Don’t Let an Ethics Issue Cripple Your Nonprofit

Ethics issues can happen in any organization at any time and depending on the issue’s magnitude could pose a threat to the nonprofit’s survival.  Nonprofits should be concerned as ethics issues can impact them in several different ways and can cause long-term damage. This article discusses how ethics issues can hurt nonprofits and how to prepare, respond and hopefully avoid them.  These issues can distract attention from your organization’s mission, so it is very important to deal with them effectively.


Nonprofit organizations rely heavily on funding from donors.  Donations are made with faith that the nonprofit delivers on promises and spends money wisely, so an ethics issue could drive donors away.  An issue may not even be true but the impact can be harmful and some donors may not return.

Nonprofits often rely on volunteers, who are giving their time to aid the nonprofit in attaining its mission.  A serious ethics problem may cause volunteers to reassess their support and make it more difficult to find new volunteers.  In addition, volunteers represent an ethics risk group for the nonprofit, since any unethical behavior by the volunteers reflects on the nonprofit.

Many nonprofits operate in regulated sectors and receive grants or contracts from federal, state or local governments.  An ethics issue can result in significant problems retaining existing grants and contracts or obtaining new ones.


Lingering Impact

Ethics issues tend not to get resolved quickly, easily or quietly, so, if your nonprofit is caught up in some type of ethical problem it will likely be around for a while.  The issue will also run hot and cold as it makes its way through to eventual conclusion which means you may need to respond about it numerous times.  NPQ recently reported on an ethics issue plaguing a nonprofit whose founder left to run for governor and appears to have received donor lists from the nonprofit.  Given the severity of the issue, it has weighed heavily on the nonprofit for some time and will likely continue to linger, which may ultimately damage the organization beyond recovery.

Click to go to the Nonprofit Quarterly Article


Establish an Expectation of Ethical Behavior

A robust ethics program is the best preventative to major ethics issues, but the program must be comprehensive and continually reinforced. The following are the most critical components of a solid ethics program.

  • Message from the Top – the Executive Director and Chair send out a joint statement on ethics no less than annually
  • Policies – Ethics and Conflict of Interest policies, once established, are reviewed and published annually, with refresher training and certification of understanding and acceptance
  • Training – all staff and volunteers (including Board members) receive training on ethics and Conflicts of Interest no less than annually
  • Personnel – build ethics sensitivity and understanding into hiring and evaluation practices (for staff and volunteers)
  • Measure – track and report compliance with training and certification processes
  • Ombudsman – select a leader trained to address ethics issues and answer questions on potential ethics challenges via hotline or other confidential contact method
  • Applied Learning – identify real-world examples of ethics issues, preferably in the nonprofit sector, as training aids
  • Communications – provide information about ethics policies and compliance to donors and other funders


Response Plan

Even with the steps noted above an ethics issue may arise, so for serious issues (or even potentially serious issues) proactively prepare a plan to address.  Plan steps include;

  • Identifying a team including members from management and the Board,
  • Selecting a crisis manager to implement the plan,
  • Establishing clear authority and decision-making responsibilities,
  • Crafting a plan for internal and external communications, and
  • Executing the plan.

A successful response will show that the nonprofit’s environment supports ethical behavior and that the issue was basically unforeseeable.  If an allegation of unethical behavior is true, the response will include steps the nonprofit will take to address the behavior.  If the allegation is false, then the nonprofit needs to be prepared to defend itself and should assemble a comprehensive report of the facts and circumstances.  Above all, the response needs to show that the nonprofit takes the issue seriously and is addressing it expeditiously.

For more on crisis planning, click to view:  Keep Calm and Lead On


Bottom Line

Ethics issues can cause irreparable harm to nonprofits because of their dependence on donors, volunteers and government funding. Nonprofit leaders need to establish high ethical behavior standards and lead by example. Build a solid  foundation with policies, training programs and compliance monitoring and have a response plan before you need it.  Implement these steps to protect your nonprofit an ethics issue, so it can continue to fulfill its mission.


What techniques does your nonprofit use to avoid or address ethics issues?  Please share your experiences in the comments section.


About the author:

Michael F. Cade is an advisor and executive coach, taking the nonprofit sector beyond the numbers.  He is a leadership pathfinder, optimizing operations and strategy to help organizations attain long-term viability and relevance.  His Framework for Fiscal Sustainability is an innovative approach for evaluating organizational health and securing the organization’s ability to deliver on its mission.

Mr. Cade publishes the nonprofit leadership blog  Not for Profit Beyond the Numbers

If you have questions or would like a consultation on a nonprofit leadership or operational issue, contact him at:

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