Looking out to How to explain finance to non finance, A number of nonprofit chief financial officers and technical assistance providers offer ideas and tips on how to make financial information more interesting for your organization’s frontline staff.
Staff members of nonprofits almost always know how important it is to fulfill the organization’s mission and are trained to do things like feed the hungry, educate children from low-income families, or fight for a healthier environment.
But even though many of these people are very good at one type of program, they don’t have much training or experience working with financial data. When setting priorities for their work, it’s easy to see why nonprofit line managers would rather feed the hungry than look at numbers on a departmental budget spreadsheet.
The challenge and opportunity for the chief financial officer (CFO) of a nonprofit is to learn how to make numbers come to life for those on the front lines of the organization and help them see numbers as an important step on the way to achieving the mission of the organization.
Here are some ideas and tips from CFOs of nonprofit organizations and technical assistance providers on how to talk about money in a way that makes non-financial managers and staff listen. In short, getting people to understand and care about numbers isn’t easy, but it can be done with some creativity and hard work.
Why is it so hard to get people to pay attention?
Here are a few reasons why it can be hard to get people who don’t work in finance to pay attention to the numbers:
People may be scared of financial information. Jeanne Bell, CEO of CompassPoint Nonprofit Services, put it this way: “Finance, like technology, is an area where people may be afraid, but they also feel like they have the right not to learn about it.”
People often feel scared when they have to deal with numbers. This could be because they have always been bad at math or because they don’t like using spreadsheets. People have told Bell, who works with a lot of nonprofits, “I’m just not good with numbers” or “I’m not good with money.” The chief operating officer of Educational Alliance, Miriam Katowitz, called this the “MEGO syndrome” (My Eyes Glaze Over). Bell said, “On the other hand, no organization, not even its CFO, would believe a staff member who said, “I’m just not a mission person” or “I’m just not a program person.”
Some organizational cultures don’t like it when people talk about money. Lawson Shadburn, the chief financial and administrative officer (CFAO) for Turnaround for Children, said that there is a tug of war over who is in charge of financial information in some nonprofits.
“People in the organization think that if they don’t look at the finances, they aren’t responsible and it’s not their problem.” “There’s no reason for them to care,” said Martha Ferry, CFO of the Association of Junior Leagues International, if people’s jobs don’t hold them accountable for financial information.
For the rest of the staff to be interested in financial information, it should start with the executive director (ED) and senior management. It is especially important for the ED to make sense of financial information.
“If they don’t, they can’t expect their non-financial staff to,” said Bell. “It shapes the organization’s culture and is everywhere.” Shadburn added, “It needs to be part of management’s plan for the kind of environment they want to create. Otherwise, no one will look at the numbers.”
The people who work for nonprofits may not know much about money. In many nonprofits, the chief financial officer (CFO) is the only person with formal training in accounting or finance, and both staff and management often don’t know much about money.
David Stolow, who used to be the CFO of a number of companies, said, “In the corporate world, employees may have backgrounds in finance or marketing, where accounting was part of their job. People in the nonprofit world usually know a lot about things like youth development, education, or the environment, but they may not know much about money.
The suggestions below from other CFOs can help you get everyone on your staff to understand and care about the bottom line.
Solution 1: Understand what motivates individual people
“Why should I care about these numbers?” This is the most important question that CFOs should be able to answer for the people in their companies. What do people care about and what are they responsible for? How will knowing about their finances or certain numbers help them do their jobs?
Jan Dahms, the CFO of International Planned Parenthood of the Western Hemisphere, said that CFOs should think of the other employees in the organization as their customers. The CFOs must then try to figure out what motivates these customers, both as individuals and as members of their departments or teams.
With this information, the CFOs need to figure out what information will be important to these customers and what will get their attention. Dahms said, “It’s a lot more than showing balance sheets or profit-and-loss statements.” “Instead, it’s trying to figure out how each team measures success in terms of what they want to accomplish. If I know that abc or xyz is important to a certain team, I go back to the drawing board and figure out how to best present data that they will accept.
Shadburn said this about how he worked with program managers: “First, I had to ask myself, ‘What is the person’s biggest worry?'” Usually, it’s not money. Then I had to find the one number they should care about and tell them, “This is what you should look at to see if you have enough money to do what you want to do.
Ferry pointed out the two numbers that her staff needs to pay attention to: the rate at which they collect dues and the rate at which people sign up for their annual conference. Her staff is motivated to keep track of these two numbers so they can see how well their program areas are doing and how well the organization is doing as a whole. They don’t have to know how to read the organization’s income statement to do this.
Solution 2: Give non-financial staff financial workshops and other ways to learn about money
There aren’t always a lot of ways for staff to sign up and make time for courses on how to read financial statements. A few CFOs came up with other ideas. Stolow has held a workshop for his staff called “Finance for Poets” to teach them about money.
He made a two-hour interactive seminar in which he used role plays and other lighthearted methods to show how companies use balance sheets and income statements. Bell co-wrote a workbook called Financial Leadership for Nonprofit Executives: Guiding Your Organization to Long-Term Success to help EDs understand financial information. She has suggested that the leaders of the many nonprofits with which CompassPoint works go through the workbook.
In the end, as Ferry said, “what’s important is not knowing how to read a financial statement. What’s important is knowing how to read a financial statement.” This means that all staff should know what certain numbers mean for their programs and their organization. Finding out what those numbers are for each person in an organization is a key part of being successful.
Solution 3: Incorporate user-friendly approaches
CFOs should know what motivates each person and include them in the budgeting process. They should also use user-friendly methods to share financial information with staff who aren’t in finance. Here are some things to think about:
Use less jargon. Stolow told CFOs to get rid of jargon by saying, “Accounting and finance have a lot of jargon that scares and turns off people who don’t know it.” You can’t forget about this. Receivables can be hard to understand, and people worry about looking stupid if they do. Getting rid of jargon helps them trust you and feel like you’re on their side.
Create trust. Caroline Horton, the CFO of Aeon (formerly Central Housing Community Trust), talked about how she built trust with the staff when she started as the organization’s first finance person: “I started by asking a lot of questions, earning people’s trust over time. I had to show them that I really did know what I was talking about. I had to give a lot of thought to how I could help them do their jobs.
When they saw that I could help, they asked me questions more and more. People here make fun of my first year, when we worked in a small office. I thought it was very important to be able to hear and understand what people were talking about in the hallway.
When they talked about the money part of their job, I would go into the hallway and ask them questions, saying, “Tell me more about this.” The more I was able to give them financial reports that were easy to use, the more they came to me, and the easier the process got.”
Whenever you can, use pictures and words instead of numbers. Even though this may seem like the opposite of what a CFO is supposed to do, many of the CFOs said that whenever possible, financial information should be shared with less numbers.
Harry Bonsu, the CFAO of Safe Space, said, “I tried charts and colorful things to show how the numbers in a statement were different, but I still got a lot of questions. When I told them what the numbers meant and gave them words, I had fewer questions.” “People don’t want to look at spreadsheets; they always tell me they want more stories,” agreed Brad Dudding, COO of Center for Employment Opportunities. I do bullet points of what’s important in each financial statement.”
Bell pushed for the use of dashboard reporting, which is when an organization picks certain performance indicators for the organization as a whole and for each department and then keeps track of them by color (red means act now, yellow means watch, and green means celebrate).
The dashboard method shows the most important financial indicators of an organization in a few easy-to-remember metrics that everyone in the organization can understand. Dudding suggested the Nonprofit Business Analysis (NBA) from the Nonprofit Finance Fund, which condenses years of numbers into charts and graphs that are easy to understand.
Some CFOs have used less common ways to get the attention of their audience. Think about what one person did to show how much money was being spent on a lot of staff meetings that he thought were often not necessary. He wore a sign around his neck that said, “We will spend $13,000 on staff salaries during this meeting.” He did a good job of getting his point across.
Use consistent metrics. Stolow told CFOs that they should use consistent metrics when coming up with new ways to show financial information. “If you talk about surpluses and deficits one week, the run rate the next, and net assets the next, people will think, ‘Wow, those finance people are busy!’ but that won’t help them understand what’s important.
” Andy Kaplan, who is the CFO of DonorsChoose.org, is making metric dashboards for the staff that will pop up every day when they turn on their computers. “Everyone will use the same measurements, and each job will have its own measurements,” Kaplan said. This will help people do their jobs and get them excited to see the results of their work.
Solution 4: Get people involved in making the budget
Most CFOs would probably find it faster and easier to just do the budgets for their staff instead of walking them through the process and giving them advice as they go. But it seems pretty clear that if people aren’t involved in making budgets, they are less likely to care about how those budgets are managed.
Bell said, “I think it’s 100% true. I don’t think it’s possible for a CFO to not involve others in the budgeting process and then expect them to monitor it in a meaningful way over time.”
To get staff involved, you need to do more than just send them financial forms to fill out and send back by a certain date. Dudding said, “When I used to send spreadsheets by email, it was hard to get people to open them, look at them, and fill them out.
Now, we’re meeting with the managers of each program to talk about it. What really helps is a set amount of time to go over things again. That’s where confusion is cleared up and problems are solved. “The process is what’s important,” Stolow agreed.
Several CFOs said that it is also important to give people information about the financial situation of the whole organization, in addition to getting staff involved in the budgeting process for their own departments. When Ferry joined her organization, she started giving her staff a one-page statement of the organization’s activities every three months. This statement showed the big picture for the organization.
The management of DonorsChoose.org has a company-wide conference call once a month to talk about organizational strategy, new employees, and the numbers. These different ways help to take the mystery out of budgeting, build trust, and get more people interested in numbers.
It can be hard to get staff members who are busy with other parts of the mission to pay attention to finances. Even with all of these great tips and suggestions, Horton said it best: “It will be harder or easier depending on whether or not the people in the organization will listen to you. It’s our job to give them a reason to listen to us by showing them the value of the information.”
We need to keep promoting this from the inside since we know it will help our nonprofits so much. There are so many chances, we need to keep going.”
Tools to help non-finance people understand financial information
There are a lot of tools that can help non-financial staff in nonprofits understand finances better. Here are a few ways that CFOs have found to make financial information more interesting to employees who don’t work in finance.
Example 1: “Finance for Poets” Training Workshop
David Stolow used to be the CFO of a number of non-profit organizations. In the past, he made and held a training workshop for his staff. He made a two-hour interactive seminar in which he used role plays and other fun ways to explain how organizations use balance sheets and income statements.
Here are some notes that Stolow wrote up to start off the training workshop. They talk about a warm-up activity he uses to get the people in the workshop interested in the topic and show how the basics of financial accounting work. After this first exercise, Stolow gives an overview of how accounting works, including what balance sheets and income statements are and how financial information is presented and interpreted.
I need two people to help me make Smith & Jones, an accounting firm. I’ll get back to you in a minute. In the meantime, work on your company’s logo.
I need another three to five people to help out. Here is a stack of cards that are green. You can go in and out of the room and take things with you. The stack of green cards can be added to or taken away from. Some of you start in the room. Some start outside. Where you end up doesn’t matter.
Accountants: Start by having one of you take a picture of the room. After that, everyone starts to move. The other of you films what’s going on in the room. After a short time, I’ll say “Freeze,” and we’ll take another picture.
What is going on here? What does this have to do with numbers? There’s no money, no numbers, no spreadsheets, no green eyewear, and no suits with white shirts.
What we just saw is pretty much how accounting works. Now, I’ll try to explain why…
Example 2: Dashboard Reporting
Dashboard reporting is being used by more and more organizations. This is a method in which an organization chooses certain performance indicators for the organization as a whole and for each department. These are then tracked regularly by color (red means act now, yellow means watch, and green means celebrate).
The dashboard method breaks down the most important financial metrics that everyone in the organization needs to know and track into a few easy-to-remember metrics that everyone can understand. In her work with nonprofits, Jeanne Bell, CEO of CompassPoint Nonprofit Services, encourages them to use dashboard reporting. She gave an example of how to turn financial information into a dashboard report.
On the first page below, Bell shows how a made-up company presented its financial information “before” going through the dashboard process. It was basically a printout of the financial statements with many columns and rows of data.
On the second page below, Bell shows how the dashboard reporting process makes the most important information from the financials stand out on a dashboard. Four key indicators of the organization’s financial performance are highlighted, and the color codes show how well the organization is meeting its goals over time.