August 22, 2017

The how and why of drafting good nonprofit policy

Noshir Dadrawala and Meher Gandevia explain how organisations can put together a good nonprofit policy and why it is important to do so.

3 min read

A policy is essentially a ‘plan’–a course or principle of action adopted or proposed by an organisation. Generally, the law does not mandate having policies. However, as organisations begin to grow, the need for having policies becomes not just desirable but, virtually a necessity.

Why do you need to have policies in place?

Policies eliminate ambiguity and provide organisations with a consistent approach to issues irrespective of the person involved. They outline procedures and practices that are key to the organisation, thus ensuring that various stakeholders are aligned. Clearly detailed procedures furnish distinct guidelines on what may be done in particular circumstances or with regard to a specific issue. What’s more, policy documents are also particularly helpful for new employees to familiarise themselves with the nonprofit’s practices often setting the backdrop for what to expect.

For example, there may be gaps in the nonprofit’s constitution (trust deed, Memorandum & Articles of Association) which a governance policy could fill. A policy on finance could provide clarity on who is authorised to sanction payments or sign cheques and other instruments and up to what limit. An HR policy would provide clarity on compensation, bonus, leave and other entitlements. A fundraising policy would lay down not just an ethical code but also a robust system on maintaining donor relationships.

In other words, policies are not documents to ‘show-case’ but, ‘go-to documents’ whenever in doubt or need for clarity.

When drafting a policy, keep the following in mind:

Objectives of the organisation are a key ingredient in framing a policy. Objectives state what is to be achieved, where and when. The objective is the final end to the plan while policy is the mode and manner to reach that goal with comprehensive guidelines that ensure effectiveness.

Policies should never be ‘cut and paste’ jobs, borrowed from others. Instead, it is important to:

Plan: Ensure that the plan is realistic and can be effectively implemented. The policy need not be voluminous. But, be sure to cover all aspects clearly, concisely and in a language that is simple to understand by everyone.

Oversee: Ensure that the policy is comprehensive and all-embracing. Review situations both external and internal that your nonprofit had to tackle in the past or is likely to confront in the future. A good policy is meant to serve as a useful guide in decision making that can stand the test of consistency and validation.

List: Ensure that you list down all the possible issues that your nonprofit would like to provide clarity on be it the role and responsibility of a board member or staff or a volunteer and clearly state the dos and don’ts.

Implement and be inclusive for impact: It is only when a policy is implemented that impact can be felt and measured. Therefore, it is also important that while drafting a policy the process is inclusive. Though policy is formally adopted by the board, it would be desirable to get input from the management team and other key stakeholders to whom it would apply. A policy that is drafted using an inclusive approach is implementable and more importantly actually gets implemented, and thus is more likely to have a positive impact.

Comply: Ensuring compliance is a key factor in determining effectiveness of any policy. It is therefore important to clearly state what is acceptable and what is not acceptable and who within the hierarchy is responsible for compliance and how. For example, if a volunteer is habitually late or defaults in performance of his/her specific task, who is to ensure compliance and how and to what extent?

Yardstick: A good policy is an organisation’s yardstick for measuring impact in terms of performance: be it in the realm of good governance, financial due diligence or excellence in human resources. Also, policies should be ‘living’ documents that must be regularly reviewed to ensure they remain fresh, practical, dynamic and relevant to the fast changing times and growing needs of the organisation and the sector.

Related article: Nonprofit boards – Three practices to ensure good governance

Jigsaw nonprofit poliy

This image is licensed under CC0 Public Domain

Key Ingredients

Generally there are no fixed templates for a policy and while some policies are voluminous and unwieldy, the more practical ones are crisp and concise. Regardless the size of the organisation or the volume of the policy, in our view, the following ingredients would be key:

  1. Policy title (e.g.: Governance Policy or Finance Policy, etc.)
  2. Date of effectiveness and validity
  3. Introduction and purpose (the rationale or why the need for this policy)
  4. Key definitions (e.g. types of compensations or designations and leaves etc.)
  5. Principles (Vision, Mission & Values)
  6. Organisation’s structure, hierarchy and functioning (Organogram)
  7. Scope (who does the policy apply to e.g. only the board, only the staff, only volunteers, etc.)
  8. Who is responsible for what and when and how penal action could be initiated
  9. Specific policies (e.g. on leave entitlements or loans and advances) and specific roles and responsibilities, duty hours and equal opportunities etc.
  10. Managing risks or safety measures
  11. Penal action (be it against member of the board, staff or volunteer)
  12. Annexure (tools, templates, forms and explanatory notes, if any)
We want IDR to be as much yours as it is ours. Tell us what you want to read.
CAP logo
Centre for Advancement of Philanthropy (CAP)

Centre for Advancement of Philanthropy (CAP), set up in 1986, is a support organization that specializes in all the laws that regulate India’s non-profit sector. CAP has recently evolved to offer complete legal and compliance advice and assistance in 8 core areas of their set-up and operations, enabling them to be compliant in every respect. – Legal, Finance, Board Governance, Human Resources, Strategy, Communication/Reporting, Fundraising & Volunteer Management. CAP also corporate foundations with their foundation advisory and CSR related compliance. The authors for this article are Noshir Dadrawala CAP’s Legal expert and Meher Gandevia who oversees the programmes.