Fund Accounting, Nonprofit, Professional Development, Technology | No Comments

It’s not confined to tax season. A look at why you’re feeling overwhelmed, and how to deal with it.

In the book “Scrum: The Art of Doing Twice the Work in Half the Time”, authors Jeff and J.J. Sutherland have an interesting chart on page 91. In this chart, they cite statistics that indicate that as one’s attention is divided, productivity decreases. Working on two projects at once means a 20% loss in productivity due to switching gears; three projects at once, and you lose about 40% due to context switching.

Accountants and financial managers at nonprofits aren’t immune to this loss, due to context switching. In fact, we’re probably more vulnerable to it due to the focused nature of our work. Dealing with financial issues, accounting questions, and understanding complex financial information requires quiet, focused time. The barrage of instant messenger apps, phone calls, emails, texts and myriad information streams in today’s connected world increases the loss due to context switching. Multi-tasking for greater productivity is a myth.

If you’re feeling overwhelmed, you’re not alone. Nearly all professionals are feeling overwhelmed these days. It’s as if the crunch before tax season never ends. Researchers point to the common culprits – instant messengers, instant news, instant everything – as a big part of the problem. The human brain isn’t wired to deal with this level of intensity, and we haven’t had time to adapt to the rapid pace of change that technology has wrought in our personal and business lives.

Although we cannot fully shut the world out and switch off the phones, there are ways to improve productivity. These include avoiding context or task switching, single-tasking instead of multi-tasking, and establishing boundaries around office times.

Single-Tasking for Greater Productivity

Multi-tasking does not improve productivity. Instead, it diminishes productivity because the mind needs time to acclimate to the second task. As we focus on one task, our attention is fixed on that task; switching to a second task takes brain power to establish focus, change direction, and process new information.

Don’t buy into the myth of multi-tasking. Instead, turn off the music or the television while you work. Shut the door to your office. Switch off the instant messages and turn your cell phone to mute while you work on a project. Allow yourself the space to focus, rather than trying to cram as many tasks as you can into the same amount of time.

Set Office Rules

Another tip to improve productivity and avoid feeling overwhelmed is to set some basic ground rules around your time in the office. While many managers prefer an ‘open door’ policy and make themselves available to their staff at any time, you may need to establish some basic policies around availability.

Some managers have ‘office hours’ when they leave their door open as a clear signal to their teams that they can drop in and ask any questions they wish. Others block out time on their calendar for quiet, focused work. Either method works fine. The point is to ensure that you have adequate quiet time for focused work and additional time blocked out for your teams.

Switch Off the Mobile Phone

 Cellphones are a great convenience, but their buzzing, shrilling, vibrating presence has ruined many a meeting, family dinner, or quiet time. Shut off the mobile phone when you aren’t at work or when you need some space. Texts are rarely as urgent as we make them out to be, and your brain needs a break from the constant stream of messages and information it’s trying to process.

Give Yourself Permission to Rest

 Lastly, give yourself permission to rest on the weekends, vacations and holidays. When you’re behind schedule on projects, it is tempting to trying to bring work home or devote a few extra hours in the evening to finishing up a project. Occasionally burning the midnight oil doesn’t hurt  but making it a habit can cut into your overall productivity. Ensuring balance in all things takes time, practice and effort, but it helps your overall productivity.

Everyone feels overwhelmed at times by work. If it becomes chronic, however, it’s time to take steps to safeguard your time. Burnout happens in all professions, including accounting and finance, nonprofit and for-profit companies.

 

Welter Consulting

Welter Consulting bridges people and technology together for effective solutions for nonprofit organizations. We offer software and services that can help you with your accounting needs. Please contact Welter Consulting at 206-605-3113 for more information.