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Five Ways to Maintain Your Nonprofit’s Ethics and Preserve Your Brand

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As a professional who consults with organizations on how to raise the visibility and value of their “brands” I’m always stressing with my clients that a brand is not a cosmetic you apply to make your organization look pretty.

Rather, a brand is nothing less than your DNA; it’s a true reflection of how healthy, or unhealthy, your organization is from top to bottom—including its ethical behavior.

Study Shows Ethics Standards Declining at Nonprofits

Unfortunately the ethics standards at many of the nation's nonprofit organizations are declining, including when it comes to financial fraud, according to a recent study by the Ethics Resource Center.

Rates of observed misconduct in nonprofit organizations by employees are at the highest level since ERC began measuring in 2000, with nonprofits faring little better than the public and private sectors.

"One would think that freed from the pressure to generate and distribute profits to shareholders, nonprofit organizations would rise high above the myriad ethics and compliance issues that have plagued the public and private sectors over the years," says ERC President Patricia Harned, Ph.D.

One would think, but that doesn’t appear to be the case.

In 2007, the types of misconduct most widely observed by nonprofit employees were: putting one's own interests ahead of the organization's (24%); lying to employees (21%); abusive behavior and misreporting hours worked (each 19% each).

Boards, while very important in shaping the perceptions of employees with regard to ethics, are not taking advantage of their influence to set clear ethics standards for their nonprofit organizations. In fact, just the opposite appears to be the case. Where boards have heavy influence, there also are high levels of misconduct and lower perceptions that top leaders prioritize ethics, reports the ERC.

Beyond Just Legal: What You Can Do

So what is a nonprofit that wants to operate on a high moral and ethical plane—and keep its brand strong and healthy—to do? Here are actions you can start taking now:

  1. Recruit and hire well

    How often have you heard “We need to recruit board members of affluence and influence?” I contend that if the portfolios of board members don’t include wisdom and integrity, their affluence and influence often translate into a liability rather than an asset. And the record shows many an organization enduring much pain because of poor (for lack of a better word) board leadership.

    But it is leadership at all organizational levels, including management, that establish the organization’s corporate culture. It is they who should be providing both example and oversight when it comes to moral and ethical issues, circumstances and decision making.

  2. Educate what’s at risk

    Believe it or not, many people don’t understand what’s at risk if they don’t perform their jobs in an ethical, accountable manner. And ethical lapses are easy to make, especially when the corporate culture gives a wink and a nod to ethical behavior.

    What’s at risk? Just about everything. Think Enron, Arthur Andersen, World Com, Global Crossing and a slew of others, including numerous nonprofits that have suffered greatly because they failed to understand the risks of their questionable or unethical behavior. We’ll refrain from mentioning names here, but if you follow the sector you know who they are.

  3. Be transparent with your finances

    Ever since Deep Throat told Bob Woodward to “follow the money”, scrutiny surrounding financial malfeasance has only intensified. Be sure that you can account to your funders for how your organization spent their money; better yet, how it made a difference in helping you achieve your mission.

    Poor bookkeeping is no excuse. Hire a certified accountant, if necessary.

  4. Speak truth to authority

    Create a corporate culture in which employees feel free to speak truthfully to management.

    Surveys show that a large percentage of employees who see misconduct don’t speak up either because they believe their superiors won’t take action or fear they would face retaliation if they report what they saw. This tends to create an unhealthy, at-risk work environment.

  5. Legal should not be the litmus test

    There’s a difference between what’s legal and what’s ethical, and it is up to an organization’s leadership to understand what that difference is. If you’re sitting around a conference table trying to split hairs between the two, don’t go to your legal department for a resolution to your dilemma. They’re being paid to find you a loophole. Rather ask yourself, “What would my mother think if this decision we’re about to make finds itself on the front page of the local newspaper or on the 6 o’clock news?”

We don’t need polls and surveys to tell us Americans are losing faith in their government, corporate and even religious institutions, including the nonprofit sector.

Let’s strive to give people something to believe in again.

Larry Checco, © 2008

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