CPAs, Nonprofits and the Art of Communication
How CPAs can improve their communication skills when working with nonprofit organizations.
June 8, 2009
CPAs have important roles to play with nonprofit organizations — providing professional services, serving on an organization’s board or working as an executive or volunteer. At a time when nonprofits are facing a number of challenges — the economy, the Madoff scandal, the greater demand for accountability and transparency, there is much work a CPA can do. But CPAs are not always the best communicators when it comes to working with nonprofits.
Margaret Linnane, executive director of the Rollins College Philanthropy & Nonprofit Leadership Center, recalls recommending an engineer friend to serve on the board of a nonprofit organization. The other board members and the engineer quickly became frustrated with each other. While the other board members spoke only in the language of mission, the well-meaning engineer spoke only in the language of measuring the organization’s effectiveness. The engineer sought a uniform, consistent way to measure how well the organization met its stated mission. The other board members had a hard time translating their passion for the mission into a set of numbers. The communication gap never closed.
Accountants, like engineers, are numbers and results driven. Numbers measure results and ultimately the financial success or failure of an organization. But that is the for-profit world. In the nonprofit world, Linnane argues, mission is the thing. A CPA or engineer will not overcome communication problems until the overriding importance of the mission is fully understood and appreciated.
That does not mean numbers are unimportant. Nonprofit organizations are expected to be good stewards of their income and assets. That is where CPAs have an important role to play — making sure the nonprofit organization is a well-run healthy enterprise. But poor communication often gets in the way. The different nonprofit organization stakeholders — donors, executives and staff, volunteers, board members and clients — often speak past each other using many different languages. By understanding this, the CPA can play a unique role in helping improve communication among all the stakeholders.
Effectiveness, Accountability and Transparency
Recently, Linnane notes, donors have begun to adopt language from the world of finance. For example, a donor no longer makes donations but “invests” in a nonprofit organization. They want to know what type of “return” they will see from their “invested” dollars — in other words, they are not only concerned with how much of the organization’s dollars goes to program expenses but whether the money is well spent. Much like the engineer, donors want more than just a measure of efficiency; they want a measure of effectiveness.
In addition to the organization’s effectiveness, donors only want to “invest” in well-run, healthy organizations. This has lead to a demand by donors for greater accountability and transparency. This mandate for accountability and transparency is evident in three areas of operation:
It is no wonder that donors and nonprofit executives often talk past each other. While donors have adopted the language of finance and investing (something CPAs can appreciate) nonprofit executives are still talking in terms of mission. What is the source of the communication problem? A recent book on information imbalance provides some insight.
Guess the Tune Playing in My Head
In the book, Made to Stick: Why Some Ideas Survive and Others Die (Made to Stick), authors Chip Heath and Dan Heath tell the story of a psychologist who conducted an experiment. She asked volunteers to tap out on a table, using just their finger, well-known tunes such as “Happy Birthday to You” or “The Star Spangled Banner” for a listener. The listener was not told what song was being tapped but asked to guess. The listeners guessed correctly only 2.5 percent of the time. Prior to the experiment beginning, the tappers had predicted that the listeners would guess 50 percent or more of the time correctly. Why did the tappers expect a much higher success rate? The authors attribute this mismatch to the curse of knowledge. The person with the knowledge cannot imagine what it is like to not know it. In everyday life, we often talk as if the listener shares our base of knowledge — as if they heard the tune that was playing in our head as we tapped it out on the table.
Whenever we communicate, there are information imbalances. The key is recognizing when they exist and working to overcome them. A CPA may have little knowledge of — or appreciation for — the delivery of social services, just as the nonprofit executive may have little background in financial reporting. This gap in knowledge must be overcome before effective communication can take place.
The authors of Made to Stick argue the “stickiness” of information is improved when it is presented by a credible source using concrete, simple examples. The authors also recommend the use of stories and emotion to improve “stickiness.”
As Linnane argues, the CPA must fully understand and appreciate the organization’s mission. This is because it is within the context of the mission that the finances can best be presented. The numbers – reported honestly and properly — are an important part of the organization’s story. They are part of the narrative that will hopefully excite and motivate current and potential donors.
In upcoming article, these concepts will be applied to some of the current challenges and opportunities faced by nonprofit organizations. You will learn that once communication barriers are overcome, CPAs can become an important part of the nonprofit organization’s success at meeting its mission.