Nonprofit Resources

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Financial Leadership at Nonprofits: Understanding Roles and Responsibilities

While nonprofit organizations frequently use the titles of chief financial officer (CFO), controller, and director of finance synonymously, they are very distinct roles with different duties and skill sets. Below, we outline key responsibilities for each.

Let’s start by looking at the differences between the CFO and controller roles:

CFOController
Strategic role and responsibilitiesTactical role and responsibilities
Focused on strategic leadership; analyzes current economic realities while preparing for future trendsFocused on effective management
Sets report dates and interprets the financial reportsEnsures the month-end close process is complete, accurate, and timely
Responsible for establishing and managing internal control processes, procedures, and policies Responsible for implementing and managing through the established internal control processes, procedures, and policies
Works closely with the CEO/president Works closely with the CFO
Provides leadership to the accounting/finance team through strategic direction; often works with peer organizations and maintains banking and industry relationshipsTypically, responsible for managing the accounting team (AP, AR, payroll, general ledger accounts, financial reporting, etc.)

Also note that while CFOs should have technical competencies, success is often a result of their:

  • Emotional quotient (an individual’s ability to understand, use, and manage their own emotions in positive ways, including to communicate effectively and empathize with others)
  • Strategic leadership capabilities
  • Ability to influence and drive the energy and resources of the organization and financial operations team in the direction established by the board and senior leadership

In many organizations, the CFO eventually takes on responsibility for areas such as IT, HR, and legal, migrating to a role similar to a chief operating officer.

 

Director of Finance

The director of finance role can vary, based on the nonprofit organization. This title is often selected to be consistent with the naming convention for leadership roles within an organization (executive director, director of operations, director of programs, etc.). While there are exceptions, the role and job description often align with the controller role.

The director of finance role is also sometimes used at smaller organizations that do not have separate CFO and controller positions.

 

Creating a Successful Development and Succession Plan

Organizations with a leadership development program and formal succession or transition policy and framework have higher rates of leadership transition success.

Consider these key elements for long-term results and sustainability:

  • Maintain a focus on recruiting and building a leadership development culture in your organization.
  • Get board members and leadership to agree on and commit to proper transitions.
  • Identify your organization’s challenges and the leadership qualities needed to address these challenges successfully.
  • Recognize that internal promotions are viewed positively by and are highly motivational for employees and can lead to increased retention.
  • Consider internal candidates first, but only if they have the necessary qualifications. When all other factors are equal, select the internal candidate unless there is an external candidate who is significantly more qualified. “Significantly more qualified” will vary from organization to organization, based on each organization’s specific situation and needs. But factor in the benefits provided by an internal candidate whose skill and performance you’re already familiar with, and who is already knowledgeable about your organization’s culture and processes.
  • Recruit for and select the best possible candidate, which may not be the best available candidate. Keep in mind that the best possible candidate may not be actively seeking a new position.
  • Assess these three areas when considering candidates for a position:
    • Competency – professional ability and experience
    • Culture – values and faith alignment with your organization
    • Chemistry – personality profiles and individual/team engagement interaction predictors

Please contact us if you have any questions about the information outlined here or if you’d like to discuss how we can help empower your organization. CapinCrouse offers a variety of nonprofit consulting and outsourced services that can be tailored to your organization’s specific requirements.

 

Additional Resources:
The Church Financial Field Guide
Anticipating Change: 7 Steps to an Effective Succession Plan

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Stan Reiff

Stan serves as Partner and Professional Practice Leader - Consulting. Stan’s professional experience includes over 35 years in ministry operations, public accounting, government accounting, and missions. He provides strategic leadership of the firm’s professional advisory and consulting services, including research of emerging issues in the faith-based nonprofit sector and the development and implementation of products and services in response to those needs.

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