by Kaleen Deatherage, Interim Executive Director
I’d like to begin by thanking all of you who attended or watched via YouTube our listening session in March, as well as those of you who have taken your time to email or stop by for a conversation as we work together to define the road ahead for the Mazamas. This is YOUR organization, and it’s heartening to see the level of engagement and care that members, staff, and the board have for our mission and our future.
Your questions and feedback from the listening session, along with the ongoing work of the staff and board, have helped us to clarify our next steps. We are going to focus on the following priorities in the coming months:
- Financial oversight and budget planning—to overcome the deficit and rebuild the Mazamas financial assets and stability.
- Identify revenue sources and build a fundraising plan—initiate new approaches to program/activity pricing and new sources of revenue generation to improve the bottom line.
- Role clarity and responsibility for decision making—clearly define the respective roles, reporting, and decision-making authorities of volunteer leaders, staff, and the board.
- Propose bylaws amendments—a well-planned process to identify needed changes, share rationale with members, hold discussions, and move to a vote within a timeline that resolves issues before hiring a new permanent ED and launching a strategic planning process.
- Improve communication organization-wide—develop and lead a well-planned, pro-active approach to communications to help support and maintain a positive and cohesive community dynamic and engaged membership.
We’ll be actively using all the Mazama communication channels to share the work happening on these priorities, and we’ll be reaching out to many of you to help contribute to these efforts, so please answer your door when we come knocking!
One of the takeaways I had from the listening session was a recognition that it could be helpful to clarify the most common nonprofit operational and governance structures, to explain what structure Mazamas currently operates with, and to suggest some structural adjustments that could better fit your present needs and set the Mazamas up for success on the road ahead.
With that in mind, let’s dive into a conversation to better understand and compare nonprofit structures.
What is a Nonprofit Organization?
A nonprofit is an entity that is driven by a dedication to a social cause in areas such as religion, science, environment, public health, social service, or education. Unlike corporations, all revenues earned by a nonprofit organization are used in furthering its mission-focused objectives instead of being distributed to shareholders or employees of the organization.
Nonprofits in most jurisdictions are tax-exempt, meaning that they do not pay income tax on the income that they receive. Non-profit organizations in the United States are monitored by the IRS using Code Section 501(c). The code determines an organization’s eligibility for the nonprofit organization’s status. The revenues earned by a nonprofit organization are mainly from donations from individuals and corporate organizations, as well as from fundraising activities.
The donations are tax-deductible for the individuals or corporations that contribute, and the organization is not required to pay taxes on the monies. Nonprofits are accountable to their donors, volunteers, and the community. The projects nonprofits undertake help build public confidence in the organization.
Although nonprofit organizations are not driven by a profit motive, they must collect revenues that help them further their specific social cause. Nonprofits may also receive sponsorship for specific projects and events from corporations, government funding via grants or contracts, merchandise sales, and even private investments.
Due to the important role that nonprofit organizations play in shaping the community, over the years they’ve been forced to adopt new methods of raising revenue to be financially stable. Over-reliance on donations and events may create cash flow problems for organizations when the donors fail to make contributions, or the amounts donated fall below the funding levels needed to remain sustainable.
Membership
With a nonprofit definition and their basic purpose established, let’s now talk about the term “membership.” What’s important to understand is that in the non-profit sector, membership often has many meanings.
Let’s begin with the membership structure and definition that the Mazamas currently operate under, which is a formal membership structure. A formal membership organization is a nonprofit that grants its members specific rights to participate in its internal affairs. These rights are established in the articles of incorporation and defined in more detail in the bylaws. Usually, in a formal membership organization, members elect the board and/or the officers; approve changes in the bylaws; and authorize major transactions such as mergers and dissolution of the organization. In short, members have a strong interest and voice in the future of the organization and not just in the tangible benefits that they receive as members. For example, trade associations, chambers of commerce, and churches are typically membership organizations in which the members rely on the organization to advocate for better business opportunities or the religious beliefs and practices of a particular line of business or faith community.
To a high degree this structure is a leftover of a bygone era of fraternal orders—Elks and Lions clubs, Freemasons, Rotary, Kiwanis—that quite honestly no longer play a significant role in today’s society. Formal membership structures, when set up in decades past, were not designed to welcome the general public. In fact, they were often designed to define the criteria that would allow certain people to join and intentionally keep other people out. This reality doesn’t mean that there is no place today for a nonprofit with a formal membership structure, but it does reveal a truth that you can no longer avoid. And that truth is it’s time for organizations like Mazamas, that still operates under an outdated nonprofit model, to take a hard look at adjusting your membership and governance structure to re-establish your relevance in the alpine and mountaineering community and to determine how, going forward, the Mazamas can make a meaningful impact on the general public.
The structure we’ve just discussed is a formal membership structure, so what is an informal membership organization? Informal membership is a practical way to integrate supporters or donors into an organization. This type of nonprofit doesn’t have formal members, it has a membership program. In contrast to a formal membership nonprofit that grants its members specific rights to participate in its internal affairs, nonprofits with membership programs are creating a means of incentivizing donations and involvement within their organization. The nonprofit extends additional engagement opportunities to members in exchange for donations in the form of membership fees. The benefit of a membership program is that nonprofits can not only reap the benefits of extra donations through membership fees, but they also provide specialized perks and engagement opportunities for invested supporters—without the added complexity and burden of managing a membership-based governance model. Implementing a membership program is a nonprofit fundraising and stewardship strategy. It is not connected to how the nonprofit is governed.
For instance, you may have heard an Oregon Public Broadcasting pledge drive asking for members to join and donate to the station. They are using “membership” as a way to raise money, allowing people or businesses to participate in their membership program by making monthly or annual donations in exchange for services like an insider newsletter or invitations to member-only events. These “donor members” are interested in OPB’s mission and find the benefits package useful. And giving a donor the right to proudly claim and display “membership status” (on a tote bag, for example) can be a powerful donation motivator.
Well documented in nonprofit literature is the following truth, changing a formal membership structure into a self-sustaining board structure tends to be a challenging task. It asks members to give up some of their power to help an organization become more flexible by giving the board more latitude to take action, allowing them to respond much quicker to changes in the external environment like the economy; the shifting nonprofit fundraising landscape; the prevailing social issues of the day; and many other factors that nonprofit senior staff members and board members must adapt to on a daily basis. That ask is never easy, especially for those who are long-tenured members accustomed to the formal membership structure.
Because our future nonprofit structure is what the Mazamas membership needs to consider, let’s dive a little deeper into member-driven vs. board-driven structures. A nonprofit corporation can choose to be governed by formal voting members or by a self-sustaining board. The governing body of your nonprofit organization is empowered and responsible for setting direction, strategic decision-making, compliance, operating-policy setting, fiscal oversight, and overall accountability for the organization in fulfilling its vision. Recognizing that selecting the best governing structure is vital to ensuring the success, growth, and development of a nonprofit organization, the savviest nonprofits revisit their structure from time to time with open-mindedness about making necessary changes to increase their relevance and competitiveness in the nonprofit sector.
To do this, it’s critical to understand the difference between a governing structure that is board of directors-driven, or one that also incorporates a governing membership. Membership governance typically involves individuals—members—who are allowed to vote on some or all of the following: matters of governance, direction, approval of budgets, activities, staffing, and/or substantial financial obligations that the organization might undertake, or the approval of long-term contracts. This structure may include members voting to appoint a board of directors or an executive committee to manage the day-to-day operations of the organization and then the membership only votes on specific actions as necessary for the success of the organization. The board may bring those types of issues before the members as necessary. Membership may require membership dues to be a voting member of the organization, or not. Membership may also include benefits, such as discounts to participate in activities of the organization where participants are required to pay fees, or perhaps have access to special activities for members only. Eligibility criteria for membership is clearly defined, as well as what the benefits to members and their responsibilities will be.
This structure works well for organizations who want a democratic structure where each member has a say in what happens. The following types of nonprofits are typically member-driven since their primary goal is to serve their members:
- Chambers of commerce
- Churches
- Social clubs
- Trade associations
With a board-governed organization, there are either no official members or members with only limited rights. If a nonprofit corporation does not have a membership structure, its board will be self-sustaining instead of being elected by members. In this setup, board members elect their replacements themselves, usually via a board nominating committee, and the board of directors is the highest authority in the nonprofit corporation. This means that board members must accept responsibility for setting direction, making decisions, and managing the activities of the organization, whether they hire others—an executive director, staff, or independent contractors—to carry it out or use volunteers. In this governing framework, the board is not accountable to another body. Most charities choose a board-driven structure.
It may be possible for Mazamas to retain voting members and still be governed by a self-sustaining board, this is something I believe should be considered carefully. Would the membership be willing to change the bylaws, granting the board greater ability to make decisions, set board terms of service, choose board members based on criteria that helps the Mazamas to be viable in 2022 and beyond, and conduct the daily affairs of the organization with an enhanced ability to make real-time decisions to adapt to the environment without waiting for an annual vote of the membership?
To help you sort through these important decisions, my next article will be an exploration of nonprofit bylaws and some specific recommendations around how the Mazamas could elect to update its bylaws to overcome some of the obstacles the organization is facing today and to set yourselves up to raise more money and make a greater impact in the alpine community, as well as throughout the reigon.
If you would like to learn more about the efforts to stabilize and prepare the Mazamas for the future, please join us for our next virtual town hall event on Monday, May 9. Look for the link to register in the eNews and on the Mazamas social media channels.