Can Nonprofit Boards Learn from the Recent Carnegie Hall Disruption?

Can Nonprofit Boards Learn from the Recent Carnegie Hall Disruption?

By: Eugene Fram

The costly upheaval between Carnegie Hall board and staff appears to be slowly moving toward resolution. * But, for decades, other types of large nonprofit organizations have imperfectly resolved the issues that have arisen at Carnegie Hall without similar spectacles. Examples: university boards know they have to fully rely on faculty to develop up-to-date curricula. Hospital boards know they have to retain skilled physicians or face the potential of due care failure liabilities.

I suggest that nonprofit directors need to consider three actions to help eliminate the type of spectacle recently evidenced by the Carnegie Hall organization. (more…)

Board Members: Does Your Nonprofit Know How To Engage Business Donors?

Board Members: Does Your Nonprofit Know How To Engage Business Donors?

By: Eugene Fram

Fund development should be a partnership between board members and CEOs/Development Officers, if the latter is available. However, I have noted that board members don’t take sufficient responsibility to make certain that CEOs and Development directors are well prepared when they approach potential business donors. This, in my view, is the first step in building a relationship fundraising approach.

Many involved with NFP fundraising or management have spent their entire careers in the nonprofit environment, resulting in a gap in communicating with those in the business environment. Some may even privately believe that those in business contribute less significantly to society. While little can be done about the latter, here is what I think can be done to fill or reduce the unfortunate gap in cultures often found between for-profits and nonprofits, especially when it relates to fund development. (more…)

Measuring Nonprofits’ Impacts: A Necessary Process for the 21st Century

Measuring Nonprofits’ Impacts: A Necessary Process for the 21st Century

By Eugene Fram

Nonprofit boards and CEOs in the United States are being overwhelmed with requests from foundations and governmental agencies to move from providing outcome data to providing impact data. One nonprofit with which I am well acquainted has been required to reform its IT program to meet the requirements of a local governmental IT program, so that impacts can be assessed. It will be interesting to see how this scenario plays out.

Unfortunately, outcomes and impact are often unrelated, which is why a program that seems to produce better outcomes may create no impact at all. Worse, sometimes they point in opposite directions, as can happen when a program works with harder-to- service populations resulting in seemingly worse conditions, but (has) higher value-added impact. … Rigorous evaluations can measure impact (to a level of statistical accuracy), but they are usually costly (a nonstarter for many nonprofit), difficult and slow. * But how do the medium and small size nonprofits measure actual results in the outside world such as enhanced quality of life, elevated artistic sensitivity and community commitment?

A Compromise Solution:

To close the gap, funders and recipients would need to agree to apply imperfect metrics over time. These are metrics that can be anecdotal, subjective or interpretative. Also they may rely on small samples, uncontrolled situational factors, or they cannot be precisely replicated. ** This would require agreement and trust between funders and recipients as to what level of imprecision can be accepted and perhaps be improved, to assess impacts. It is an experimental approach

How To Get to Impact Assessment:

1. Agree on relevant impacts: Metrics should be used to reflect organizational related impacts, not activities or efforts. Impacts should focus on a desired change in the nonprofit’s universe, rather than a set of process activities.
2. Agree on measurement approaches: These can range from personal interviews to comparisons of local results with national data.
3. Agree on specific indicators: Outside of available data, such as financial results, and membership numbers, nonprofits should designate behavioral impacts for clients should achieve. Do not add other indicators because they are easily developed or “would be interesting to examine.” Keep the focus on the agreed-upon behavioral outcomes.
4. Agree on judgment rules: Board and management need to agree at the outset upon the metric numbers for each specific indicator that contributes to the desired strategic objective. The rules can also specify values that are “too high” as well as “too low.”
5. Compare measurement outcomes with judgment rules to determine organizational impact: Determine how may specific program objectives have reached impact levels to assess whether or not the organization’s strategic impacts have been achieved.

Lean Experimentation

The five-point process described above closely follows the philosophy of lean experimentation, *** now suggested for profit making and nonprofit organizations.

Lean allows nonprofits to use imperfect metrics to obtain impact data from constituents/ stakeholders over time. Under a lean approach, as long as the organizations garners some positive insights after each iteration, it continues to improve the measurement venues and becomes more comfortable with the advantages and limitations of using these metrics.

Organizationally the nonprofit can use this process to drive change over time by better understanding what is behind the imperfect metrics, especially when a small sample can yield substantial insights, and actually improve the use of the metrics.

* http://ssir.org/articles/entry/the_promise_and_peril_of_an_outcomes_mindset
** https://nonprofitquarterly.org/2012/07/24/using-imperfect-metrics-well-tracking-progress-and-driving-change/
*** http://ssir.org/articles/entry/the_promise_of_lean_experimentation

Can Only Three Nonprofit Board Committees Engage Directors Meaningfully?

Can Only Three Nonprofit Board Committees Engage Directors Meaningfully?

By: Eugene Fram

Current research shows that the average nonprofit board has an average of 4.8 committees, down from 6.6 in 1994. * I suggest three standing committees. ** This three-standing committee configuration is flexible. Its strength is that it generates a coordinated robust review of the past board experiences to drive an emphasis on policy development and strategic planning. Organizations know where they have been, are thinking about the future but are not mired in micromanagement

    A Policy/Strategy Focused Board

Planning & Resource Committee: The CEO, working with the committee, is chiefly responsible for developing the nonprofit’s vision, subject to the input of staff plus the input and approval of the board. The group also plays an important role to make it easier to keep strategic planning and evaluation of new projects a prominent part of board agendas. At the same time, it also monitors the activities of all board task forces. These are work-groups of board and staff tasked with investigating policy or strategic issues. There, for example, is no separate personnel committee under this configuration, but if there is a need to revise a retirement plan for the organization, a task force is given the responsibility to review options for board discussion and decision.

Assessment Committee: If there is no finance committee, this group, along with the CEO, establishes organizational and budget goals. The committee subsequently conducts a robust evaluation of the CEO and organizational impacts, using both quantitative and qualitative impact data.

Executive Committee: The committee’s major function, outside of its legal obligations to act for the board between meetings, is to act as a review group for all reports emanating from the two other committees, fostering a high level of director engagement. This, for example, provides progress reviews at the task-force level, at one of the two standing committees and then at the executive committee level. All of this before an item is placed on the board. Most on the board have one or more opportunities to provide their suggestions and concerns. It is an engaging “no surprise” review system.

    Exceptions & Permutations Of The Three-Standing Committee Approach

State Regulations: Some states require separate standing finance and/or audit committees. If not, the assessment committee is responsible for the financial well being of the organization, and several members of the committee can act as an independent audit committee, meeting with the external or internal auditors as needed. Another way to meet state requirements is to have an audit committee composed of independent outside experts plus one or two board members. Former board members often are willing to volunteer, if they are familiar with the organization’s financial reports.

Strategic Planning Objectives: Some nonprofit boards use interim standing committees to reflect major objectives of the strategic plan. If a major building project is needed, a standing committee is formed to overview the project until it is completed. A new ad hoc configuration of four committees is formed.

Governance Considerations: Under the three-committee approach cited above, the executive committee needs to overview governance issues such as board recruiting, board self-evaluations and board structures that need task force attention occasionally.

Cyber security?: There are wide ranging view on whether or not a cyber security standing committee is needed. One side concludes the potential losses are so substantial in the 21st century that it needs substantial board attention. Others conclude that it is a major risk that needs to be monitored in connection with the probabilities of other types of major risks such a flood or fire.

Special Regulations: Some fields, such as healthcare, have special regulations for which a board is ultimately responsible. One approach is having a board committee overview the outcomes involved. But nonprofit boards, with a three-committee format can use task forces which to review compliance with the regulations.

My experience with this board committee configuration has proven it is productive and adaptable to making board structure changes. Prior to board action, the task force members and the two other groups reviewing reports become well versed in the options available. Since the topics reviewed are limited to policy and strategic opportunities/concerns, the board and staff members become meaningfully involved.

* BoardSource (2015), “Leading With Intent: A National Index of Nonprofit Board Practices,” January.

** http://amzn.to/eu7nQl

Guidelines To Finding Authentic Nonprofit Leaders

Guidelines To Finding Authentic Nonprofit Leaders

By Eugene Fram

The problems of Enron, Tyco and WorldCom have provided negative examples for future leaders, according to William George, Senior Fellow at the Harvard Business School. As an antidote to these and others serious problems that have plagued business and nonprofits in the last several decades, he cites the movement towards Authentic Leadership. He further lists six guidelines to identify behaviors in such leaders. Following are my views on how his guidelines can be useful to directors and managers in the nonprofit environment. (http://hbswk.hbs.edu/item/authentic-leadership-rediscovered) (more…)

Suggested & Field Practices From Most Viewed 2015 Blog Posts

Suggested & Field Practices From Most Viewed 2015 Blog Posts

By Eugene Fram

Currently my blog-site has over 350 posts on nonprofit governance. Following are six 2015 posts that stand out based on viewer interest.

1. http://non-profit-management-dr-fram.com/2015/11/15/the-nonprofit-strategic-plan-is-finished-tools-to-move-forward/
The nonprofit’s 3 or 5-year strategic plan has been completed with the entire board management and staff reading from the same document. But what about the shoals that must be bridged before its benefits can be implemented? For example:

2. http://non-profit-management-dr-fram.com/2015/11/08/the-nonprofit-ceo-exceeds-hisher-authority-what-happens-then/
For a nonprofit organization, it is necessary to hire a president/CEO or executive in whom the board can place a high degree of trust. But along with the trust, the board must ROBUSTLY annually evaluate the CEO and the organization’s performance.

3. http://non-profit-management-dr-fram.com/2015/10/25/why-are-some-nonprofit-boards-missing-the-mark-what-to-do-2/.
For-profit organizations or nonprofit organizations, in my opinion, have five identical basic board guidelines. For Deloitte Partners, a worldwide accounting and financial advisory firm, these constitute board responsibilities that can’t be delegated to management. The board has responsibilities to have: a viable governance structure, annual assessments of (board and) organizational performance, driven strategic planning, improved management talent and assured organizational integrity. A relentless pursuit of these lofty goals will enable nonprofits to be “on the mark.”

4. http://non-profit-management-dr-fram.com/2015/08/02/how-often-do-nonprofit-board-members-need-to-question-strategic-norms/
Following are four nonprofit areas that call for strategic scrutiny and, if recognized by several other current board members as constraints on the future of the nonprofit, the process may allow individual directors to seek positive change:

5. http://non-profit-management-dr-fram.com/2015/06/14/once-again-how-to-keep-a-nonprofit-informed/
With high performing nonprofit boards, directors will rarely be invited by the CEO to participate in operational decisions. As a result, management will always have more information than the board. Yet the board still needs to know that is happening in operations to be able to overview them. The name of the game is for the CEO to communicate the important information and to keep directors informed of significant developments. Still, there’s no need to clutter regular board meetings by reporting endless details about operations. Following are some practical suggestions:

6. http://non-profit-management-dr-fram.com/2015/12/13/dysfunctional-levels-in-nonprofit-boards-organizations-2/
These data and comments can lead one to conclude that all nonprofit boards are dysfunctional. I suggest that nonprofit boards can generate a range of dysfunctional behavioral outcomes, but the staff can muddle through and continue to adequately serve clients.

Once Again! Nonprofit CEO: Board Peer – Not A Powerhouse

Once Again! Nonprofit CEO: Board Peer – Not A Powerhouse

By: Eugene Fram

Viewer Favorite: Updated and Revised

Some nonprofit CEOs make a fetish out of describing their boards and/or board chairs as their “bosses.” Others, for example, can see the description, as a parent-child relationship by funders. The parent, the board, may be strong, but can the child, the CEO, implement a grant or donation? Some CEOs openly like to perpetuate this type of relationship because when bad decisions come to roost, they can use the old refrain: the board made me do it.

My preference is that the board-CEO relationship be a partnership among peers focusing on achieving desired outcomes and impacts for the nonprofit. (I, with others, would make and have made CEOs, who deserve the position, voting members of their boards! Some state laws specifically outlaw it.)

There are many precedents for a nonprofit CEO to become a peer board member, some without voting rights, some with full voting rights. One nonprofit group is university presidents, where shared governance with faculty bodies can be the norm. For example, when General Eisenhower became president of Columbia, he referred to the faculty in an initial presentation as “Columbia employees.” Later a senior faculty member informed him “With all due respect, the faculty is the university.”

Another nonprofit group is hospitals where the CEO may also be or has been the chief medical officer. The level of medical expertise needed to lead requires that a peer relationship be developed. Also if the hospital CEO is a management person, he and the chief medical officer must have a peer relationship, which extends to the board.

Hallmarks of a Peer Relationship
• The CEO values the board trust assigned him/her, and carefully guards against the board receiving surprise announcements.
• The board avoids any attempts to micromanage, a natural tendency for many nonprofit boards.
• When a board member works on a specific operating project, it is clearly understood that he is accountable to the CEO for results.
• The CEO has board authority to borrow money for short term emergency needs
• The CEO understands need for executive sessions without his/her presence.
• The CEO understands the need for robust assessment processes to allow the board to meet its overview duties.
• Both board and CEO are alert to potential conflicts of interest which may occurs.
• Both value civil discussion when disagreements occur.
• The board realizes that nobody does his/her job perfectly, and it does not react to occasional CEO modest misjudgments.

Summary
Elevating a nonprofit CEO to a status of board peer does not automatically make the CEO a powerhouse. The board legally can terminate the CEO at will. However, in my opinion, the following benefits can accrue to the organization.

The peer relationship help will:

• Help the organization to build a desirable public brand.
• Allow a capable person to interface with the media.
• Define a role for the CEO to lead in fundraising.
• Allow the organization to hire better qualified personnel.
• Allow the organization to present a strong management environment to funders. After all, top people readily communicate with people in similar positions.