Management of non profit organisation module 3

Management of Non profit Organization -MODULE 3
UMA K, Assistant Professor. Page 1
Module 3: Governance and Professionalism: Governance process and Board role; Credibility
andlegitimacy issues; Professionalism, Productivity and measurement of quality
Governance and Professionalism
 Governance process and Board role;
 Credibility and legitimacy issues;
 Professionalism,
 Productivity and measurement of quality
Introduction:
In any operating environment, well governed organizations are more effective and more
likely to be successful than poorly governed ones.
It is because good governance systems focus on activities which contribute to achieve the
objective for which the organization exists.
Good governance is even more important for organizations in the voluntary sector, as compared
to those in the for profit sector.
As the voluntary organizations are required to deliver more services and are accountable to its
members, donors, and various stakeholders whereas the for profit organizations are primarily
accountable to their shareholders to provide a benefit in form of profits.
Governance is the systems and processes concerned with ensuring the overall direction,
effectiveness, supervision and accountability of an organization.
Governing is about:
 Agreeing the purpose of the charity or non profit
 Agreeing broad strategies to carry out the charity or non-profit’s purpose effectively
 Accounting for the non-profit’s performance
 Ensuring it operates within the law.
Corporate or a Corporation is derived from the Latin term “corpus” which means a “body”.
Governance means administering the processes and systems placed for satisfying stakeholder
expectation. When combined, Corporate Governance means

Meaning of Governance
“Governance” is a word derived from the French word “Gouvernance” and was first used
in English by Chaucer. Governance is the way in which an organization is managed or
administered.
In simple terms “Governance” means “the process of decision making and the process by
which decisions are implemented or not implemented”.
Governance is the primary duty of every Trustee, working in what so ever capacity, to ensure
sound, proper and effective functioning of the Trust.
One is bound to follow all the statutory provisions applicable to such Trusts under
different laws, guidelines, notifications and Executive Orders issued by the appropriate
Government authorities.
 a set of systems,
 procedures,
 policies,
 practices,
 Standards put in place by a corporate to ensure that relationship with various
stakeholders is maintained in transparent and honest manner.
The heart of corporate governance is transparency, disclosure, accountability and integrity. It
is to be borne in mind that mere legislation does not ensure good governance. Good governance
flows from ethical business practices even when there is no legislation.
Corporate Governance is integral to the existence of the company.
Corporate Governance is a system of structuring, operating and controlling a company
with the following specific aims:—
 Fulfilling long-term strategic goals of owners;
 Taking care of the interests of employees;
 A consideration for the environment and local community;
 Maintaining excellent relations with customers and suppliers;
Proper compliance with all the applicable legal and regulatory requirements
Characteristics or Elements of Good Governance in NPO:
Good governance has 8 major characteristics.
 It is Participatory,

 Consensus
 Oriented,
 Accountable,
 Transparent,
 Responsive,
 Effective and Efficient,
 Equitable and Inclusive and
 Follows the Rule of Law.
Characteristics of Governance: Good governance has 8 major characteristics. Its participatory,
consensus oriented, accountable, transparent, responsive, effective and efficient, equitable and
inclusive and follows the rule of law. It assures that corruption is minimized, the views of
minorities are taken into account and that the voices of the most vulnerable in society are heard
in decision-making. It is also responsive to the present and future needs of society.
1. Participation: Participation by both men and women is key cornerstone of good governance.
Participation could be either direct or through legitimate intermediate institutions or
representatives. It is important to point out that representative democracy does not
necessarily mean that the concerns of the most vulnerable in society would be taken into
consideration in decision making. Participation needs to be informed and organized. This
means freedom of association and expression on the one hand and an organized civil society
on the other hand.
2. Rule of law: Good governance requires fair legal frameworks that are enforced
impartially. It also requires full protection of human rights, particularly those of
minorities. Impartial enforcement of laws requires an independent judiciary and an
impartial and incorruptible police force.
3. Transparency: Transparency means that decisions taken and their enforcement are done in
a manner that follows rules and regulations. It also means that information is freely
available and directly accessible to those who will be affected by such decisions and their
enforcement. It also means that enough information is provided and that it is provided in
easily understandable forms and media.

4. Responsiveness: Good governance requires that institutions and processes try to serve all
stakeholders within a reasonable timeframe.
5. Consensus oriented: There are several actors and as many view points in agiven society.
Good governance requires mediation of the different interests in society to reach a broad
consensus in society on what is in the best interest of the whole community and how this can
be achieved. It also requires a broad and long-term perspective on what is needed for
sustainable human development and how to achieve the goals of such development. This can
only result from an understanding of the historical, cultural and social contexts of a given
society or community.
6. Equity and inclusiveness: A society’s well-being depends on ensuring that all its members
feel that they have a stake in it and do not feel excluded from the mainstream of society.
This requires all groups, but particularly the most vulnerable, have opportunities to improve
or maintain their well-being.
7. Effectiveness and efficiency: Good governance means that processes andinstitutions
produce results that meet the needs of society while making the best use of resources at
their disposal. The concept of efficiency in the context of good governance also covers the
sustainable use of natural resources and the protection of the environment.
8. Accountability: Accountability is a key requirement of good governance. Not only
governmental institutions but also the private sector and civil society organizations must be
accountable to the public and to their institutional stakeholders. Who is accountable to whom
varies depending on whether decisions or actions taken are internal or external to an
organization or institution. In general an organization or an institution is accountable to those
who will be affected by its decisions or actions. Accountability cannot be enforced without
transparency and the rule of law.
Need For Governance:
“Corporate governance deals with laws, procedures, practices and implicit rules that
determine A Company’s ability to take informed managerial decisions vis-à-vis its
claimants - in particular, its shareholders, creditors, customers, the State and employees.
There is a global consensus about the objective of ‘good’ corporate governance: maximizing
long-term shareholder value.” By Confederation of Indian Industry (CII).

Governance is needed to create a corporate culture of transparency, accountability
and disclosure. It refers to compliance with all the moral & ethical values, legal
framework and voluntarily adopted practices.
1) Corporate Performance: Improved governance structures and processes ensure quality
decision-making, encourage effective succession planning for senior management and enhance
the long-term prosperity of companies, independent of the type of company and its sources of
finance. This can be linked with improved corporate performance- either in terms of share price
or profitability.
2) Enhanced the donor’s trust: donors consider governance as important as financial
performance when evaluating NPOs for donation. Donors who are provided with high levels
of disclosure and transparency are likely to donate openly in those NPOs.
3) Better access to Global level: Good corporate governance system attracts donation
from global donors, which subsequently leads to greater efficiencies in the financial sector.
4) Combating/ Fighting Corruption: NPO’sthat are transparent, and have sound system
that provide full disclosure of accounting and auditing procedures, allow transparency in all
business transactions, provide environment where corruption would certainly fade out. Corporate
Governance enables an organization to compete more efficiently and prevent fraud and
malpractices within the organization.
5) Enhancing Enterprise Valuation: Improved management accountability and
operational transparency fulfill donor’s expectations and confidence on management and
corporations, and in return, increase the value of NPOs.
6) Reduced risk of crisis and Scandals: Effective Governance ensures efficient risk
mitigation system in place. A transparent and accountable system makes the Board of a
company aware of the majority of the mask risks involved in a particular strategy, thereby,
placing various control systems in place to facilitate the monitoring of the related issues.
7) Accountability: Donors relations are essential part of good corporate governance.
Donors directly/ indirectly entrust management of the company to create enhanced value for
their donation. The company is hence obliged to make timely disclosures on regular basis to

all its members in order to maintain good donors’ relation. Good Corporate Governance
practices create the environment whereby Boards cannot ignore their accountability to these
stakeholders.
Good governance ensures:
 compliance with law and regulation
 that an organization is well run and efficient

that problems are identified early and dealt with appropriately

the preservation of the reputation and integrity of the sector

That charity makes a difference and the objects of the charity are advanced.
Principles that promote Good Governance in NPO:
1. There should be clarity regarding individual director responsibilities
2. A board needs to have the right group of people
3. The board sets the vision; mission and strategies of the organization
4. The board has a role to play in enhancing the capabilities of the organization they serve.
5. The board sets the tone for ethical and responsible decision-making throughout NPO.
6. The board helps NPO to engage effectively with its stakeholders.
Outcome of Good Governance:
1. Trust in the organization by its donors, members and the stakeholders
2. The organization can achieve the goal
3. The organization has the ability to forecast the crises
4. Financial stability
5. With Management by Objective (MBO), there will be better environment
GOVERNANCE PROCESS AND BOARD ROLES IN NPO:
Governance is the key to open, transparent and equitable society. Sound governance of an
organization is a subjective issue and therefore it is very important to perceive the importance
and relevance of governance with regard to the values, mission and vision of an organization.
Governance process in NPO/ NGO:
1. Board
a) Functions and responsibilities of the board

b) Decision making by the board
c) Basic steps for decision making by the board
2. Financial Management
a) Budgeting
b) Financial record keeping systems
c) Financial reporting systems
3. Legal compliances
4. Internal controls systems
a) Budgetary controls
b) Organizational controls
c) Accounting controls
d) Supervisions controls
e) Management controls
f) Safeguarding controls
g) Preventive controls
5. Communication
a) Determining information flow
b) Communicating with and reporting to stakeholders
c) Management Information system
6. Conflict management
Key Persons of Non -profit Organization Governance:
For successfully running of an organization whether profit or non profit
corporations, these people play a dominate role in their achievement.
The board’s role is to provide entrepreneurial leadership of the company within a
framework of prudent and effective controls which enables risk to be assessed and
managed.
The Board of Directors plays a pivotal role in ensuring good governance. The
contribution of directors on the Board is critical to the way a corporate conducts itself.
A board’s responsibilities derive from law, custom, tradition and current practice. In the
present times transparency, disclosure accountability, issues of sustainability, corporate
citizenship, globalization are just some of the concerns that the Boards have to deal with. In

addition, the Boards have to respond to the explosive demands of the marketplace. This two
dimensional role of the Board of Directors is the cornerstone in evolving a sound, efficient,
vibrant and dynamic corporate sector for attaining of high standards in integrity, transparency,
conduct, accountability as well as social responsibility.
1. Board:Board of a NPO plays a very crucial role in the functioning of the organization. With
the limited funds, greater demand for services, need for transparency and accountability and the
NPO need to increase the creditability and effectiveness by following the sound practices.
Therefore, the boards of the NPO whether new, established or in transition, should work
together to fulfil their roles.
Functions and responsibilities of the board
• To establish the organization’s mission, vision and direction
• Represent the stakeholders
• Responsibility and reporting to stakeholders
• Strategic direction: Develop and implement the long term plan
• To ensure good financial health of the organization
• To ensure sufficient and appropriate human resources
• To direct organizational operations
• ensuring compliance with the objects, purposes and values of the organization
• Setting and approving policies, plans and budgets
• Ensuring that the organization complies with all relevant laws, regulations
• Setting and maintaining a framework of delegation and internal controls
• Providing an accounting structure to management
• Direct and advise management
• Ensure transparency of the process
Decision making by the board: During decision making , the board should
• Draw on the expertise of all board members
• Make clear, well thought and decision
• Formally record decisions for future reference, and for legal purpose
• Communicate the decision to the appropriate parties
Basic steps for decision making by the board:

• Recognize and define problem
• Examine the problem
Three most common ways during the meeting are:
Brainstorming
Buzz groups
Discussion groups
2. Financial Management
a) Budgeting
Budgeting process in one of the most important aspects of an NGO. Budgeting is nothing
but the financial planning which includes the cost element to the planned actions on the basis
of sources and application of funds.
b) Financial record keeping systems
 For project management i.e., know how much money has been spent and on what?
 For controls purposes i.e., to check that funds are not misused
 For budget monitoring and planning
 To comply with the local legal requirements
 To comply with the donors requirements
c) Financial reporting systems
The board should make sure to get the accurate financial information about the
organization at regular intervals
3. Legal compliances
The board should ensure that the organization is not violating any local laws and regulations.
Some of the laws that are applicable to an NGO are:
• Income Tax Act 1961
• Foreign Contribution Regulation Act 1976
• Societies Registration Act 1860
• Companies Act 1956
• The Employees provident funds and miscellaneous Act 1952
• The Payment of Gratuity Act 1972
4. Internal controls systems

Internal control systems operate at all levels within an organization. The main objectives
achieved by internal control systems are:
• To provide reasonable assurance regarding the achievements of specific objectives
• To achieve efficiency and effectiveness in operations
• To achieve reliability, completeness and timeliness in preparation of financial and
management information
• To ensure compliance with applicable laws and regulations
Following are the internal controls systems in NPO;
a) Budgetary controls e) Management controls
b) Organizational controls f) Safeguarding controls
c) Accounting controls g) Preventive controls
d) Supervisions controls
5. Communication:
Each organization should identify people with a legitimate interest in its work like the
members, stakeholders and public and regularly inform them about the affairs of the
organizations.
a) Determining information flow:
In order to ensure effective communication, the board should ensure:
• Establish policies for communication and feedback
• Establish a code of ethics for the board
• Establish a complaint and grievance procedure
• Respond appropriately to requests for information
b) Communicating with and reporting to stakeholders:
One of the essential tools that promote transparency in an organization is reporting to the
various stakeholders.
• Their views are taken into account in the organization’s decision making
• They are informed and consulted on the organization’s plans and proposed developments
• The Organization’s performance, impacts and outcomes are reported to stakeholders
c) Management Information system: Information must be capable of being used for
informative or inference purposes, arguments, or as a basis for forecasting or decision

making. Thus, it is imperative for any organization to provide right information in right
quantity, to right person, at right time.
6. Conflict management
In an organization, the personal and professional concerns of the board members affect to
working ability of the large extent.
This sometimes also affects the working of the staff members, directors, officers, trustees
and others who serve a NPO should not have a personal or business interest that may conflict
with their responsibilities to the organization.
Board and how boards govern: Every charity has a governing body (most often called a
board) that takes overall responsibility for its work
A board may not always be called a board: other names include a management
committee, council, executive committee, board of trustees, board of governors or
some other term. The name of the governing body is usually determined in its governing
document.
The board consists of trustees who work together and take overall responsibility for
the charity. Being a trustee is a formal role. Some charities may not use the term trustee but
may use another term such as committee member or director: what matters is the role, not the
title.
Although charities and boards differ greatly in size and structure, all trustees and all
boards share some fundamental roles and responsibilities.
How does the board govern?
To govern a charity means to secure its long term direction, furthering its objects or
purposes as set out in its governing document, ensure that it is effectively and properly run
with legal and other obligations met, and be accountable to those with an interest or a 'stake'
in the charity.
Most of the board’s work takes place at board meetings where trustees act collectively.
The board can take steps to concentrate on,
 big issues at meetings,
 making key decisions,
 monitoring activities and

 Then delegating day to day work to others – staff, volunteers, sub-committees or
individual trustees.
In small charities, boards are likely to be involved in day to day issues aswell as in
governance issues. In these charities, trustees should still distinguish between when they are
working on day to day issues and when they are working on governance issues, to help ensure
the board is carrying out its overall responsibilities.
Individual trustees act and make decisions as part of the collective board. They are
bound by any collective decision. They can only act on their own if they have been authorized
to do so by the board.
Boards govern effectively by:

Focusing on their governance responsibilities

Being clear about who works on behalf of the charity to carry out its work - staff,
volunteers and, in smaller charities, individual trustees - and maintain good relationships
with them

Ensuring the board itself operates effectively.
The Board of Directors is the group charged with governing your nonprofit corporation. Those
who serve on the Board are called directors or board members. Among other things, the Board:
 Meets regularly and follows an agenda at the meetings
 Authorizes all bank accounts, all borrowing of money, and all major contracts
 Has the bylaws available, abides by them, and reviews them annually
 Approves an annual budget and makes specific plans to generate sufficient income
to meet or exceed expenses
 Has established a fiscal year and is certain that the necessary tax returns for the
organization are filed on time
 Sets policy for the organization and ensures compliance with laws
 Ensures board policies are fair to all board members
 Has established its standing committees and has a clear understanding of committee
responsibilities and authority
 Holds effective meetings so that members can use their time well
Board Responsibilities:

The board has a responsibility to support management and staff, and ensure operations
run smoothly and in accordance with the law. Following, are 10 responsibilities of non profit
boards:
 Establish mission and purpose.
 Select the executive director.
 Support and evaluate the executive director.
 Set policies and ensure effective planning.
 Monitor and strengthen programs and services.
 Ensure adequate financial resources.
 Protect assets and provide proper financial oversight.
 Build a competent board.
 Ensure legal and ethical integrity.
 Enhance the organization’s public standing.
Responsibilities of the board:

Administrative Responsibility:

Furthering the charity’s overall purpose, as set out in its governing document, and
setting its direction and strategy – for example, by developing plans and strategies
and monitoring progress.

Ensuring the work of the charity is effective, responsible and legal – for example, by the
use of policies and procedures and systems for monitoring and evaluating the charity’s
work.

Safeguarding finances, resources and property and ensuring they are used to further the
charity’s purposes – for example, by insuring and documenting assets, maintaining financial
systems, monitoring income and expenditure and ensuring the charity is financially
sustainable or viable.

Being ‘accountable’ to those with an interest or stake in or who regulate the charity – for
example, by preparing annual reports and accounts and consulting with stakeholders. (link
to risk?)


Being clear about the people who carry out work on behalf of the charity- trustees, staff,
volunteers –establishing and respecting boundaries between the governance role of the board
and operational or day to day matters.

Ensuring the board operates effectively – for example, ensuring it receives the right
reports and advice, by planning the recruitment and induction of trustees, providing
trustees with support and training or carrying out reviews or appraisals of the board’s
effectiveness.
 Financial responsibilities of the board: An explanation of the key financial
responsibilities held by the board in a non profit organization. The board has some key
financial responsibilities. These include:

Financial planning: No matter how modest the resources of your charity or non-profit
the board should agree a budget. The budget sets out the expenditure you plan to make
and the income you expect to raise. The board needs to monitor on a regular basis the
actual performance against the budget. Agreeing and monitoring the budget is a key way
in which the board ensures that income and any assets the organization may have are
used to further the organization’s aims. Charity trustees have a duty to ensure that the
organization’s resources are only used to further the charity's objects.

Financial controls: The board should ensure that there are proper controls in place to
ensure money can be accounted for and not misused. The extent of the controls you
need will depend on the size and scale of your organization ranging from procedures for
authorizing expenditure and setting out who signs cheques through to a full financial
handbook.

Financial reporting: The non profit or charity board needs good financial information
to understand the financial health of the organization. It is particularly important that you
keep an eye on the cash flow to ensure your organization is not in danger of becoming
insolvent.
 Funding: the role of the board: Thinking strategically about funding and creating a
diverse funding base. Virtually everyone in the organization can get involved in generating
money and there are lots of ways you can do it! You can read about fund-raising
techniques for individuals, companies and trusts and using events, collections, and lotteries
and so on. This section however highlights the need for the board to think strategically

about funding. It’s important for stability to create a diverse funding base. One way you
can do that is by getting income from a mix of sources. Asking for money is not the only
option. An increasing number of organizations earn money and for some not-for-profit
organizations this is the preferred or only way they generate funds.
Understanding our funding base
 How secure is our income? Are we too heavily dependent on one source of income or
do we need a better mix?
 How much of our income is restricted, meaning we can only spend it on certain things?
Do we have enough for our essential costs?
Different sources of funding
1. Fund raising from the public: do we understand the regulations
2. Associated with fundraising (for example, data protection, gaming legislation, permits for
public collections)?
3. Applying for grants: is there a danger we are chasing the money and forgetting our purpose?
4. Contracts do we have the capability to do this? Will the contract cover all the costs?
5. Should we consider loans, have we the power?
6. Can we trade? What are the legal and tax implications?
7. Is equity capital a possibility for us?
Efficiency and effectiveness in funding activities
 What are the costs of fundraising? How can we guard against spending more than we
rise?
 Are we making use of tax effective giving?
 What are the risks of earned income?
Strategy and impact: A good board shares the leadership and direction of an organization by
ensuring there is a clear framework for its work. The trustee board or non profit board is
responsible for ensuring that the charity or non profit is clear about why it exists and how it will
bring about its goals. It needs to ensure that the organization is indeed making progress towards
its goals. Charity trustees have a legal duty to ensure that their activities further the charity’s
purpose. It is therefore essential that every board member understands the purpose of the
organization.
A board can help to provide clarity of purpose in the following ways:

Vision and mission: A vision statement sets out the ideal state your charity or
nonprofit is seeking. A mission statement sets out the role your organization will play

to achieve the vision. The board ensures that the organization is clear about its vision
and mission and that all its activities contribute ultimately to their achievement.
 Values: Board provides leadership in the values it embodies and the culture it fosters.
These will in turn be reflected in the way that staff and volunteers work. The non profit
or charity board may wish to make the organization’s values explicit. See for example
the operative movements.

Strategy: A strategy sets out how the organization will move from where it is now to a
desired point in the future. A well considered strategy is essential to your non-profit or
charity’s effectiveness. Of course the board won't determine the strategy on its own, it
will seek the view of all those who have a stake in the organization. If you have staff they
may have a lot of the work in identifying strategic options, but the final responsibility lies
with the trustees. Read more about this in our Strategy section
 Managing risk: Identifying and managing risk is a key charity or non profit board
responsibility. All organizations, regardless of size or the area they operate in, face risk. It
could be the risk of losing money, injuring clients, bad publicity, or losing key staff or
volunteers.
Who is a trustee?
Trustees have the overall legal responsibility for a charity. The law describes charity
trustees as ‘the persons having the general control and management of the administration of a
charity’ (Charities Act 1993, section 97).
Some charities use the term ‘trustee’ to describe individuals who are not actually
charity trustees or board members: they might instead be patrons or hold the title to a charity’s
property. A charity may have a board or management committee which runs the organization
and “trustees” who hold the organization, property or investments. It is the board or
committee who are the “charity trustees”. The “trustees” in this case will be “holding” or
“custodian trustees”. People who are holding or custodian trustees might also be on the
committee and so also be “charity trustees”
It is very important that a charity can identify its trustees. This is not always as
straightforward as it sounds. The trustees are the individuals who take decisions at the
governing body of the charity, regardless of their actual title.

Who can be a trustee?
Most people can become trustees. Trustees generally need to be over the age of 18. They
cannot have been previously disqualified as a trustee or company director, be an un-discharged
bankrupt or have certain unspent criminal convictions. The Charity Commission has a detailed
checklist covering all eligibility requirements.
Some organizations have restrictions over who can be a trustee. Trustees of charities
working with children or vulnerable adults generally need to be checked. Some organizations
only elect trustees from a formal membership.
Trustees have specific duties that

Should be set out in organization’s constitution or governing document. The company
directors of a charitable company are also its charity trustees.

Trustees must act collectively to govern the charity and take decisions.

Together, the trustees are described in this guidance as the trustee board.

Trustees have no authority to act on their own as a trustee unless this has been
authorized by the trustee board as a whole.

Charities are generally governed by a trustee board that takes overall responsibility for
its work. Governance is a term used to describe the trustees’ role in:

the long term direction of the charity, including its objectives or purposes

implementing policies and activities to achieve objectives

complying with legal requirements

accountability to those with an interest or 'stake' in the charity
Procedure for electing Trustees:
Trustees are elected or appointed in many different ways, depending on the charity’s
governing document. They might be elected by members or appointed by the other trustees, or
even appointed by an outside body such as a local authority or church if the governing document
stipulates this.
Some charities invite individuals other than trustees to attend trustee board meetings:
for example, staff (where employed) or advisors. It is important to distinguish between the
trustees and other individuals who attend to avoid any confusion. Trustees are the only people
entitled to make decisions at a board meeting.

The role of trustees:
Trustees operate within two sets of formal rules,
1. The governing document which may be called rules or a constitution or the trust
deed. In a charitable company, the governing document will be called the Memorandum and
Articles of Association.
2. The second set of rules is those in the law, particularly the acts which govern their
type of organization, for example, the Trustee Act 2000 (for unincorporated charities),
Insolvency Acts, Companies Acts and Charity Acts.
3. Trustees work collectively as a board and take decisions at formal board meetings. Once a
decision has been collectively made all trustees are bound to support that decision.
4. In practice, many trustee boards delegate day to day or operational matters to individual
trustees, volunteers, committees, staff or agents. In larger charities the trustee board might
delegate the day to day running of the organization along with some decision making
powers to a staff team via a chief executive.
5. Regardless of how much day to day work is delegated from them, the trustee board retain
overall legal responsibility and may only delegate as far as their governing document or the
relevant legislation allows.
Trustee skills:
All trustees should be able to demonstrate values such as honesty and integrity.
They should be committed to the charity’s aims and values.
In addition, there are many different skills, experiences, attributes and areas of
knowledge that charities welcome from their trustees:

The 'hard' skills - legal, financial, management and so on - which are necessary to
understand some of the complex decisions to be taken

The 'soft' skills - boards of trustees need people who can encourage team working, problem
solving, asking difficult questions, decision making and, yes, to make people laugh!

Trustee boards should understand the communities they serve. People with knowledge of
the community – for example, as users of services or as local residents - can make very
valuable trustees.


Knowledge of a charity's field of work or good people skills is just as important as technical
knowledge or professional expertise. Trustees can and indeed should supplement their own
skills with professional advice where required. Indeed, an effective trustee board should
draw on a range of skills, knowledge, experiences and attributes.
Legal duties of trustees:
The overriding duty of all charity trustees is to advance the purposes of their charity as
well as several basic responsibilities: The overriding duty of all charity trustees is to advance the
purposes of their charity as well as several basic responsibilities:

Trustees are responsible for the proper administration of their charity: Trustees
must make sure that the charity’s assets and resources are used only for the purposes of
the charity. They must make sure that the charity is run in accordance with its governing
document, charity law and all other laws and regulations that affect its activities.

Trustees must accept ultimate responsibility for everything their charity does:
The trustees are responsible for the vision, mission and management of the charity.
They are accountable if things go wrong.
 They can delegate some tasks as the governing document allows but ultimate
responsibility remains with trustees.

Trustees have to act reasonably and prudently in all matters relating to their
charity: The law imposes a duty of care on the trustee’s of charities. This is sometimes
expressed as a duty ‘to exercise such care and skill as is reasonable in the
circumstances’. The duty will be greater if a trustee has (or claims to have) any special
knowledge or experience, or if their business or profession means they can reasonably be
expected to have special knowledge or experience. In matters where trustees are not
expert, they will be expected to take appropriate advice.

Trustees must safeguard and protect the assets of their charity: A charity’s assets
include its investments, cash, land, intellectual property, staff and reputation.

Trustees have a duty to act collectively: Decisions and responsibilities are shared, so
all trustees should take an active role. Trustees can act by majority (unless the
constitution says otherwise), but all the trustees are collectively responsible for

decisions made by the trustees. Once a decision is made all trustees are bound to
support it.

Trustees must act in the best interests of their charity: The interests of the charity
are paramount. Trustees should not allow their personal interests or views to override
this: they must exercise independent judgment.

Trustees must avoid any conflict between their personal interests and those of the
charity: The main implication of this is that the scope for trustees to receive personal
benefit from their charity is very limited. Trustees must deal appropriately with any
conflicts which arise between their own personal interests and those of the charity.
Trustees must also be alert to possible conflicts between duties they may owe to other
organizations and the duties they have to the charity.
Trustees are ultimately responsible for the charity and should take the lead in ensuring
that risk management is approached comprehensively and that it permeates all aspects of the
charity’s operations.
Employment policies and procedures:
Trustees should ensure that the charity has policies for the recruitment of staff, ensuring
that policies and practices are in place so that applicants are treated fairly and in accordance
with equal opportunities practice at all stages of advertising, short listing and interviewing.
They should establish policies for staff appraisal, support and supervision, probationary periods
and remuneration that are proportional to the size of the charity.
The employment policies and procedures section will help trustees define, regulate
and inform how their organization operates and information on how to develop their policy.
 Chief Executive: Where a staff structure is in place and a chief executive manages the
staff team, then a direct responsibility of the board is to recruit and support the chief
executive.
 Volunteer management: From recruiting volunteers to making sure they are
supported within your organization, the managing volunteer helps board members
understand the role of volunteers.
Credibility and Legitimacy issue:

Credibility means in general the quality of being trusted and believed in. Synonyms are
trustworthiness, reliability, dependability. Credibility is the quality of being believable or
trustworthy. It refers to whether or not a person or a statement is believed or trusted. Sometimes
leaders or experts are not considered by the public to be credible because they have a personal
interest in the outcome of a situation or a conflict which would likely influence their views
and/or statements about that situation or conflict.
Credibility is one of the most critical factors that affect an NGO. Being credible is
simply the perception of being trustworthy and believable. Why do people buy brand name
goods and services? One of the key reasons is that the brand represents a level of quality that
they know and trust.
How can an NGO build credibility?
A key factor is being consistent, with reference to
 the work being done,
 The message being disseminated or the concepts being advocated.
 Sharing knowledge is a useful way to build credibility.
This helps in building the intellectual base of the NGO, and its ability to articulate the
views of the people it is speaking for. And obviously, telling the truth is always the best way.
Good testimonials can also be a powerful way to generate trust.
A number of strategies can be seen being used by NGOs to build their credibility:
 Use of academics and experts to evaluate NGO projects and activities
 Associating with national or regional associations, alliances, or forums
 Obtaining accreditation
 Finding credible spokespeople
 Speaking and publishing regularly
 Seeking awards and prizes as recognition for work done
 Partnering with key community, governmental and industry entities
 Writing case studies that tell compelling stories from people and communities
they serve
 Getting some good press stories
 Understanding an NGO's strengths and larger connections, communicate the strengths and
connections consistently

 Keeping a significant presence online - both web and email
 Generating a good image through newsletters, bulletins, press releases etc.
Ultimately, building good credibility builds trust and confidence - which not only
strengthens staff morale, but enables an NGO to garner resources to be more effective in its
programmes and projects
The notion of legitimacy is multi-faceted. The different dimensions of the term
‘legitimacy’ - moral, legal, social or political and technical - might coexist in organizations and
are closely interrelated. It is important to note that the majority of authors place special emphasis
on the moral dimension of legitimacy. The fact that the mission of the majority of organizations
is to build a more fair and soldiery society in which a certain set of values prevail makes the
moral facet acquire even more importance.
Organizations in the third sector can not be understood outside the context of the society
and the social nucleus or mass they generate around them. Entities do not simply believe that
they must be legitimized in order to gain the social support needed to carry out their projects,
rather they also value society in general, users and members as the main agents that legitimise
them.
Professionalism:
The professionalism means behaving in an ethical manner while assuming and fulfilling
rightful responsibilities in every situation every time, without fail. To get a bit more granular,
one can say that it means, in part, conducting professional affairs in such a way as to engender
trust and confidence in every aspect of your work. It means having the requisite ability to be
worthy of the confidence others place in you. It means having already made the right choices so
that attract the right sort of client and work under good circumstances rather than having to
continually make the best of bad circumstances and take whatever is tossed your way, regardless
of its quality.
The Merriam-Webster dictionary defines professionalism as "the conduct, aims, or
qualities that characterize or mark a profession or a professional person"; and it defines a
profession as "a calling requiring specialized knowledge and often long and intensive academic
preparation."

Professionalism in NGOs/NPOs is a process that starts from within the organisation,
geared towards building credibility, transparency and accountability and ultimately trust with the
constituency and partners that they work with.
Approaches to Professionalism
1. Publicising their activities/ programmes
2. Interacting with other organizations/ groups
3. Build support and collate resources
1. Publicising their activities/ programmes:
Through a variety of activities (for example, Press campaigns, information dissemination,
media products, as well as non-formal activities such as dramas, newsletters, bulletins),
NGO/NPOs inform the broader community and civil society of their activities and programmes.
2. Interacting with other organizations/ groups:
NGOs/NPOs intensively interact with a wide variety of formal and informal groups
through campaigns, community group meetings, workshops, site visits, interviews , that enable
them to build network and leverage their activities and resources.
3. Build support and collate resources:
Networking for information collation and dissemination remain the core of NGOs/ NPOs
activities. Through internships, training and skill development, and other formal and informal
process.
Productivity and Measurement of Quality:
NPO usually depends on good governance system within and outside the organization. This
influence on the outcome of the NPO i.e., with the good governance process NPO can produce
the product as services to the society or to the world.
5 steps to measure the quality of a NPO:
1. How organization is communicating its goal or mission (internal and external activities)
2. Measuring the wealth of the organization with revenue
3. Measuring the efficiency of the organization with sunk cost
4. Measuring the human resource activities in the organization
5. Measuring the governance process of an organization.
These definitions imply that professionalism encompasses a number of different
attributes, and, together, these attributes identify and define a professional.

What are these Attributes or Features?
1. Specialized Knowledge: First and foremost, professionals are known for their
specialized knowledge. They've made a deep personal commitment to develop and improve their
skills, and, where appropriate, they have the degrees and certifications that serve as the
foundation of this knowledge.
2. Competency: Professionals get the job done. They're reliable, and they keep their
promises. If circumstances arise that prevent them from delivering on their promises, they
manage expectations up front, and they do their best to make the situation right. Professionals
don't make excuses, but focus on finding solutions.
3. Honesty and Integrity: Professionals exhibit qualities such as honesty andintegrity.
Theykeep their word, and they can be trusted implicitly because of this. They never compromise
their values, and will do the right thing, even when it means taking a harder road.
4. Accountability: Professionals hold themselves accountable for their thoughts, words,
and actions, especially when they've made a mistake. This personal accountability is closely tied
to honesty and integrity, and it's a vital element in professionalism.
5. Self-Regulation: They also stay professional under pressure. For instance, imagine a
customer service employee who's faced with an irate customer. Instead of getting upset or
angry in return, the employee exhibits true professionalism by maintaining a calm, business-
like demeanor, and by doing everything that she can to make the situation right.
6. Image: Professionals look the part–they don't show up to work sloppily dressed, with
unkempt hair. They're polished, and they dress appropriately for the situation. Because of this,
they exude an air of confidence, and they gain respect for this.
Why is professionalism essential for Nonprofit Organization?
As we know the attributes of a professional person like its is also essential for an
organization of Non profit. These are the organization working for the development of society.
They need to be following a few professional skills in their activities they may perform. The
following are the reason for essentiality of professionalism in NPO.

To provide an effective programmes or activities of an organization

To be maintain its activities more professionally.

Helps to its employees to be more professional


It is help to build credibility of the organization

It is help to maintain transparency

Helps in Accountability
 To build professionalism within the organization, they can concentrate on,

Publishing their activities

Interact with other organization groups

Build support and resources
Perhaps most importantly, professionalism means, in every situation, willfully
gathering responsibility rather than avoiding it. Doing so is important because if you don't
acknowledge and assume the onus of responsibility in every aspect of your work you will
seldom if ever make the right choice to do what is necessary to achieve consistent success for
your employer, your employees, your clients, or yourself. Quite simply, if the buck doesn't
stop with you, you're not a professional.
Distinctions between professionals and Non Professionals:
 A professional makes deliberate choices where others have choices made for them or they
simply react to what comes their way.
 A professional is afforded the luxury of making deliberate choices because he has made
deliberate preparations.
 A professional can make deliberate preparations because his understanding of and
familiarity with the relevant (professional) landscape informs him on how to prepare. Also,
like the chess master, he is trained to understand the inevitable results of hundreds of
different patterns; he has disciplined himself to observe the whole board and not just the
most immediate features or the area with the most tension in the game.
 A professional is seldom caught off-balance. The discipline for deliberate preparation
and the understanding that comes with it allow that even when something unexpected
or unfamiliar is introduced, a professional can quickly understand its basis and easily
extrapolate the appropriate tactic, strategy, or process for ethically and successfully
resolving issues.
 In this capacity, and most fundamentally, a professional habitually makes the right choices
because all of his choices are based on the integrity provided by his moral and ethical
foundation. Any choice of expedience over integrity can quite easily be recognized by

anyone as the wrong choice. Here, the professional simply acknowledges what is obvious,
makes the right choice, and acts deliberately (and now we're back at the start of this list).
The Importance of Professionalism:
Professional workplace behavior is necessary for the long-term success of a business,
whether a big corporation or small business. Employee interactions and relationships with
customers are of vital importance to ensure that company goals and objectives are met. A
professional work place attitude and appearance allow employees to take pride in their work
and improve worker performance. Managers who behave professionally set an appropriate
example by encouraging their people to conduct themselves in a manner that supports
company-wide success.
a. Establish Boundaries: Professionalism in the work place establishes boundaries
between what is considered appropriate office behavior and what is not. While most managers
support an enjoyable and vibrant work environment, limits must be put in place to avoid
conflicts and misunderstandings. Workers who conduct themselves professionally steer clear of
crossing the line with their conversations and other interactions with co-workers, superiors and
clients.
b. Encourage Improvement: A business environment in which employees dress and
operate professionally is more conducive for success. According to & liquid; Dress for
Success & amp; a nonprofit organization dedicated to helping businesswomen obtain
professional work attire, professional dress codes support career development and personal
growth in the work place. Workers who dress and act professionally feel better about
themselves and are encouraged to perform better for their clients.
c. Maintain Accountability: Companies that interact directly with client’sare obligated to
provide the best services possible and present their company in the best possible light.
Professionalism counts when providing written information to clients. Professionally written
company reports, business plans or other correspondence help businesses remain accountable
with their level of service.
d. Promote Respect: Professionalism is establishes respect for authority figures,
clients and co-workers. Maintaining a professional demeanor limits gossip and inappropriate
personal conversations that could be considered disrespectful.

Keeping a professional attitude with clients who behave inappropriately demonstrates
the level of respect an employee has for the customer and the business partnership.
e. Minimize Conflict: Conflicts are less likely to arise in a professional business environment.
Workers who respect each other boundaries and conduct themselves professionally rarely
have disagreements that cannot be resolved efficiently. Professionalism in business also
benefits diverse environments in which business people and their clients have several
different perspectives and opinions. Professional behavior helps business people avoid
offending members of different cultures or backgrounds.
Productivity and Measurement of quality:
Performance measurement and improvement are systematic processes by which an
organization continuously and consistently tracks and applies important program and operations
data for the purpose of optimizing its ability to efficiently and effectively advance its desired
social impact. The most powerful performance measurement systems are typically a core
responsibility of an organization's own staff, who integrate program, financial and
organizational data to measure an organization's progress and success.
Performance measurement is an ongoing organizational process, as opposed to
program evaluations, which are discrete assessments or studies to answer critical questions.
Performance Measurement for NPO refers to a process NPOs can use to develop
performance measures, report on performance and discover changes the organization
needs to make to improve overall performance.
All organizations strive to achieve their missions effectively. For-profit enterprises
typically focus on creating wealth for their shareholders while NPOs focus on achieving their
social mission and meeting the needs of their stakeholders, many of whom (e.g., individuals or
government agencies) may have made financial contributions or have personal interests (e.g.,
volunteers) in the organization and its work. Because NPOs rely primarily on the financial
resources of government agencies and private funders they have a significant fiduciary
responsibility to manage those resources effectively. Performance measurement for NPO helps
NPOs with this responsibility as well as their responsibility to ensure they meet the needs of
their volunteers.
How it's used

Performance measurement enables an organization to continuously learn and improve,
which helps it to achieve better results. The metrics (data points) tracked should be derived from
an organization's intended impact and theory of change—what the organization is holding itself
accountable for achieving and how to get there. By measuring performance, nonprofits can:
 Track progress towards and be held accountable for their intended impact and theory of
change
 Ensure programs or initiatives are implemented as designed
 Learn about ways to achieve even better results by analyzing insights
 Communicate progress and successes internally and externally to staff,
beneficiaries, funders, peer organizations, and the broader community
 Over time, gain insights about program effectiveness and what works and, if
appropriate, prepare for rigorous program evaluations
Case study:
1. An NGO is desirous of pursuing Micro Credit activities by mobilizing resources both from
the members of SHGs and other grants. Among Government, Corporate and international
NGOs, which source of funding do you recommend? Substantiate your recommendations by
examining the pros and cons of each source of funding.
Reference:
1. https://bloch.umkc.edu/mwcnl/resources/documents/overview-nonprofit-governance.pdf
2. http://www.theprofessionalismgroup.co.uk/professionalism-for-non-profits/
3. Professionalism and nonprofit organizations. By Majone G.

Management of non profit organisation module 3

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