Bridgestar’s March Issue of “Leadership Matters” Profiles How Chief Financial Officers (CFOs) Can Strengthen Nonprofit Organizational Effectiveness

Bridgestar’s March Issue of “Leadership Matters” Profiles How Chief Financial Officers (CFOs) Can Strengthen Nonprofit Organizational Effectiveness

Establishing the chief financial officer ( CFO ) position can provide nonprofit organizations with the expertise and perspective to handle big-picture financial management issues as they grow or evolve. As in the for-profit world, some organizations hire CFOs in order to better understand their finances so they can make informed decisions about resource allocation tradeoffs, while others find the CFO role to be the key to managing a complex matrix of programs and services, funding sources, and strategic goals, according to the March issue of “Leadership Matters.”

Published by Bridgestar, a nonprofit initiative of the Bridgespan Group dedicated to attracting, connecting, and supporting senior leaders for the sector, “Leadership Matters” selects a different theme about how to build and sustain effective nonprofit organizations. This month’s feature article, “The Impact of a CFO,” is based on interviews with management and board members of Rubicon Programs, Inc. about their experiences in creating the CFO position. A San Francisco-area-based organization, Rubicon is a four-time winner of Fast Company/Monitor Group’s Social Capitalist Awards that provides affordable housing; career, mental health and family counseling; and employment opportunities for homeless and economically disadvantaged individuals.

Hiring a CFO may not be the right answer for every nonprofit. But in 2001, Rubicon recognized that it needed to establish effective financial management of its $12 million-plus budget, numerous programs, and funding from 100 different sources. Initially, the organization tried to fill this need through a variety of positions: controller, director of finance, and part-time financial consultant. However, Rubicon management and board soon realized that they needed to upgrade the position to a full-time CFO, who could bring the top-level financial management expertise and strategic insight to oversee the finances of the diverse programs and funding sources. The organization had determined that outsourcing was not an effective alternative because of the complexity of its finances and the need for ongoing internal communications.

Before it hired Kristen Growney as its first CFO in January 2002, Rubicon identified specific competencies it needed in the CFO position. The organization was looking for someone who could:

•    Provide strategic insights into the business. The organization wanted someone with expertise that extended beyond nonprofit accounting – someone who could evaluate trends, and provide insight into the business.
•    Effectively manage the accounting function, interpret the needs of the accounting staff and help them meet the organization’s needs.
•    Provide objectivity to how decisions were being made.
•    Juggle different revenue streams.
•    Work with a diverse group of people.
•    Appreciate the organization’s mission and understand how finances can help support the mission.

Despite the interest in establishing the CFO position, there were also challenges. “We still needed the controller, and from an external standpoint it looked like we were just adding to our administrative staff. But then we talked about how important the CFO is for our ability to provide timely information to our funders that helps us obtain a steady flow of funds in the future. And while this was an expensive position to pay for, we recognized that the financial downside of not having a CFO was significantly worse for us if we didn’t have the vital information we needed to make business decisions,” said Erwin Reeves, Board Treasurer, Finance Committee Chair and former Board Chair.

It helped that Rubicon’s President and Executive Director, Rick Aubry, communicated to everyone at the outset that the CFO was in charge of finances and would help make their jobs more manageable and effective.

Yet the management team and board needed time to get used to the changes the new CFO would bring to the accounting systems and the organization overall. “Prior to my arrival, I think the board had gotten used to not getting financial information,” Growney, who has since left Rubicon, said. “It took them about a year to get comfortable with the new level of transparency and engagement with the financials.”

It took less time to convince accounting department staffers, who had thought hiring more bookkeepers was a better solution and would lighten their load. Growney’s ability to work with a diverse group of people, teach new tools and skills, and establish a rapport with her staff enabled her to quickly demonstrate her value to the organization.

Some of the benefits Rubicon experienced in hiring a CFO included:

•    Making financials more transparent to board and managers.
•    Achieving greater consistency and usability of internal reporting.
•    Developing managers to use financial information in making decisions
•    Establishing higher accountability about different lines of business.
•    Enabling longer-term financial planning for different lines of business.
•    Depersonalizing business decisions by taking a financial perspective in examining them and discussing tradeoffs.

Aubry said, “We have a much better managed accounting/finance department and we’re much more successful at thinking through what our businesses should be about. In 2003, we closed one of our three social enterprises. It was the right decision and with our CFO’s financial analysis we were able to separate out aspiration from reality. More importantly, we were able to make this decision not as a one-off, but in the context of supporting and sustaining the larger organization.”

According to Rubicon management and board members, organizations considering whether to establish a CFO function should:

•    Analyze your organization to determine if a CFO is the right solution. The size, complexity of the funding structure and the diversity of your organization will help determine if you need a CFO and what type of background the candidate needs for the position.
•    Determine if your organization is committed to bringing a CFO onboard. Is management ready to accept some of the inevitable changes and decisions that may result from having visibility into the finances? Is the organization willing and able to pay the compensation that a CFO requires?
•    Ensure that the executive director sees the CFO as a partner in managing the organization from a financial perspective and is willing to give that person the authority to make decisions.
•    Clearly define the objectives for the position and anticipate challenges and tradeoffs. Organizations may incur resistance to any change that the CFO introduces, and the new internal accountability that managers will have may also bring limitations.

“Making the decision to hire a CFO is a significant step in the life cycle of a nonprofit organization because it means that the organization may have a complex portfolio of programs, services, funding sources, and strategic goals. But making the decision is not the final step in the process – because organizations need to prepare to adjust to the new CFO, new processes and cultural change that could occur. The Rubicon case study helps outline steps organizations should take when evaluating whether or not to hire a CFO and what to do after they hire a CFO,” said David Simms, Managing Partner, Bridgestar.

The main article is also accompanied by audio clips from the Rubicon interviews. The current issue of “Leadership Matters” is available to Bridgestar members at: www.bridgestar.org/Resources/Newsletters/2007/March2007.aspx. For a complimentary subscription, please email subscribe@bridgestar.org.

About Bridgestar
Bridgestar ( www.bridgestar.org ), an initiative of the Bridgespan Group, is a nonprofit organization providing talent-matching services, content, and tools designed to help organizations build strong leadership teams and individuals pursue career paths as nonprofit leaders. Bridgestar’s goal is to attract, connect, and support senior talent, leading to greater organizational effectiveness and social impact.

Establishing the chief financial officer ( CFO ) position can provide nonprofit organizations with the expertise and perspective to handle big-picture financial management issues as they grow or evolve. As in the for-profit world, some organizations hire CFOs in order to better understand their finances so they can make informed decisions about resource allocation tradeoffs, while others find the CFO role to be the key to managing a complex matrix of programs and services, funding sources, and strategic goals, according to the March issue of “Leadership Matters.”

Published by Bridgestar, a nonprofit initiative of the Bridgespan Group dedicated to attracting, connecting, and supporting senior leaders for the sector, “Leadership Matters” selects a different theme about how to build and sustain effective nonprofit organizations. This month’s feature article, “The Impact of a CFO,” is based on interviews with management and board members of Rubicon Programs, Inc. about their experiences in creating the CFO position. A San Francisco-area-based organization, Rubicon is a four-time winner of Fast Company/Monitor Group’s Social Capitalist Awards that provides affordable housing; career, mental health and family counseling; and employment opportunities for homeless and economically disadvantaged individuals.

Hiring a CFO may not be the right answer for every nonprofit. But in 2001, Rubicon recognized that it needed to establish effective financial management of its $12 million-plus budget, numerous programs, and funding from 100 different sources. Initially, the organization tried to fill this need through a variety of positions: controller, director of finance, and part-time financial consultant. However, Rubicon management and board soon realized that they needed to upgrade the position to a full-time CFO, who could bring the top-level financial management expertise and strategic insight to oversee the finances of the diverse programs and funding sources. The organization had determined that outsourcing was not an effective alternative because of the complexity of its finances and the need for ongoing internal communications.

Before it hired Kristen Growney as its first CFO in January 2002, Rubicon identified specific competencies it needed in the CFO position. The organization was looking for someone who could:

•    Provide strategic insights into the business. The organization wanted someone with expertise that extended beyond nonprofit accounting – someone who could evaluate trends, and provide insight into the business.
•    Effectively manage the accounting function, interpret the needs of the accounting staff and help them meet the organization’s needs.
•    Provide objectivity to how decisions were being made.
•    Juggle different revenue streams.
•    Work with a diverse group of people.
•    Appreciate the organization’s mission and understand how finances can help support the mission.

Despite the interest in establishing the CFO position, there were also challenges. “We still needed the controller, and from an external standpoint it looked like we were just adding to our administrative staff. But then we talked about how important the CFO is for our ability to provide timely information to our funders that helps us obtain a steady flow of funds in the future. And while this was an expensive position to pay for, we recognized that the financial downside of not having a CFO was significantly worse for us if we didn’t have the vital information we needed to make business decisions,” said Erwin Reeves, Board Treasurer, Finance Committee Chair and former Board Chair.

It helped that Rubicon’s President and Executive Director, Rick Aubry, communicated to everyone at the outset that the CFO was in charge of finances and would help make their jobs more manageable and effective.

Yet the management team and board needed time to get used to the changes the new CFO would bring to the accounting systems and the organization overall. “Prior to my arrival, I think the board had gotten used to not getting financial information,” Growney, who has since left Rubicon, said. “It took them about a year to get comfortable with the new level of transparency and engagement with the financials.”

It took less time to convince accounting department staffers, who had thought hiring more bookkeepers was a better solution and would lighten their load. Growney’s ability to work with a diverse group of people, teach new tools and skills, and establish a rapport with her staff enabled her to quickly demonstrate her value to the organization.

Some of the benefits Rubicon experienced in hiring a CFO included:

•    Making financials more transparent to board and managers.
•    Achieving greater consistency and usability of internal reporting.
•    Developing managers to use financial information in making decisions
•    Establishing higher accountability about different lines of business.
•    Enabling longer-term financial planning for different lines of business.
•    Depersonalizing business decisions by taking a financial perspective in examining them and discussing tradeoffs.

Aubry said, “We have a much better managed accounting/finance department and we’re much more successful at thinking through what our businesses should be about. In 2003, we closed one of our three social enterprises. It was the right decision and with our CFO’s financial analysis we were able to separate out aspiration from reality. More importantly, we were able to make this decision not as a one-off, but in the context of supporting and sustaining the larger organization.”

According to Rubicon management and board members, organizations considering whether to establish a CFO function should:

•    Analyze your organization to determine if a CFO is the right solution. The size, complexity of the funding structure and the diversity of your organization will help determine if you need a CFO and what type of background the candidate needs for the position.
•    Determine if your organization is committed to bringing a CFO onboard. Is management ready to accept some of the inevitable changes and decisions that may result from having visibility into the finances? Is the organization willing and able to pay the compensation that a CFO requires?
•    Ensure that the executive director sees the CFO as a partner in managing the organization from a financial perspective and is willing to give that person the authority to make decisions.
•    Clearly define the objectives for the position and anticipate challenges and tradeoffs. Organizations may incur resistance to any change that the CFO introduces, and the new internal accountability that managers will have may also bring limitations.

“Making the decision to hire a CFO is a significant step in the life cycle of a nonprofit organization because it means that the organization may have a complex portfolio of programs, services, funding sources, and strategic goals. But making the decision is not the final step in the process – because organizations need to prepare to adjust to the new CFO, new processes and cultural change that could occur. The Rubicon case study helps outline steps organizations should take when evaluating whether or not to hire a CFO and what to do after they hire a CFO,” said David Simms, Managing Partner, Bridgestar.

The main article is also accompanied by audio clips from the Rubicon interviews. The current issue of “Leadership Matters” is available to Bridgestar members at: www.bridgestar.org/Resources/Newsletters/2007/March2007.aspx. For a complimentary subscription, please email subscribe@bridgestar.org.

About Bridgestar
Bridgestar ( www.bridgestar.org ), an initiative of the Bridgespan Group, is a nonprofit organization providing talent-matching services, content, and tools designed to help organizations build strong leadership teams and individuals pursue career paths as nonprofit leaders. Bridgestar’s goal is to attract, connect, and support senior talent, leading to greater organizational effectiveness and social impact.

Establishing the chief financial officer ( CFO ) position can provide nonprofit organizations with the expertise and perspective to handle big-picture financial management issues as they grow or evolve. As in the for-profit world, some organizations hire CFOs in order to better understand their finances so they can make informed decisions about resource allocation tradeoffs, while others find the CFO role to be the key to managing a complex matrix of programs and services, funding sources, and strategic goals, according to the March issue of “Leadership Matters.”

Published by Bridgestar, a nonprofit initiative of the Bridgespan Group dedicated to attracting, connecting, and supporting senior leaders for the sector, “Leadership Matters” selects a different theme about how to build and sustain effective nonprofit organizations. This month’s feature article, “The Impact of a CFO,” is based on interviews with management and board members of Rubicon Programs, Inc. about their experiences in creating the CFO position. A San Francisco-area-based organization, Rubicon is a four-time winner of Fast Company/Monitor Group’s Social Capitalist Awards that provides affordable housing; career, mental health and family counseling; and employment opportunities for homeless and economically disadvantaged individuals.

Hiring a CFO may not be the right answer for every nonprofit. But in 2001, Rubicon recognized that it needed to establish effective financial management of its $12 million-plus budget, numerous programs, and funding from 100 different sources. Initially, the organization tried to fill this need through a variety of positions: controller, director of finance, and part-time financial consultant. However, Rubicon management and board soon realized that they needed to upgrade the position to a full-time CFO, who could bring the top-level financial management expertise and strategic insight to oversee the finances of the diverse programs and funding sources. The organization had determined that outsourcing was not an effective alternative because of the complexity of its finances and the need for ongoing internal communications.

Before it hired Kristen Growney as its first CFO in January 2002, Rubicon identified specific competencies it needed in the CFO position. The organization was looking for someone who could:

•    Provide strategic insights into the business. The organization wanted someone with expertise that extended beyond nonprofit accounting – someone who could evaluate trends, and provide insight into the business.
•    Effectively manage the accounting function, interpret the needs of the accounting staff and help them meet the organization’s needs.
•    Provide objectivity to how decisions were being made.
•    Juggle different revenue streams.
•    Work with a diverse group of people.
•    Appreciate the organization’s mission and understand how finances can help support the mission.

Despite the interest in establishing the CFO position, there were also challenges. “We still needed the controller, and from an external standpoint it looked like we were just adding to our administrative staff. But then we talked about how important the CFO is for our ability to provide timely information to our funders that helps us obtain a steady flow of funds in the future. And while this was an expensive position to pay for, we recognized that the financial downside of not having a CFO was significantly worse for us if we didn’t have the vital information we needed to make business decisions,” said Erwin Reeves, Board Treasurer, Finance Committee Chair and former Board Chair.

It helped that Rubicon’s President and Executive Director, Rick Aubry, communicated to everyone at the outset that the CFO was in charge of finances and would help make their jobs more manageable and effective.

Yet the management team and board needed time to get used to the changes the new CFO would bring to the accounting systems and the organization overall. “Prior to my arrival, I think the board had gotten used to not getting financial information,” Growney, who has since left Rubicon, said. “It took them about a year to get comfortable with the new level of transparency and engagement with the financials.”

It took less time to convince accounting department staffers, who had thought hiring more bookkeepers was a better solution and would lighten their load. Growney’s ability to work with a diverse group of people, teach new tools and skills, and establish a rapport with her staff enabled her to quickly demonstrate her value to the organization.

Some of the benefits Rubicon experienced in hiring a CFO included:

•    Making financials more transparent to board and managers.
•    Achieving greater consistency and usability of internal reporting.
•    Developing managers to use financial information in making decisions
•    Establishing higher accountability about different lines of business.
•    Enabling longer-term financial planning for different lines of business.
•    Depersonalizing business decisions by taking a financial perspective in examining them and discussing tradeoffs.

Aubry said, “We have a much better managed accounting/finance department and we’re much more successful at thinking through what our businesses should be about. In 2003, we closed one of our three social enterprises. It was the right decision and with our CFO’s financial analysis we were able to separate out aspiration from reality. More importantly, we were able to make this decision not as a one-off, but in the context of supporting and sustaining the larger organization.”

According to Rubicon management and board members, organizations considering whether to establish a CFO function should:

•    Analyze your organization to determine if a CFO is the right solution. The size, complexity of the funding structure and the diversity of your organization will help determine if you need a CFO and what type of background the candidate needs for the position.
•    Determine if your organization is committed to bringing a CFO onboard. Is management ready to accept some of the inevitable changes and decisions that may result from having visibility into the finances? Is the organization willing and able to pay the compensation that a CFO requires?
•    Ensure that the executive director sees the CFO as a partner in managing the organization from a financial perspective and is willing to give that person the authority to make decisions.
•    Clearly define the objectives for the position and anticipate challenges and tradeoffs. Organizations may incur resistance to any change that the CFO introduces, and the new internal accountability that managers will have may also bring limitations.

“Making the decision to hire a CFO is a significant step in the life cycle of a nonprofit organization because it means that the organization may have a complex portfolio of programs, services, funding sources, and strategic goals. But making the decision is not the final step in the process – because organizations need to prepare to adjust to the new CFO, new processes and cultural change that could occur. The Rubicon case study helps outline steps organizations should take when evaluating whether or not to hire a CFO and what to do after they hire a CFO,” said David Simms, Managing Partner, Bridgestar.

The main article is also accompanied by audio clips from the Rubicon interviews. The current issue of “Leadership Matters” is available to Bridgestar members at: www.bridgestar.org/Resources/Newsletters/2007/March2007.aspx. For a complimentary subscription, please email subscribe@bridgestar.org.

About Bridgestar
Bridgestar ( www.bridgestar.org ), an initiative of the Bridgespan Group, is a nonprofit organization providing talent-matching services, content, and tools designed to help organizations build strong leadership teams and individuals pursue career paths as nonprofit leaders. Bridgestar’s goal is to attract, connect, and support senior talent, leading to greater organizational effectiveness and social impact.

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2007-03-19

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