Att: Nonprofit Board Members, Trustees & Managers: Complimentary Leader’s Guide for Policy vs. Paper Clips

I thought some followers might be interested in the Leader’s Guide for my Book Policy vs. Paper Clips Third Edition (2011).   The book is available in paperback and kindle formats on Amazon.com 
 

Leader’s Guide for Policy Vs Paper Clips–Third Edition

by Dr. Eugene H. Fram, Professor Emeritus

E. Philip Saunders College of Business Rochester Institute of Technology
1 West Edith Ave (A103)
Los Altos, California 94022 eugenefram@yahoo.com | 650-209-5724)

 
While Dr. Fram is certainly an advocate for the Corporate Governance model, you don’t have to be a believer to find a number of gems applicable to all nonprofit governance issues contained now in his just-released third edition of Policy vs. Paper Clips.
Mike Burns

President of BWB Solutions, “Nonprofit Board Crisis,” April 5, 2011

Copyright 2011 by Eugene Fram

 

Using This Guide

The third edition of Policy vs. Paper Clips can be effectively used as a discussion vehicle for one-day executive seminars on NONPROFIT GOVERNANCE targeted to chief executives and board directors.

The book’s strength is based on recognizable problems and opportunities covered within a compelling storyline. Each of the issues presented is based on the author’s board director experiences or situations he observed through his consulting practice with human service agencies, philanthropic foundations, arts groups, trade associations and religious groups.

In preparation for the seminar, participants should be asked to read the book. Typically, reading time should not take more than four hours, because experienced executives and board members will readily recognize the real- world environments from which the text material has been drawn.

However, any experienced seminar leader will recognize that the quality of reading preparation will vary widely. Consequently, a discussion section will begin with a heading titled, “Situation.” In each of these sections, the guide will present a brief overview of the issues involved. The leader then can expand upon them to be certain that participants who have not invested the time to prepare well will have basic understanding of the issues involved.

THIS LEADER’S GUIDE HAS BEEN ORGANIZED FOR FLEXIBILITY. IT CAN BE USED WITH A VARIETY OF TEACHING APPROACHES AND THE QUESTIONS ARE ARRANGED TO DEVELOP A GREAT DEAL OF DISCUSSION AND, HOPEFULLY, SOME DEBATE. ALTHOUGH FOCUSED ON THE CORPORATE MODEL, THE ELEMENTS INVOLVED CAN BE APPLIED TO ANY NONPROFIT GOVERNING MODEL.

OPENING OUTLINE “Policy vs. Paper Clips shows how to transform your organization by optimizing:” [Leader: Briefly review how each of these elements might be covered in the seminar. Also add other topics of participant interest.]

Professionalism, Flexibility, Efficiency, Intentional Simplicity, a Secure Chief Executive, Focusing on Strategic Planning, a Responsible Executive Committee, Trust between the Management, Staff & Board and Meaningful Involvement for the Board Members.

[Leader: Request participants to bring the book to class. You can quickly refer to passages on occasion. Also, participants whose pre-reading has been modest can quickly obtain a better sense of the directions of the discussion.]

 

Chapters, Major Situations and Questions for Discussion

1. The Corporate Model – A Board Alternative

I. Situation: Russ Peterson, a director recently appointed to the Yorkville board, is dissatisfied with the time it takes to make a decision, given the minutiae on the agenda. He feels his board service may be a waste of time. Russ voices his concerns in a series of e-mails to his friend, Jack Billings, an experienced nonprofit president/CEO. Russ is on the verge of resigning, but Jack feels Russ has the potential for making a significant board contribution and suggests there are actions he can take to change the situation.

  1. From your experiences, list some of the warning signs (e.g. body language, specific comments, poor meeting attendance) that a valued board member might be ready to resign? In many cases, the person, like Russ, will not openly discuss the situation with the chief executive or board colleagues.

  2. If either the chief executive and/or board chair perceives that a valued board member is thinking of resigning, what, if anything, can they do about it? What have been your experiences with these types of situations?

II. Situation: Jack reports (page 15) “Given the advantage of hindsight, I now admit that I did not properly assess how heavy a burden tradition (culture) can be to (change the way our board operates).”

  1. How can a chief executive and/or a board member(s) go about changing the board’s governance culture? Can you cite any successes or failures in this area?

  2. How well do all the members of your board understand the culture under which your board operates? Is it possible for some directors to become so immersed in the culture of a nonprofit that they don’t bring some valuable outside perspectives to the nonprofit’s challenges? (The director may feel it is necessary to yield to a long established nonprofit culture.)

III. Situation: Page 21. The board sets policy. The top manager (ED or president/CEO) is responsible for operations.

  1. Nonprofit boards can delegate all operating decisions to the chief executive and can reserve for themselves only those major decisions specified by the corporate by-laws. How are policy decisions and operational decisions defined in your organizations? (Note: By tradition, many nonprofit organizations invite board members to become involved with direct service to clients or staff operations. (These organizations assume that this increased involvement will lead to more director dedication and greater funding.)

  2. As you will note,the authors strongly suggest that the chief operating executive in medium and larger size organizations should be given the title of President and CEO (p. 11-15) and the senior volunteer director should hold the Board Chair title. Do you agree?

2. The Corporate Model – Professionalism, Flexibility, Efficiency

I. Situation: Based on Jack’s advice, Russ contacts several other board members about his concerns and receives some positive responses. All three want to investigate change.

  1. How have major governance changes come about in your organizations? Who were the people or outside forces that brought about the change? How did they impact the board relationships with the chief executive and staff?

  2. In making a board change, Jack describes three groups that can surface – those in favor of change, those opposed to change (some staunchly so) and “process people.” (p. 25-27) [Leader: Define Process People. In your experiences, have members from each of these three groups helped or impeded the board change process?]

II. Situation: The functions of a nonprofit board are listed on pages 29-30. [Leader: Review in Detail]

A. Are there any other functions you feel should be properly assumed by the board?

B.[Leader: May want to review the “Notes” on pages 35-37 to generate a discussion of the pros and cons of the Corporate Model, understanding that some organizations may not be in a position to consider its full adoption.]

3. How the Model is Structured – Intention Simplicity 

[Leader: Review how traditional boards have evolved because volunteer directors are intimately involved with operations. Hence, there are a variety of standing committees (example: Personnel, Building, Program) which can micromanage operations. Review the organizational chart on page 49 as an example of a simple committee structure relying on ad hoc board-staff committees when policy issues need to be investigated or reviewed.]

I. Situation: In recent years, nonprofit boards have been moving toward fewer standing committees. In addition to the three shown on the organizational chart, another three recommended are Internal Affairs, External Affairs and Governance. A few boards determine their board standing committees based on their major strategic objectives.

  1. Do you feel that your board needs fewer or more standing committees, or does your current configuration work well?

  2. To what extent do you use staff-board committees to investigate or review policy issues? What do you see as the advantages and disadvantages of this arrangement?

  3. The model in the book works well with a board numbering 18-24 directors. Do you think it would work well with smaller boards? Larger boards?

  4. If necessary, how could you go about reducing the size of the board?

  5. Should the chief operating executive be the president/CEO? Should he or she become a voting member of the board? (p. 55) [Leader: This question may have been thoroughly discussed earlier.]

  1. Directors find that working on policy and strategy issues simply isn’t as immediately rewarding or personally interesting as working with operational issues where results are often more immediate. Under this simplified organizational model, how can you develop meaningful director involvement?

  2. Jack cautions Russ (page 59), “Be aware that old culture can create ‘drag’ when it comes to implement change.” What types of cultural drags have you encountered when attempting to make board changes? [Leader: This question may have been thoroughly discussed earlier.]

II. Situation: In recent years, many nonprofits have added a fourth standing committee to the structure, relating to financial policies. In the example shown on page 49, the Assessment Committee is large (can be 8-9 directors out of 24) because it handles overall organizational assessment and financial assessment. A subgroup of persons with financial knowledge, when needed, operates as an independent Audit Committee to interact with the external auditors.

A. This structure involves a large group of directors highly involved with assessment and financial policy issues. How well do you think this 4type of committee structure would function with smaller boards?

4. Assessment and the Model –The CEO Cannot Be Insecure

[Leader: Might begin with an overall discussion on the issues covered in this chapter, organizational assessment, CEO performance, fraud protection, legal issues + expanded 990.]

I. Situation: [Leader: Might read, with some dramatic emphasis “Living with the Model” pp. 64-69]

A. In establishing organizational outcomes, to what extent is this a negotiated process between the CEO and the board? How are the more qualitative outcomes assessed when imperfect measures have to be employed? (pp. 67-68)

II. Situation: In the past, the CEO assessment frequently was developed by the board chair using a simple questionnaire. In the 21st century, the assessment of the CEO needs to be much more robust to assure the community or the membership that the board is fulfilling its management oversight and fiscal responsibilities.

A. How can the board chair and board make certain the CEO assessment process is a robust process and fair to the CEO?

III. Situation: [Leader: There has been a consensus that there is little that boards can do to prevent fraud. However, there are steps that a nonprofit or a for-profit board can take to lessen the risks of fraud taking place. They are covered on pages 81 to 84, and the Leader might want to develop a discussion of the steps involved.]

A. To what extent have your organizations been plagued by fraud situations and how have they been handled? What, if anything, could the board or management have done to prevent them?

IV. Situation: While nonprofit organizations are not covered by the Sarbanes-Oxley Act, some nonprofits have gone to the extra effort and expense of operating under its provisions. Directly related to nonprofits are the Intermediate Sanctions Act and the IRS 990, especially its recently expanded version. [Leader: Review the provisions of these if some are not familiar with them. pp. 89-96]

  1. To what extent,if any,have your organizations adopted provisions of the Sarbanes-Oxley Act? If you have adoption provisions, how costly has the process been?

  2. To what extent are you familiar with the provisions and the penalties of the Intermediate Sanctions Act?

  3. In what ways, if any, has the compliance with the expanded version of the 990 impacted your mission statement, or the way the board operates?

Summary: A secure nonprofit CEO and board need to be comfortable with more rigorous assessment, with taking some steps to prevent fraud, and with having better working knowledge of expanding legal requirements.

5. The Model and the Future –The Planning and Resource Committee

I. Situation: Like the Assessment Committee, the Planning & Resource Committee is a large one. Its job is to assist the CEO in short-term and long- range planning. It also has an obligation to assist the board to move to a generative mode, as recommended by Harvard’s Bill Ryan (pp. xxii, xxii). All ad hoc committee reports are reviewed by this group for comments before moving forward to the Executive Committee review and the final board review. This process exposes the group to all important policy issues as they are being developed and provides a vehicle for meaningful board involvement.

  1. What are the advantages and disadvantages of having the chief executive responsible for driving short-term planning and playing a leading role in long-range planning?

  2. Generative mode(“what if”)questions should be a key board function. How well do your boards operate in this mode?

  3. Staff input is critical to the success of ad hoc committees. However, the time required affects staff schedules. How can these conflicts be resolved?

[Leader: As a summary, you may want to review the points listed on pages 109 to 111]

6. The Model at Work – The Executive Committee and Its Responsibilities

I. Situation: The Executive Committee is an expediting group that:
• sets board meeting agenda
• acts for the full board between meetings, subject to later ratification by the full board.
• receives all reports from the Assessment and the Planning and Resource committees.
• appoints all members of standing, ad hoc and advisory committees.

By doing its work well, the Executive Committee allows the full board to concentrate on important policy issues. (p. 118)

A. Before all policy issue reports reach the Executive Committee, more than half the directors have acquired some knowledge of them through their participation in either of the two major committees and/or through participation on an ad hoc committee. This process expedites communication flow, but do you feel that it develops enough meaningful involvement to enhance director interest in board activities?

B. What should be the responsibilities of the board chair and the CEO in developing the board meeting agendas? (p. 120)

C. Situation: Jack states, (p. 143) “I hope that…you understand why I favor giving the CEO the right to vote. It is a sign of authority. Since the CEO represents the staff, it also gives the staff a voice on the board, albeit indirectly”. Do you agree with Jack?

[Leader: Briefly review the scenarios on pages 123 to 142 and discuss the differences in detail as needed. Note the need to employ a strong secure CEO in each case.]

7. The Model Creates a New Culture – Trust is the Critical Factor

I. Situation: Jack indicates (p. 150) that level of trust on a nonprofit board can be judged by the questions posed and the interpersonal reactions that develop. Examples: Are discussions on the board relevant,rigorous and probing?Do only a few directors dominate because they commandeer the discussion? Are there (divisive) factions on the board? Is board chemistry volatile or collaborative? Is the board equipped to deal with the potential life-threatening issues for the organization?

A. Are there any other questions related to trust level that should be included in Jack’s list?

II. Situation: Jack concludes (p. 152) that the CEO should routinely keep the board informed about personnel changes at a high level. “However, (the board) generally…should have little interest in changes relating to operational staffing. … The board should reverse the CEO’s decision (relating to staffing) only if the long-term prospects for the position and the costs involved do not fall within the approved budget strategy.”

A. Do your boards work in a similar manner?

III. Situation: Jack indicates (p. 157)… “that an essential ingredient in board culture is the CEO’s ability to be flexible. He or she needs to accommodate to a new boss every year or two. …You simply can’t be complacent. He or she needs to be alert, to recognize when the board – often initiated by the chair – wants to move in a new direction.”

A. How do CEO’s & board members accommodate to this type of environment? (p. 157)

B. How can CEOs & board members continue to tap the creativity of the board? (p. 156)

C. How much fiscal latitude should the CEO have? (p. 163)

D. Should the CEO have authority to borrow money on his/her own when there is a short term cash-flow problem? (p. 164)

IV. Situation: Jack concludes (p. 166) “When it comes to raising funds, consider the president/CEO the forward scout looking for a potential source of funds. The board – the cavalry – is called in to support that effort and broaden the based of support. In other words, the scout gives the signal, but the cavalry is needed to take the objective.”

A. On an academic grading scale, how would you grade your board’s fund raising efforts? What efforts have been most effective and least effective?

8. The Model and Commitment – Board Members Must be Involved

I. Situation: Relating to board members’ need to be involved in the organization’s day-to-day concerns (p. 174), Jack concludes, they will be involved “…if you keep them informed and they have specific, worthwhile (policy or strategic) tasks to accomplish for your not-for-profit group.”

A. Who is responsible for keeping directors informed? How is it effectively done?

B. What are the reasons why your directors volunteer to serve? (p. 175)

C. How can the CEO and Board Chair tailor each director’s personal interests to the policy interests of the organization? (pp. 176-178)

D. How can the board encourage directors to bring their special expertise and cultural values to board discussions? [Leader: Example: Involve a marketing expert in developing a strategic marketing plan, rather than asking him or her to draft advertising copy.]

II. Situation: Jack points out that Directors… “will stay interested and involved in their nonprofit organizations if they are convinced that their activities have a purpose and serve the organization. …Being pertinent and time-limited is especially applicable for younger individuals building a career, not only because they often lead busy lives but also because this age group is now used to immediate gratification and to projects that last no longer than the equivalent of a semester.”(p. 178)

  1. Knowing the strategy and policy development assignments are not as appealing as being involved with operations, how can nonprofits meet these challenges? [Leader: This can lead to a discussion of managing the millennial generation.]

  2. How can the CEO communicate the important operations information to board members and keep them informed about significant operations developments without cluttering board agendas with endless details?

  3. Jack also suggests that the CEO meet with each board member informally about every three months. (p. 189) Do you think this is feasible?

[Leader: A summary (p. 187) So many directors on nonprofit boards are busy people with demanding schedules. They need to have clear evidence that their involvement is meaningful and makes a real difference for the organization and the people it serves.]

9. The Corporate Model – Two Years Later

[Leader: The purpose of this four page chapter is to bring continuity to the story line.]

10. The Model in Action – Real-Life Experiences

I. Situation: [Leader: Ask the participants to provide reactions to each of the following statements. p. 204]

“As president (rather than executive director), I have clout when dealing with others. The title gives me entree to and equity with business executives.”

“It has freed me to take our mission and policies and implement them in an efficient way.”

“It assisted us in the rapid development of a work plan. The model appeals to ‘fast track’ board people who want to get things done.”

“Our organization is clearly more entrepreneurial. This opens doors in the business world. Business titles enable you to approach business-people or donors without feeling your going ‘hat-in-hand’.”

A. Do you view these as valuable benefits?
[Leader: There are several other statements on pages 204-208 that you might

want to pose to the group for discussion.]

11. The Model vs. Tradition – An Overview of the Differences

[Leader: There are a variety of discussion formats that can be used with these tables. The one to use will depend on how the discussions have evolved earlier in the seminar?]

12. Is Your Organization Ready for the Corporate Model? –

The Model is about structure and people

[Leader: Although the chapter question and answers center on the Corporate Model, following are some issues that are generic to all nonprofit governance formats]

I. Situation: Jack suggests that under his model, “There are fewer committees, fewer board meetings, fewer ‘surprises,’ and greater top-management accountability.” (p. 219)

  1. What are the upsides and downsides of these outcomes?

  2. What do you do about a hostile or dysfunctional board member? (p. 223)

  3. How often should a board meet? (p. 224)

  4. How does a president/CEO turn down advice about operations from the board? (p. 226)

  5. How should a board respond if the president/CEO makes a mistake? (p. 227)

  6. When should board members get involved in operational areas? (p. 231)

SOME ADDITIONAL ISSUES FOR DISCUSSION [Leader: These questions can be inserted at various times in the seminar, depending on the flow of discussion, or as a separate section at the end of the seminar.]

  1. The potential additional liability of a volunteer who holds the CEO designation. p. 13

  2. Why do some chief executives like the idea of “shared responsibility” for operations? p. 14

  3. Board members must set the tone for long-range planning and have the time to do it. p. 18

  1. Board members of start-up nonprofits feel a need to tell the executive director “exactly what to do.” p. 19

  2. The quality of board activity improves as discussions take on a policy flavor. p. 33

  3. No matter how conscientious the board member is, he or she needs some staff support to make decisions. p. 34

  4. The public and some corporate directors often view (nonprofit) managers and executive directors (because of the organizational history of nonprofits) as “hired hands,” not as managerial professionals who are able to handle all operational responsibilities p. 36

  5. Formality is natural outcome of any growing organizations, whether it is a for-profit or nonprofit organization. p. 37

  6. If an executive director is incapable of change or unwilling to change, nothing can be done until the nonprofit gets a new executive. p. 39

  7. Streamlined committee structures can create an elite group of board members (those who really know what’s going on) and then leave the rest of the board to merely rubber-stamp decisions. p. 51

  8. To what extent do executive directors and CEOs really understand how boards determine goals and expected outcomes? p. 64

  9. “Reputational risk” is shorthand for saying that management and the board must plan to protect legally the organization’s reputation, especially when a minor internal problem can become well known in the community. p. 89

  10. Without shareholders, profits, and customers who can make choices, measurement of nonprofit organization results is much more difficult than the measurement of the results of for-profit organizations. p. 96

   14. The interaction between staff and board committee members contributes significantly to the creativity within an organization. p. 107

   15. Boards are being held much more personally accountable for their actions by the community and by legal statute. p. 111

  1. Budgets are best developed from the bottom up under the direction of the CEO, the person who knows the most about the organization and has responsibility for executing policy direction. p. 126

  2. Think of the Executive Committee as an expediting group. By doing its work well, it allows the full board to concentrate on important policy issue. p. 144

  3. The board must view the CEO as a competent executive, not as an expert in direct service who needs help with management activities. p. 155

  4. In order to maintain trust between the chair and the CEO, the chair must be certain that the evaluation of the organization and the personal evaluation of the CEO are inclusive, i.e., cover a balance of the most relevant outcomes. p. 156

   20. How can directors be INVITED to participate in operational areas? p. 182-3

   21. Board members most likely to feel a commitment are those who take pride in the organization and what it is doing. p. 185

The following articles can be reproduced for educational purposes when the third edition of Policy vs. Paper Clips is adopted for class usage.

Eugene Fram, “The Special Relationship: Nurturing the Bond between Board Chair and CEO,” Nonprofit World, September/October, 2011, Forthcoming.

Eugene Fram, “Designating a ‘Lead Trustee’ Can Help Boards Improve Their Operations,” Chronicle of Philanthropy, June 2, 2011, p. 34.

Eugene Fram & Bruce Oliver, “Want to Avoid Fraud? Look to Your Board,” Nonprofit World, September/October, 2010, pp. 18-19.

Eugene Fram, “What’s in a Name? Benefits of the President/CEO Title,” Nonprofit Director, Alliance for Children & Families, website, Mary 24, 2010.

Jerry Talley & Eugene Fram, “Using Imperfect Metrics Well: Tracking Progress & Driving Change,” Leader to Leader Journal, January 2010, pp. 52-58.

 

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