To perform their vital social role, nonprofits need to command trust from multiple stakeholders. Good governance in the form of clear policies and practices can help foster this, as a new paper sets out.
You can’t see it or touch it. Trust, however, forms the bedrock of so much in the world around us, from activities to relationships to institutions. Absent this element – and especially when it suddenly disappears – so much else can come crashing down. And despite the ease with which trust can vanish, its creation is typically a slow process.
The nonprofit sector is especially reliant on trust. No donor, for example, would knowingly give without having faith that their charitable gift will be well used. Staff and volunteers, beneficiaries, private sector partners and governments also need to know they’re dealing with a nonprofit that will act with integrity, transparency and efficiency.
So, how can nonprofits build and maintain such trust? The most effective approaches leave nothing to chance. Good governance – a set of policies and practices that strive for transparency and accountability – can contribute to fostering this sense of confidence. A new paper from Karen Kardos, our Global Head of Philanthropic Advisory, explores some of the key elements of good governance.
While trust is intangible, the paper emphasizes that sound policies and practices are not:
“Having well documented policies and practices can go a long way to instilling public confidence,” writes Karen.
The paper sets out the what and the why around such policies. Karen explores some of the main areas that most require documentation, including conflict of interests, ethics, whistle blowing, investment policy, compensation, gift acceptance and data retention.
Despite the need for codifying these common elements, it’s not a checkbox or one-size-fits-all exercise. Each jurisdiction has its own rules that nonprofits must comply with, for example. Even more so, each nonprofit has its own culture and make-up. The policies and practices adopted need to reflect that.
Enshrining all these elements – and making sure they’re accessible – may be time consuming for nonprofits but has clear benefits, as the paper stresses:
“Well documented, transparent policies send the message to both internal and external stakeholders that it takes its mission seriously and strives for organizational excellence.”
That said, though, scrutiny and formalization have their limits. Not every practice that a nonprofit organization follows can be documented and reviewed, as this would create “an administrative nightmare.”
The need for nonprofits’ endeavors worldwide has seldom seemed greater. From addressing basic human needs to environmental challenges to civic engagement to promoting culture, the sector has enormous potential to change lives for the better. To be able to do so, however, building and maintaining trust is critical.
While only one ingredient, the good governance highlighted in the new paper can help achieve this.