Anyone interested in starting a public-benefit 501-c-3 charitable organization should familiarize themselves with a few core components.

First Questions

Is the organization really needed?  Would partnering with an existing organization which offers complementary services be a better use of resources? If you answered yes to the first question and no to the second, continue reading.

Legal Requirements

First, there are legal requirements: filing Articles of Incorporation with the Secretary of State; establishing a board of directors (typically a minimum of a President, Treasurer and Secretary serving as officers is required); and applying for tax-exempt status with the IRS (most major donors, foundations, etc. will not contribute financially otherwise).

None of the regulatory requirements are difficult, although they can be time-consuming to complete. It may make sense to hire a nonprofit consultant, accountant or attorney familiar with the nonprofit sector to assist.

Once the technical aspects of establishing a nonprofit organization are complete, the more interesting and challenging components come into play, among them:

Fundraising (Developing a broad-based, diverse funding stream to ensure long-term viability)

One of the biggest mistakes nonprofit organizations make is being overly reliant on any one funding source. The goal is to create a multi-faceted, diverse fundraising plan. Especially in today’s economy, no funding source is guaranteed. Ideally, a fundraising matrix should include: private foundation grants, government grants, community foundation grants, earned income, revenue generated through events, planned giving, major donors, direct mail solicitation, corporate partnerships, on-line donations, etc.

Fundraising comes down to relationships. People (and this includes foundations and large corporations) give to people. Cultivating relationships is key.

Board structure

Critical to the success of the organization is a functional and engaged board of directors, comprised of a healthy blend of impassioned, committed professionals and influential stakeholders willing to share expertise, resources and to provide the executive director entrée to leaders in various spheres of influence.

Committee structure is also important (small, nimble committees are preferable). Typical committees include Executive, Finance, Marketing, Fundraising as well as a variety of time-limited, outcome-specific ad hoc committees created from time to time. Committee work is a great way to keep directors involved, engaged.

Relationship/coalition-building (developing stakeholders, political allies, colleagues, constituents, funders)

Relationship-building is the single most important task of nonprofit executive. Indeed, no one can accomplish much in isolation, but when leaders among various spheres of influence come together around a common cause, anything is possible. One important job of the leader of the organization is to engage influential people to “join the bandwagon.”

Boards can only do so much. And, many influential people won’t serve on yet another board. However, almost everyone will give 20 minutes of their time, or is willing to sit on a time-limited ad hoc committee, or serve on an advisory board (with the clear expectation that they can be called on from time to time for their expertise).

Organizations can save untold thousands of dollars by developing relationships and subsequently tapping into the expertise of attorneys, accountants, marketing executives, media professionals, etc., willing to provide modest pro bono services.

The job of influencing a community or gathering support for a cause becomes much more doable when the burden is shared with others with clout that can lend credibility and are in a good position to spread the “virus.”

Outcomes (Determining desired results, best practices to achieve those results, and best means to measure and report results)

Critically important is having systems in place to gather, analyze, and report outcomes. Evaluation plans should be interwoven into program design. Having a clear plan in place for what the organization is going to accomplish (objectives), how it’s going to go about it (methods), and how it will know if it does or not (evaluation) is invaluable in satisfying funders, clients and stakeholders as well for internal analysis.

High quality evaluation/reporting systems are one of the best ways to ensure transparency and earn the trust of the community.

Quality Assurance (Striving to ensure every component is high quality, conforms to best practice standards, etc.)

Improving the quality components of all programs and the organization as a whole is an on-going process. It is important to set high standards and to perpetually seek ways to improve – through researching best practice models, prioritizing staff development and placing a high value on training. There’s no need to re-create the wheel. Rather, it’s important to identify comparable programs and learn from the best ones. Borrow well.

Forecasting

Being able to see the forest for the trees is an important attribute for a nonprofit leader. Understanding trends and patterns in philanthropy, staying on top of legislation, remaining apprised of latest research and best practice standards… all influence an administrator’s reliability in crafting realistic longer-term agency goals.

Mission/Vision/Policies/Procedures

A thoughtfully crafted mission statement will guide and inform decisions throughout the existence of the organization. A vision statement sets the course for some period of time. Policies and Procedures provide framework/infrastructure for day-to-day operations. An evolving organization is advised to give the formulation (and perhaps revision) of the mission statement, in particular, the proper attention it deserves.

Personnel (Identifying Needs to be Filled, Job Descriptions)

Among the first board tasks of a newly formed nonprofit is hiring the executive director, who serves as the organizations CEO and then has responsibility to hire other staff.

Finding (and retaining) the best talent possible is always a challenge. Most nonprofit administrators list “personnel issues” as their top frustration. The job of an administrator is much more manageable if he or she is surrounded by competent, passionate, skilled staff. Likewise, staff who describe their supervisor as loyal, supportive, flexible, honest and committed to their professional growth are certainly more likely to perform well and stay longer.

Identifying the right performance appraisal instrument is important. The tool serves numerous purposes: to clarify staff expectations; to identify and subsequently monitor progress of objectives; to provide tangible, well-documented data for the purposes of merit-based salary adjustments and promotions, etc. Used properly, performance appraisal tool can serve as a useful “road map” and a fair method to quantify work performance.

Culture (Creating thoughtful office norms, philosophies, ideals, values)

Shaping a work environment which fosters productivity, loyalty, camaraderie; one which simultaneously celebrates diversity (in the myriad ways in which the word is defined) while inspiring unity and cohesion is one of the trickier tasks for a manager. And one of the most fun. A good amount of time should be spent asking those large existential questions, “Who are we?” and “What do we value?”

As a supervisor, certain qualities are important to model: a strong work ethic, commitment to customer service, honesty, flexibility, trust, balance, accountability, individuality, fairness. Hire competent people and stay out of their way (while always being available for guidance, support). Recognizing that work isn’t the only important aspect of an employee’s life will earn an administrator reams of respect from his or her employees.

Trust and respect are at the core of any high-performing organization and should be guiding values when crafting personnel policies, etc.

Note: keep in mind that running a nonprofit is running a business. That’s not to say that the administrator of the organization should have an MBA (although it wouldn’t hurt). Most nonprofit execs move up through the ranks without a lot of fiduciary experience. That’s ok, as long as the board understands the importance of providing tools and training necessary to be successful. An executive director who can’t find his or her way around a P & L sheet is not a good sign and can be very frustrating for board members from the corporate community on the finance committee, for example.