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Premium member Presentation Transcript The Path to Building a Sustainable Organization from the "Inside Out": The Path to Building a Sustainable Organization from the "Inside Out" 2012 APGA ConferenceWelcome: Welcome Robert Mermelstein, CFO Phipps Conservatory and Botanical Gardens Ivy Silver, VP, Gallagher Benefit Services Joseph Wert, Practice Leader, Gallagher Benefit Serviceswhat you can expect: what you can expect defining organizational sustainability what is the “iron triangle” the human side of organizational change sustainable financial practices governing organizational changeIn 2011 it is estimated that more than 250,000 nonprofit organizations ceased to exist : In 2011 it is estimated that more than 250,000 nonprofit organizations ceased to existsustainability defined: sustainability defined sus·tain·a·bil·i·ty [suh-stey-nuh-bil-i-tee], noun, the ability to be sustained, supported, upheld, or confirmed Financial sustainability is the ability of an organization to maintain its capacity in good times and bad.the “Iron Triangle” : Mission and Program Organizational Capacity Financial Capacity the “Iron Triangle” 1 as adapted from the Nonprofit Finance Fund, “Linking Mission and Money”, 2001PowerPoint Presentation: Mission and Program – why the organization exists and what it provides to its stakeholders Organizational Capacity – the ability of an organization to operate its business through its people, operating controls and processes Financial Capacity – the organization’s capital structure…the distribution of its financial assets and liabilities Mission and Program Organizational Capacity Financial Capacitysustainable balance: sustainable balance Managed growth requires that a balance be struck between the pace of program growth on the one hand, and the pace at which organizational and financial capacity can grow on the other.the challenge: the challenge If you pursue every program that satisfies your mission without regard for organizational and financial viability, you’ll get to retire early … because you won’t have an organization to work for very long! How do you decide which programs to pursue and which programs to table?activity: 2 persons : activity: 2 persons Person 1: Describe a new program, project or initiative at your organization that is unsustainable. Person 2: Describe a new program, project or initiative at your organization that is sustainable.organizational capacity : organizational capacity Sustainability QuestionPowerPoint Presentation: Mission and Program Organizational Capacity Financial CapacityPowerPoint Presentation: Do we communicate our SHARED VALUES throughout the work environment? Do we have a STRATEGY that is aligned with our mission and communicated to our staff? Do we have STRUCTURES that support the performance, interdependence, and engagement of our talent? Do we have SYSTEMS to acquire, develop, and retain our talent and help us keep on track with our performance? *attributed to McKinsey 7S Framework MethodologyPowerPoint Presentation: Do we have STAFF positions that need to be reallocated, and are there gaps in our required competencies? Do we know the emerging SKILLS that are required of our staff to continue our success in the future? Does our leadership STYLE align, motivate and demonstrate our commitment to staff that we have?external environment: external environmentinternal environment: internal environmentconstraints and strengths: constraints and strengthsexecute and measure: execute and measurecelebrate and start again!: celebrate and start again! “In the long run, we hit only what we aim at” : “In the long run, we hit only what we aim at” Henry David Thoreaufinancial capacity: financial capacity Strategies for Long-Term SuccessPowerPoint Presentation: Mission and Program Organizational Capacity Financial Capacityfinancial capacity: financial capacity The negligence of financial capacity is widespread. It is the corner of the triangle most ignored. There is a belief in the nonprofit sector that energy, will power, stamina and enthusiasm can overcome all obstacles.financial capacity: financial capacity When things go bad, the temptation in the face of adversity is to say to oneself, "We must work harder," rather than to look at the balance sheet – where money is or is not allocated – for systemic reasons for failure.beware of growth: beware of growth Growth can and should be a good thing. But unmanaged growth of an organization can spell disaster for an organization. Growth can exacerbate, rather than alleviate, financial capacity and can lead to a capital structure that does not support the organization.programs and financial capacity: programs and financial capacity Each program contributes very differently to financial capacity. Some programs are cash cows, some are cash pigs. Like all else, you must be able to see the forest through the trees. Understand how all of your programs contribute individually and collectively to the financial capacity of the organization.capital structure: capital structure Understand your balance sheet and how it supports your mission and programs and organizational capacity.capital structure: capital structure Our facilities often represent our most significant investment with profound long-term implications for operations and capacity. Often, our primary source of funding for growth is contributions from funders. They traditionally ignore the big picture and focus on individual programs.capital structure: capital structure There is a growing realization that funding program costs without meeting the associated (and necessary) additional organizational costs is as short-sighted for the funder’s mission as is the operating nonprofit’s pursuing mission-related programming without regard to long-term resource implications.capital structure: capital structure Think beyond today. Consider the long-term implications of every decision that you make. Every decision has an underlying financial ramification. Understand those ramifications and address them in developing your strategy for building financial capacity.sustainable governance: sustainable governance Who’s in Charge?sustainable goverance: sustainable goverancescenario : scenario Annual Employee Benefit Plan Open Enrollment This years renewal for health insurance incurred a 24% increase in rates. The broker said there was nothing they could do about that. Employees have not received a Cost of Living increase in almost 3 years and there is premium cost sharing with the employees. Any cost increase has an impact on those who enroll. Employee moral is a bit shaky right now and the Executive Director is considering installing a Voluntary Benefits program because there are a number of maternity cases without a short term disability plan in place for lost time.at the board meeting: at the board meeting Unsustainable How many carriers did we review? How much more is it to lower the health insurance copay? These cost increases are ridiculous. Let’s drop the insurance I heard Sara in Accounting had a stroke. Are her claims driving this increase? At my worksite I have to pay more for benefits, so should our employees Sustainable Do these increases impact the ratio of benefits to compensation target % within our compensation philosophy? How does the turnover rate for employment compare to last year? What is the percentage of pay that an employee must spend? What were the results of the employee engagement survey? What is our competitive market position relative to our defined benchmark organizations? How is trend being managed against?activity: 3 groups what is a sustainable response?: activity: 3 groups what is a sustainable response? Scenario 1 5 of the 8 senior positions are held by individuals 55 years and older. Scenario 2 The landscape teams have developed an expertise in edible plants. Scenario 3 Your “competitor” organization is in fiscal trouble.PowerPoint Presentation: Corporation are built to respond to market forces. Nonprofits are built to respond to mission.PowerPoint Presentation: sustainability decision making requires intention, discipline, focus and the right information, at all levels of an organization, especially at the board level.goverance models Demb and Neubauer (1992)* : goverance models Demb and Neubauer (1992)* The watchdog : provides total oversight and has no direct involvement in the organizations activities The trustee : the board behaves like a guardian of assets and is accountable to the members and society for those assets The pilot : the board takes an active role in directing the business of the organizationidentifying sustainable board actions: identifying sustainable board actions Can a Nonprofit act like a Corporation?origins of change: origins of changemaster your destiny, or someone else will: master your destiny, or someone else willthe dash board: the dash boardyour tool box: your tool box build sustainability within the organization philosophy board and staff training board self assessment board and staff job descriptions with embedded expectations of sustainability committee charters well designed meeting agendas impactful and reviewed dashboardswhat else would you like to know?: what else would you like to know?contact us, please!: contact us, please! Robert S. Mermelstein, CFO, Phipps Conservatory and Botanical Gardens P: 412-441-4442 x3922 F: 412-665-2368 firstname.lastname@example.org Ivy Silver, VP, Gallagher Benefit Services P: 610-230-2120 C: 215-230-4381 Ivy_Silver@ajg.com Joseph A. Wert, Practice Leader, HR Advantage (a division of Gallagher Benefit Services) (973) 650-0309 P: 973-650-0309 joseph_wert@HRadv.com How can we help you?PowerPoint Presentation: No part of this document may be reproduced or transmitted in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise, without prior written permission of the American Public Gardens Association. Copyright © 2012 by the American Public Gardens Association All rights reserved You do not have the permission to view this presentation. In order to view it, please contact the author of the presentation.