Destructive Behaviors in the Workplace

Picture2This essay will identify three common forms of destructive behavior in the workplace and provide suggestions to help leaders curb these types of behavior.  There are countless forms of destructive behaviors in the workplace, so this paper should not be viewed as a comprehensive listing.  Preventative and corrective actions are also numerous and should be customized to fit the specific culture and needs of a particular organization.

Common Destructive Behaviors

Johnson (2012) defines incivility as “rude or discourteous actions that disregard others and violate norms for respect” (p. 325).  This type of behavior might often be ignored by management or dismissed as a personality issue that cannot be fixed.  In fact, the guilty party may not even realize just how rude or discourteous his/her behavior really is.  But, allowing an employee (or group of employees) to continue practicing incivility will alienate a great number of an organization’s employees.  Wise leaders will intervene early on, knowing that failure to do so will put the organizational culture at risk and lead to diminished motivation, loyalty, and job satisfaction (Johnson, 2012).

Aggression can also involve very rude and hurtful behavior.  But, unlike incivility, aggression is always tied to an intentional attempt to hurt someone else or the organization itself (Johnson, 2012).  This type of behavior is most commonly a symptom of a dangerous emotion like envy, vengeance, or embarrassment. “Evidence suggests that people who feel negative emotions, particularly those who feel angry or hostile, are more likely than people who don’t feel negative emotions to engage in deviant behavior at work” (Robbins & Judge, 2010, p. 109).  Wise leaders must work to strengthen the emotional intelligence of organizational supervisors so they can better anticipate, identify, and prevent such emotions from going unchecked among employees.

Sexual Harassment
There are two primary forms of sexual harassment: quid pro quo (“something for something”) and hostile work environment (Pynes, 2009).  Both forms are illegal yet far too common in the modern workplace. Like most destructive behaviors, sexual harassment has an extremely negative impact on the job performance of its victims (Johnson, 2012).  It is incumbent upon organizations and their leaders to work to prevent these behaviors and to proactively address the issues through education and awareness.

Suggestions to Prevent Destructive Behaviors

A Solid, Ethical Culture
The first and foremost safeguard against destructive behaviors is a culture that organically discourages such actions.  This can be fostered through incentive programs, evaluation processes, and clear company policies.  But, it can only be reinforced and strengthened by consistent, ethical leadership at every level of the organization.  “Leaders are the ethics officers of their organizations, casting light or shadow in large part through the example they set” (Johnson, 2012, p. 318).

Strong Whistleblower Policies
Whistleblower rules established by the 2002 Sarbanes-Oxley Act prevent an employer from taking adverse action against an employee who speaks out against organizational abuse, fraud, or criminal activity (American Society of Safety Engineers, 2004).  This rule was enacted in response to the surge of corporate scandals like Enron, WorldCom, etc.  A wise organization, however, will go beyond the regulations and protect those who point out the misconduct of fellow employees.  “The organization needs to provide formal mechanisms so that employees can discuss ethical dilemmas and report unethical behavior without fear of reprimand” (Robbins & Judge, 2010, p. 241).  When it comes to guarding against sexual harassment, it is especially important to follow two suggestions from Barbeito (2004). “Protection of the privacy of all parties should be included in the procedures” and “Zero tolerance and disciplinary action against perpetrators should be expected” (p. 24).  And, that leads the discussion to the next point.

Swift and Decisive Action
Employees need to know that destructive behaviors will not be tolerated.  No written policy or procedure will communicate this to employees better than what they actually observe.  Swift action can also prevent certain behaviors from deteriorating into something even more destructive.  “If left unchecked, incivility escalates into aggression” (Johnson, 2012, p. 327).  Consistent actions will also encourage victims to speak out and bring destructive behaviors to the attention of management before a situation escalates to dangerous levels.

A Clear, Consistent Code of Ethics
Many have minimized the value of a formal code of ethics by highlighting the inherent vagueness of such a code and the difficulty of enforcement.  However, the benefits of developing and administering a code are clear.

Employees in companies with formal codes of ethics judge themselves, their coworkers, and their leaders to be more ethical than workers in companies that don’t have codes.  Members of code organizations believe that their organizations are more supportive of ethical behavior and express a higher level of organizational commitment. (Johnson, 2012, p. 339)

This results in an organizational climate that fosters more ethical (and less destructive) behaviors.


Principled leaders will obviously want to prevent destructive behaviors in their workplace.  But beyond the ethical obligations involved, leaders should also realize the practical risks of leaving these behaviors unchecked (low performance, disloyalty, etc.).  It is important to note that “those who engage in such unethical behaviors are driven to meet their own needs at the expense of coworkers and the group as a whole” (Johnson, 2012, p. 325).  Although many of the preventative measures mentioned above will require a significant investment of time and resources, they will ultimately payoff in both tangible and intangible ways.



American Society of Safety Engineers. (2004). Whistleblower protection: OSHA publishes final rule on whistleblower procedures under Sarbanes-Oxley Act of 2OO2. Professional Safety, 49(10), 16.

Barbeito, C. L. (2004). Human resource policies and procedures for nonprofit organizations. Hoboken, NJ: John Wiley & Sons.

Johnson, C. E. (2012). Meeting the ethical challenges of leadership: casting light or shadow (4th ed.). Los Angeles: Sage Publications, Inc.

Pynes, J. E. (2009). Human Resources Management for Public and Nonprofit Organizations. San Francisco: Jossey-Bass.

Robbins, S. P., & Judge, T. A. (2010). Essentials of organizational behavior, 10th E. Upper Saddle River, NJ: Prentice Hall.


(Adapted from an academic assignment by Chris Ronk, Piedmont International University.  The paper was originally submitted in partial fulfillment of course requirements at Concordia University Chicago where Chris is pursuing a Ph.D. in Organizational Leadership.)


The Formation of Knowledge Management as a Discipline

Picture1Robbins and Judge (2010) define knowledge management (KM) as the “process of organizing and distributing an organization’s collective wisdom so the right information gets to the right people at the right time” (p. 153).  Kroenke (2009) considers KM to be the “process of creating value from intellectual capital and sharing that knowledge with employees, managers, suppliers, customers, and others who need it” (p. 352).  However one defines this emerging discipline, it is clear that KM is essential for today’s competitive climate.  Kroenke’s (2009) use of the phrase “intellectual capital” in his definition highlights the fact that we live in an age in which knowledge must be viewed as an organizational asset.  Those who have a lower view of organizational knowledge will most likely be outdone by those who have mastered the latest techniques to identify, store, and utilize this valuable information.

The Three Stages of KM Development

As a relatively new concept in the world of business, KM has evolved through at least three states of development since its birth in the mid-1990s (Koenig & Srikantaiah, 2004).  A brief look at these three stages will demonstrate the ongoing process by which KM has become a serious discipline that truly adds value to any organization.  The fact that KM has moved through all three of these stages also adds validity to its existence as a valuable and lasting discipline.

Stage 1: Storing and Sharing Best Practices
The development of KM began within the consulting industry and focused on the sharing of organizational information in order to keep colleagues from reinventing the wheel every time they faced a challenge with a new client.  With the growth and popularity of the Internet in the mid-1990s, organizations realized that online technology could be used to make the sharing of information possible across large, and even global, organizations (Koenig & Srikantaiah, 2004).  Online technology also made such sharing affordable for most any size organization.  This allowed organizations to develop and utilize consistent best practices throughout every division, department, or sector.

During this stage, KM was also used to preserve “organizational memory” by storing the lessons learned by key employees (Kroenke, 2009).  This form of KM minimized the negative impact organizations often faced when a key employee left the organization.  It also ensured consistent and uninterrupted services for customers during a time of internal transition.

Stage 2: Communities of Practice
The second stage of KM was focused more on getting employees actively engaged with the stored knowledge that was developed in the first stage. “KM won’t work unless the culture supports sharing of information” (Robbins & Judge, 2010, p. 154).  During this stage, HR departments began to see the advantage KM had to offer and they moved quickly to integrate KM into personnel practices (Koenig & Srikantaiah, 2004).  As a result, many organizations now incorporate some form of KM training as part of the orientation process for new employees.

Stage 3: Retrieval and Taxonomy
The third stage of KM’s development is focused on organizing the enormous amount of information that is being collected in today’s KM systems.  This systematic cataloging is necessary in order to make the use of KM more efficient and effective (Koenig & Srikantaiah, 2004).  As databases grow in size, a standard taxonomy becomes more and more critical.  “KM users need an easily accessible and robust means of determining whether content they need exists, and, if so, a link to obtain that content” (Kroenke, 2009, p. 353).  Without this, users can be overwhelmed with irrelevant data or lost in time-consuming hunts for something that may not even exist.  When this happens, the information within the KM system becomes as useless as an old file box stored in the attic.

Modern technology should make taxonomy and retrieval more possible than ever.  The proliferation of search engines in our everyday lives has made data retrieval almost second nature.  Most employees will understand a standard Boolean search with little or no training.  Likewise, thanks to the popularity of blogging, those entering data in the KM system will be more familiar with (and comfortable using) data tags than they would have been a decade ago.  KM managers, however, face the challenging task of systematizing the storage and retrieval process in order to ensure consistency and efficiency.


 “When done properly, KM provides an organization with both a competitive edge and improved organizational performance because it makes its employees smarter” (Robbins & Judge, 2010, p. 153).  Although an employee’s IQ is unlikely to go up by using KM, the collective knowledge of the organization will certainly improve and each employee will be far better equipped to handle most any situation.

Despite all of these benefits, the value of KM is not always appreciated by today’s business leaders.  “When consulting firm Bain & Co. asked 960 executives about the effectiveness of twenty-five management tools, KM ranked near the bottom of the list” (Robbins & Judge, 2010, p. 153).  This author would suggest that KM needs a fourth stage of development that is focused on buy-in from top executives.  This would not only stimulate the ongoing expansion of KM within most organizations, but it would also ensure that adequate investments are made in this strategic area.  This “fourth stage” will most likely occur naturally as organizational leaders see the successes enjoyed by those already making serious investments in KM systems.




Koenig, M. E., & Srikantaiah, T. K. (Eds.). (2004). Knowledge management lessons learned: What works and what doesn’t. Medford, NJ: American Society for Information Science and Technology.

Kroenke, D. M. (2009). Using MIS (2nd ed.). Upper Saddle River, NJ: Pearson Prentice Hall.

Robbins, S. P., & Judge, T. A. (2010). Essentials of organizational behavior (10th ed.). Upper Saddle River, NJ: Prentice Hall.


(Adapted from an academic assignment by Chris Ronk, Piedmont International University.  The paper was originally submitted in partial fulfillment of course requirements at Concordia University Chicago where Chris is pursuing a Ph.D. in Organizational Leadership.)

Servant Leadership

Picture1The origin of the servant leadership concept is most often attributed to the writings of Robert Greenleaf (Northouse, 2013). In his seminal work, The Servant as Leader, Greenleaf presented an approach to leadership that placed the highest priority on the needs of others (What is Servant Leadership?). His model also espoused that a great leader will be motivated to serve first, and as a result, will be more effective in leadership (Northouse, 2013). According to Greenleaf, individuals are better equipped, better motivated, and more productive when they follow a servant leader.

Review of the Literature

The Principles of Servant Leadership
A systematic literature review by Parris and Peachey (2013) concluded that there is currently “no consensus on the definition of servant leadership” (p. 377). Numerous researchers in recent years, however, have developed lengthy lists of characteristics, attributes, and behaviors in order to describe servant leadership (Northouse, 2013). Exploring each of these works is beyond the scope of this paper, but the theory itself can be effectively summarized in the four basic principles that follow.

Serve First. This is the fundamental core of the servant leadership concept. Greenleaf stated, “The servant-leader is servant first…It begins with the natural feeling that one wants to serve, to serve first. Then conscious choice brings one to aspire to lead” (What is Servant Leadership?). According to Greenleaf, an ideal candidate for leadership will recognize a social responsibility to care for and assist those who are less privileged (Northouse, 2013). With this focus, the leader will carefully examine actions and decisions as to how they will impact others, especially followers. As Jesus would describe it nearly 2000 years before Greenleaf, “whoever desires to become great among you, let him be your servant…just as the Son of Man did not come to be served, but to serve…” (Matthew 20:26-28, NKJV).

Meet the Needs of Others. Unlike many other leadership theories that elevate the needs of the leader or the organization, servant leadership focuses on meeting the needs of followers. According to the theory, an organization can benefit from this approach because “if followers are treated as ends in themselves, rather than means to an end, they will reach their potential and so perform optimally” (Waterman, 2011). This conclusion is consistent with other behavioral theories, including Maslow’s Hierarchy of Needs (Robbins & Judge, 2010).

Lead Others to Serve. Applying the servant leadership approach, Boyum (2008) states, “Success is when those who are served become healthier, freer, more autonomous, and wiser and as a result become servants themselves” (p. 2). Based on Greenleaf’s approach, producing more servants will effectively produce more leaders who will one day produce other servants. Organizations benefit greatly when individuals at every level take on a leadership role and behave more autonomously in their tasks. How much greater can this impact be if each employee not only takes on more ownership for their actions, but also looks to serve others around them in the process?

Remain a Servant. Greenleaf believed that a servant can only be a great leader if he/she remains a servant (Boyum, 2008). A great servant who is elevated to leadership may find it challenging to maintain a servant’s heart. Yet, a failure to keep one’s focus on the needs of others will strip a leader of the very qualities that opened the door for leadership in the first place. Constant reminders of one’s stewardship responsibilities are necessary to avoid this pitfall.

The Practices of a Servant Leader
Unlike many leadership theories, servant leadership is not easily prescriptive in nature. “Even Greenleaf admitted servant leadership is unorthodox and would be difficult to operationalize and apply” (Parris & Peachey, 2013, p. 378). The concept itself is most effective when it is a way of life or a philosophy, not when applied as a management technique. Yet, there are certain behaviors that are essentially tied to servant leadership.

Servant leadership involves actively listening to subordinates and coworkers (Northouse, 2013). Being intentionally receptive does not come naturally. However, those who learn to master this skill will not only increase their overall awareness, but they will also be able to pinpoint the needs of followers. Such needs are often missed in short, hurried conversations with others. Active listening will also communicate to followers that a leader sincerely prioritizes the needs and concerns of subordinates, which is the basic core of servant leadership.

Servant leaders look for opportunities to invest in others and improve their overall situation. In an organizational setting, this may come in the form of empowered delegation. “A [servant] leader uses less institutional power and control while shifting authority to those who are being led” (Northouse, 2013, p. 221). Such a leader will also look for ways to provide more career development and decision making opportunities for subordinates.

It would be easy to assume that a servant leader is constantly doing menial tasks in order to serve everyone around them, but that is not the case. “Having a ‘servant’s heart’ does not mean offering service at all times in all situations. It means bearing the idea of being a servant in mind, when decisions are made and action is taken” (Waterman, 2011). It also does not mean that followers are allowed to do as they please without concern for standards or policies. A servant leader is not unable to maintain order, but he or she will do so using persuasion rather than coercion (Northouse, 2013).


Some have referred to servant leadership as a “paradoxical approach” because it challenges our traditional notions about strong leadership (Northouse, 2013, p. 248). Yet, many of the greatest leaders in history have demonstrated many of the traits and practices associated with servant leadership. In my own opinion, the greatest leaders in history (Jesus, Luther, Kennedy, Reagan, etc.) were great because of who they were, not because of what they accomplished. Circumstances and events may have elevated them to notoriety, but it was their core beliefs and convictions that allowed them to shine in the darkest hours. That is one of the reasons why I believe servant leadership is superior to many of the other approaches to leadership. “Other leadership theories are traditionally defined only by what the leader does, servant leaders are defined by their character and by demonstrating their complete commitment to serve others” (Parris & Peachey, 2013).

In closing, servant leaders “are not self-serving; they believe that they serve something beyond themselves as well as the people they lead and with whom they share time” (Waterman, 2011). This perspective enables a servant leader to endure through difficult times, embrace personnel challenges as opportunities, and endow others with the power to produce other servant leaders who will work to accomplish the greater good.


NKJV. (1982). The New King James Version of the Bible. Thomas Nelson, Inc.

Boyum, G. (2008). The Historical and Philosophical Influences on Greenleaf’s Concept of Servant Leadership: Setting the Stage for Theory Building. Academy of Human Resource Development International Research Conference in the Americas. Online Submission.

Northouse, P. G. (2013). Leadership: Theory and Practice. Thousand Oaks, CA: SAGE Publications.

Parris, D. L., & Peachey, J. W. (2013). A Systematic Literature Review of Servant Leadership Theory in Organizational Contexts. Journal of Business Ethics, 113(3), 377-393.

Robbins, S. P., & Judge, T. A. (2010). Essentials of Organizational Behavior, 10th E. Upper Saddle River, NJ: Prentice Hall.

Waterman, H. (2011). Principles of ‘Servant Leadership’ and How They Can Enhance Practice. Nursing Management, 17(9), pp. 24-26.

What is Servant Leadership? (n.d.). Retrieved May 8, 2013, from The Robert K. Greenleaf Center for Servant Leadership:


(Adapted from an academic assignment by Chris Ronk, Piedmont International University.  The paper was originally submitted in partial fulfillment of course requirements at Concordia University Chicago where Chris is pursuing a Ph.D. in Organizational Leadership.)


Compensation Rules for Nonprofit Organizations

(Adapted from a paper submitted by Joshua McDonald, Mgt4NPOs student at Piedmont International University.  Used by permission.)

moneyMany nonprofit organizations have become embroiled in scandal. One only needs to turn on the news or engage in social media to see stories about overpaid executive officers for various charitable organizations, causing many to question the tax-exemption status of the third sector. However, nonprofit organizations play an important role in our society and economy. By their very nature, they generally exist “to advance a public or community interest rather than for individual personal or financial gain” (“Just”). The government offers tax exemption status to nonprofits because their missions for the good of humanity take some of the burden off of the public sector (Blazek 208). In order to make sure that nonprofit organizations fulfill their tax-exempt purposes, the government has enacted strict regulations concerning the compensation of its directors, officers, and other employees.

Because of this unique nature, nonprofit organizations have specific guidelines as to who may benefit from their activities and revenues. One of the most important issues in establishing a nonprofit and obtaining tax-exempt status is to ensure that the funds received will not benefit those who are deemed insiders or disqualified persons (Blazek 215-16; Welytok and Welytok 160). A disqualified person is anyone who may have substantial power over the decision making process of the organization (Kupfer). The Internal Revenue Service (IRS) states that, in order to qualify as a 501(c)(3) organization, a nonprofit “must not be organized or operated for the benefit of private interests, such as the creator or the creator’s family, shareholders of the organization, other designated individuals, or persons controlled directly or indirectly by such private interests” (IRS, “Inurement”).

The IRS has labeled specific transactions between a tax-exempt organization and a disqualified person as “self-dealing” under the tax code IRC 4941. This code lists six different types of transactions which, regardless of their benefit or injury to the organization, are considered self-dealing and may result in penalization: “sale, exchange, or leasing of property; lending money or other extension of credit; furnishing of goods, services, or facilities; paying compensation or paying or reimbursing expenses; transferring foundation income or assets to, or for the use by or benefit of, a disqualified person; certain agreements to make payments…to government officials” (IRS, “IRC 4941” 2-3). There are, however, a number of exceptions to these regulations. For example, the IRS notes that this does not specifically prohibit the sale and purchase of property sold at fair market value (IRS, “Tax” 5). This also does not include items or services used exclusively for the organization’s tax-exempt purpose and which are provided for no cost (IRS, “IRC 4941” 14).

Another form of private inurement is excess benefit transaction. The IRS outlines this infraction as any transaction in which “an economic benefit is provided by an organization, directly or indirectly, to or for the use of a disqualified person, and the value of the economic benefit provided by the organization exceeds the value of the consideration received by the organization in return for providing the benefit” (Brauer et al. 6). This can take place as any number of forms of what has been deemed “unreasonable compensation” for disqualified persons, such as various executives, officers, and employees, as well as their family members (Kupfer). These transactions include the use of property or vehicles owned by the organization for personal business, payment for personal expenses, or excessive wages (Welytok and Welytok 96). This may also consist of the selling or leasing of property to officers or employees by the organization for a price that is below fair market value (IRS, “Intermediate”).

Another type of violation, which is similar to, yet distinct from, private inurement and excess benefit transactions, is private benefit transaction (Kupfer). The activities, resources, and funds of a tax-exempt nonprofit organization must be directed toward the good of the community or a particular group of people who have been recognized as “objects of charity (such as the poor or distressed),” rather than for the benefit of a private organization or individual, whether a disqualified person or not (“Tax” 5). While this may often be a difficult determination to make, the IRS has some general guidelines to assess if an organization is in violation of this regulation. In 1989, the Tax Court determined that the term private benefit refers to “nonincidental benefits conferred on disinterested persons that serve private interests,” meaning the benefit must be proven to be more than just a consequence of a public benefit of the organizations actions, and of an extensive financial amount (Megosh et al. 2-3).

Organizations found to be in violation of these regulations face severe penalties from the IRS. In cases of self-dealing, an excise tax of 5 percent of the amount of the transaction for each year involved is imposed on the “self-dealer,” the disqualified person benefitting from the transaction, as well as a 2.5 percent tax on the organization’s manager, plus an additional 5 percent if he is also found liable as self-dealer (IRS, “Internal”). Disqualified persons found liable for receiving the excess benefits from excess benefit transactions will be charged a 25 percent excise tax of the amount of each transaction and may be responsible for returning property and along with interest for the period before correction (Brauer et al. 17). If these transactions are not corrected with a specified period of time, an additional excise tax of 200 percent on any remaining amount owed will be imposed on the disqualified persons involved, and 50 percent for any manager involved (Welytok and Welytok 97; IRS, “Internal”). Repeated or especially egregious offenses of private inurement, as well as extreme cases of private benefit, may result in the revocation of the organization’s tax-exempt status (IRS, “Tax” 5).

The officers and board members responsible for the organization have a duty to make sure they avoid these types of practices and the potential disastrous consequences which may result. One important step in fulfilling this duty is to adopt a conflict-of-interest policy in order to exclude private interests from the financial decisions of the organization (Blazek 50). This policy may include documentation for the procedures for handling potential conflicts, as well as the disclosure of potentially conflicting relationships (Welytok and Welytok 124). An important aspect of this preventative measure is keeping detailed minutes of board meetings and recording major financial decisions in case any activities are called into question (Mancuso 29).

Developing a reasonable compensation package is another important step for avoiding potential violations of IRS regulations. The IRS gives very specific guidelines for what is deemed reasonable. The various factors considered are:

The nature of the employee’s duties; the employee’s background and experience; the employee’s knowledge of the business; the size of the business; the employee’s contribution to the profit making; the time devoted by the employee to the business; the economic conditions in general and locally; the character and amount of responsibility of the employee; the time of year when compensation is determined; the relationship of shareholder-officer’s compensation to stock holdings; whether alleged compensation is in reality, in whole or in part, payment for a business or assets acquired; and the amount paid by similar size businesses in the same area to equally qualified employees for similar services. (Wright and Rotz 10)

One way compensation packages are determined is by comparing the salaries of executives in comparable positions in similar nonprofit organizations. The organization’s committee which is determining compensation examines nonprofits of a equal size with related purposes, revenue streams, and budgets in equivalent geographic locations (Welytok and Welytok 88-90). By reviewing the compensation packages of these organizations which are in compliance with IRS regulations, a nonprofit can avoid the risk of the revocation of their tax-exempt status.

Tax-exemption should be understood as privilege extended by the government and not simply seen as a right of an organization (Ronk 2). When a nonprofit organization fulfills its mission, it benefits our society as a whole. The directors should strive to maintain that status, knowing that exemption allows them to put more funds into their purpose. Churches and other Christian ministries have an even greater responsibility to obey the government’s regulations as long as they are in accordance with the Scriptures. In fact, in Mark 12:17, when Jesus was questioned regarding paying taxes, He responded, “Render to Caesar the things that are Caesar’s.” Believers and local churches are stewards of the resources God has given them and He expects us to use them responsibly and honorably, whether it is compensating the employees or fulfilling our ministries. It is more than a matter of paying or receiving money; it is a matter of our testimony for the cause of Jesus Christ before the world.

Works Cited

Blazek, Jody. Nonprofit Financial Planning Made Easy. Hoboken: Wiley, 2008. Print.

Brauer, Lawrence M., et al. “An Introduction to IRC 4958 (Intermediate Sanctions).” Washington: GPO, 2002. Web. 11 Feb. 2014.

The Holy Bible. Nashville: Broadman and Holman, 1996. Print. New King James Vers.

“Just What Is a Non-Profit, Anyway?” Center for Non-Profits. Web. 13 Jan. 2014.

Kupfer, Judah I. “What Is Reasonable Compensation? A Guide to Avoid IRS Penalties.” Nonprofit Quarterly, 5 June 2011. Web. 11 Feb. 2014.

Mancuso, Anthony. Nonprofit Meetings, Minutes, & Records. Berkeley: NOLO, 2008. Print.

Megosh, Andrew, et al. “Private Benefit under IRC 501(c)(3).” Washington: GPO, 2001. Web. 11 Feb. 2014.

Ronk, Chris. “Lecture 11: Obtaining and Maintaining Tax-Exempt Status.” Financial Management and Legal Issues. Piedmont International University, Winston-Salem. 2014. Microsoft PowerPoint file.

United States. Dept. of the Treasury. Internal Revenue Service. “Intermediate Sanctions – Excess Benefit Transactions.” Washington: GPO, 2013. Web. 11 Feb. 2014.

—. “Internal Revenue Manual – 7.27.15 Taxes on Self-Dealing.” Washington: GPO, 1999. Web. 11 Feb. 2014.

—. “Inurement/Private Benefit – Charitable Organizations.” Washington: GPO, 2013. Web. 11 Feb. 2014.

—. “IRC 4941 – The Nature of Self-Dealing.” Washington: GPO, 1985. Web. 11 Feb. 2014.

—. “Self-Dealing by Private Foundations: Providing Goods, Services, or Facilities.” Washington: GPO, 2013. Web. 11 Feb. 2014.

—. “Tax Guide for Churches and Religious Organizations” Washington: GPO, 2009. Web. 11 Feb. 2014.

Welytok, Jill Gilbert, and Daniel S. Nonprofit Law and Governance for Dummies. Hoboken: Wiley, 2007. Print.

Wright, Jean, and Jay H. Rotz. “Reasonable Compensation.” Washington: GPO, 1993. Web. 11 Feb. 2014.

(This post has been adapted from a paper submitted by Joshua McDonald, Mgt4NPOs student at Piedmont International University. Used by permission.)

Risk Management for a Nonprofit

Risk(Adapted from a paper submitted by Matthew Collins, Mgt4NPOs student at Piedmont International University. Used by permission.)

No matter where one looks, there is risk.  Daily, individuals spend much effort in avoiding and protecting against risk and the same can be said for all companies and organizations.  Nonprofits are no different and as such, this requires the executive director and board alike to be fully aware of their risks and reasonably protect the organization from the damages that are can occur.  It is all too common for people to see the purchase of insurance as being virtually synonymous with risk management; this is a dangerous presupposition and completely dismisses the reality that there is far more at stake to a nonprofit than merely financial loss.

Risk management must consider all aspects of the organization and have a plan in place to avoid and/or mitigate the damage that can occur.  According to the Nonprofit Risk Management Center, risk management is a “discipline for dealing with the possibility that some future event will cause harm.  It provides strategies, techniques, and an approach to recognizing and confronting any threat faced by an organization in fulfilling its mission” (Primer 1).  An organization can have risk exposure through the volunteers interacting with the clients, technological systems including security and data storage, hazards on premise such as cracks in basketball courts or dangerous equipment in kitchens, and so on.  The reality is that virtually all aspects of the organization can have something go wrong and without proper risk management the organization can face insurmountable devastation and consequences and can even cease to exist as a result.

So what is an organization to do?  How can there be adequate protection created to counter the virtually infinite number of dangers?  The answer is in a systematic approach that identifies the risks, prioritizes them based on their potential damage, and creates a plan for action to avoid against and react to any of the dangers.  The first step in creating a risk management plan is to have a thorough understanding of what it is exactly that the organization does, how it does it, who does it, and where is it done.  By beginning with creating a complete review of the organization, the nonprofit leadership team will have a clear sense of the critical services and functions which will lead to the next step of creating a risk analysis. Producing a risk analysis is “the process of identifying credible threats that could cause an interruption in an organization’s business.” (Disaster 18) At the initial pass of the analysis, a simple list would be created as the leadership team brainstorms and writes down anything imaginable that could take place.  Some areas of risk are common sense while others would require the use of imagination.  The review should consider all aspects of the organization and be thorough.  This is not the time to say “that isn’t likely” or “that has never happened before”, instead all threats should be identified and allow the filtering stage to come next.

Once the team believes that any potential threats are identified, they must begin the process of determining the potential damage from each.  This phase of the risk management plan creation process would answer the question “if this were to occur, how would we be affected?”  Some examples of the questions that would need asked: “If the IT room has a fire and destroys the hardware and equipment, how long would we be down?” or “If a child trips and breaks a leg on the playground, how would we handle the medical expenses?”  The answering of these questions will have two results; first, the organization will understand their most vital components of the operation and secondly, a natural prioritization of these components (and their risk exposure) will begin to develop.  The group will want to follow this process through and use a numeric rating system to score to each threat and damage; this will allow them to prioritize and order their risk management plan (Disaster 18).

An organization with unlimited capital and resources can virtually protect themselves against all risk but this isn’t the reality for many, if not all, nonprofits.  Once the risks are assessed and prioritized, the organization would go through each and first determine the best methods of avoiding the risk altogether if possible and secondly create an action plan if it were to occur (which would include the means of paying for the damages).  Risk management doesn’t necessarily mean costs and so it would behoove the leadership team of the nonprofit to consider any and all ways to reduce the risk and to protect against it.  Benjamin Franklin’s well-known statement that “an ounce of prevention is worth a pound of cure” is never as true as it is in risk management and to prevent the threat from occurring will most often be less expensive and damaging than repairing from the damage after the fact.  These low-cost prevention methods may include screening volunteers, developing standard operating procedures for the team, sealing cracks in a basketball court, or storing data and information offsite or in the ‘cloud’.

The penultimate component in the risk management plan is to determine the exact action plan if the threat is realized.  If the fire does actually break out in the building, if a child does fall and break her arm, if a volunteer does cause a vehicle accident – what will the organization do in the aftermath and how will it pay for it (Primer 1)?  Having the procedures ironed out in dealing with the incident is vital to minimize the damage caused.  Each team member must be well-versed in understanding the responsibility during the situation and how they should respond themselves.  These procedures should be complete, easy to understand, readily accessible, and included in regular training programs.  As far as the means of paying for the damages, it is unlikely that most nonprofits can afford to be self-insured and so it is advisable that the organization purchases the appropriate amount of insurance that strikes the right balance of protection and expense.  This is a difficult matter and it is highly advisable for the organization to work alongside an insurance professional who has experience in nonprofits to help create the best insurance program that is right-sized for the organization.  They should be well familiar with the organization’s mission, facilities, programs, clients, and team member organization (National).

The final component of the risk management program is the effective training of the entire staff from volunteers to the paid team members.  Well-developed orientation programs and training segments must be an integral part of the organization’s risk management plan.  The best program that sits on a shelf will do little for the team when it is most needed.  The leadership team would be well-served to include regular discussions about risk and what to do if a threat is realized.  While this may seem tedious at times, all the preparation in the world won’t matter if the team can’t execute when it matters most.  The single greatest means to counter the risks that the nonprofits face is their team members and the organization that realizes this will be the organization with the most thorough risk management program.

Work Cited

National Council of Nonprofits.  Risk Management and Insurance. NCoN, 2014. Web. 18 Feb. 2014.

Nonprofit Coordinating Committee of New York.  Disaster Planning, Emergency Preparedness & Business Continuity: Version IV. NPCCNY, 2013. Web. 18 Feb 2014.

Nonprofit Risk Management Center.  A Primer on Risk Management. NRMC, 2007. Web. 18 Feb. 2014.

(Adapted from a paper submitted by Matthew Collins, Mgt4NPOs student at Piedmont International University. Used by permission.)

Compensation Issues for Nonprofit Organizations

money-163502_640Employee compensation and incentive plans should be aligned with an organization’s core strategies and, ultimately, should be designed to advance the organization’s mission.  This can be challenging in to any business, but nonprofit organizations (NPOs) face a set of challenges that are somewhat different from the for-profit world.  This paper will briefly explore some of those unique challenges and address the importance of overcoming these obstacles in order to align compensation plans with organizational objectives.

Regulatory Limits

The IRS regulations that govern NPOs require organizations to “ensure that no part of the net earnings inures to provide an advantaged benefit to any individual or shareholder” (Barbeito, 2004, p. 49).  Accordingly, an NPO must avoid what is commonly referred to as excessive compensation.  The most recent federal regulations outline procedures that organizations can follow in order to provide a “rebuttable presumption,” or a safety net, to ensure compliance with these rules.  The details of the rebuttable presumption are beyond the scope of this paper, but suffice it to say that nonprofit administrators have the added burden of complying with complex rules that other businesses would never need to consider.

These federal limitations can create a significant disadvantage for nonprofit organizations that often compete with their for-profit counterparts.    After all, “high pay provides incentives for companies by attracting and retaining competent workers and extrinsically motivating them to exhibit effort and capability in performing their jobs” (Kim, 2006, p. 3).  If large nonprofits are unable to attract top talent for their executive teams, then they are forced to “settle” for those who willing (or able) to work for far less compensation.  Fortunately, the nonprofit world benefits from the altruism of many competent individuals who make the choice to serve in the third sector.  But, these limitations must still be considered when discussing compensation policies and recruitment strategies.

Equity and Expectancy

“The notion of equity theory posits that the pay structure greatly matters to employee performance as well as to employers’ interest…violations of equity in reward determination significantly affect the attitude and performance of workers” (Kim, 2006, p. 4).  According to Robbins and Judge (2010), this issue of equity can have at least four dimensions; self vs. inside, self vs. outside, others vs. inside, and others vs. outside.  Attempting to ensure equity in all four contexts can be quite challenging, especially when an employee is comparing herself or others with outside (external) points of reference.  But, despite its challenges, organizational leaders must strive to establish equity or risk creating tension, anger, or even guilt (Robbins & Judge, 2010).  Such emotions are demotivators and will directly impact organizational performance.

Similarly, expectancy theory posits that employees expect certain rewards in return for their effort, dedication, or performance.  When compensation and incentive programs fail to meet these expectations, employee morale and motivation suffer greatly (Robbins & Judge, 2010; Pynes, 2009).  It seems that our entertainment culture and constant exposure to glamorous lifestyles have only made it increasingly difficult to meet these expectations.


The prevailing perception of the general public seems to be that nonprofit employees choose less compensation by default, taking what some have called an “implied vow of poverty” (Sanderson, 2012).  To feed this warped perception, there is a growing amount of negative media coverage regarding nonprofit compensation (Gibelman, 2000).  Gibelman goes on to argue that perceptions have been tainted by commonly-held beliefs that “those who work with the poor should get poor wages” and that “nonprofits are not real businesses” (p. 62).  The scandals in the news and reports of misappropriations only add to these misconceptions.  Unfortunately, these perceptions eventually lead to the idea that nonprofit employees are less legitimate than their for-profit counterparts.  “The existence of a mental model that supports lower compensation indicates society holds a view that the contribution of these professionals is of less value than those in the for-profit sector in our capitalist economy” (Sanderson, 2012, p. 9).

The unfortunate reality is that nonprofit organizations must now consider the PR impact of their compensation decisions.  Hiring a top-tier CEO to lead an organization can be challenging when his or her salary will be reported on the public Form 990 each year.  These 990s are reviewed by watchdog groups, potential donors, competitors, and even those who oppose an organization’s mission.  If the salary appears to be too generous, the organization can easily be targeted with negative attacks.


The compensation-related challenges facing today’s nonprofit organizations can seem enormous.  But, leaders must find ways to overcome these hurdles and align sound practices with overall strategies.  The direct impact that compensation decisions can have on organizational outcomes certainly makes this a battle worth fighting.  As Kim (2006) states, “The compensation system greatly influences the actions of employees, human capital characteristics, and administrative expenditures that are pivotal to a company’s strategy formulation and implementation and its ultimate success” (p. 5).


Barbeito, C. L. (2004). Human Resource Policies and Procedures for Nonprofit Organizations. Hoboken, NJ: John Wiley & Sons.

Gibelman, M. (2000). What’s All the Fuss About? Executive Salaries in the Nonprofit Sector. Administration in Social Work, 24(4), pp. 59-74.

Kim, H. (2006). Strategic Impacts of Compensation System on Organizational Outcomes: An Empirical Study of the Conceptualizations of Fit and Flexibility in the Compensation Design. (Unpublished doctoral dissertation). The Ohio State University, Columbus.

Pynes, J. E. (2009). Human Resources Management for Public and Nonprofit Organizations. San Francisco: Jossey-Bass.

Robbins, S. P., & Judge, T. A. (2010). Essentials of Organizational Behavior, 10th E. Upper Saddle River, NJ: Prentice Hall.

Sanderson, A. D. (2012, June). The Involuntary Vow of Poverty: Probing Perceptions of Non-Profit Compensation. (Unpublished academic paper). Winona: Saint Mary’s University of Minnesota.

(Adapted from an academic assignment by Chris Ronk, Piedmont International University.  The paper was originally submitted in partial fulfillment of course requirements at Concordia University Chicago where Chris is pursuing a Ph.D. in Organizational Leadership.)

Does Employee Motivation Come Easier for Those in Ministry Organizations?

Christian managers have strong advantages when it comes to motivating employees. Some of those advantages are prayer, the Holy Spirit, training from the church, and a standard of treating people. Secular managers may have standards, and access to training, but they don’t have the privilege of prayer or the guidance of the Holy Spirit.

The advantage of prayer is the most important advantage to Christian managers. In prayer we can find out what our people need to be motivated. We can gain guidance and insight into ways we can help them along within the organization. Secular managers don’t have this type of access. They don’t have this type of Godly guidance. As Christian managers we can ask the One who created our employees and who knows them intimately, to teach us how to lead them and motivate them. He knows how they work and what they need and He is faithful to impart that knowledge to us.

Another advantage is the Holy Spirit. The Holy Spirit is so creative. He can impart to us ideas that are out of the box. When we call on God in prayer and He answers in these creative ways it is such an advantage. Essentially, we have access to knowledge that we wouldn’t have otherwise had access to.

Training from the church is also an advantage for Christian managers. In that Biblical training we learn what God expects of us in our treatment of people. We also gain skills in interaction within the Body of Christ that help us learn and grow in our treatment of other people. We learn that within the Body, we all have a function and an important purpose. Knowing that and experiencing that helps us project that attitude on to others.

The final advantage listed is a standard of treating people. Treating people well and with godly love is an amazing motivator. Giving thanks and recognition when and where due are essential to motivation. You can give it publicly, or privately. Thanks is essential. Paul exemplified that in some of his epistles. Philippians 1:3 is a strong example of that in his greeting.

All of these advantages are so important to the Christian manager in motivating employees within organizations.

-Anonymous Mgt4NPOs Student