Board Culture

Onboarding the New Nonprofit CEO: Who’s In Charge?

Onboarding the New Nonprofit CEO: Who’s In Charge?id-100423604

By Eugene Fram                  Free Digital image

When the chair of the search committee announces that a new CEO has been selected, there is visible relief in the boardroom. After the stress of a waning—or even absent executive at the helm, directors tend to relax, engaging in a series of social events that provide a pleasant if superficial acquaintance with the new executive.

What actually lies ahead is much more serious and vital to the future of the organization. Call it orientation, acculturation or transitioning; it is the board’s responsibility to see that the CEO is grounded in every aspect of the organization. And that requires a plan that is carefully structured and may take a year to complete. Major responsibility for the plan and its implementation rests with the board chair and one or more senior board members. While there are many formats to achieve this goal, the best, in my opinion, is what has been described as a customized format.

Under a customized format the nonprofit board tailors a program that helps the new executive develop a solid base in the organization and an understanding of its unique climate and culture.
Biweekly meetings should be scheduled. However, both sides should be wary if the time required does not decrease considerably as the year progresses. The CEO will then operate more independently, perhaps even making modest mistakes from which he/s can easily recover. Those handling the orientation must take care to delegate responsibility incrementally, based on the CEO’s background and experiences. Every custom designed orientation program should include nine steps. Some must be taken in sequence, while other steps can proceed concurrently. (more…)

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CEOs Need To Develop Partnering Relationships With Board Members

 

 

CEOs Need To Develop Partnering Relationships With Board Members

By Eugene Fram               Free Digital Image

When a CEO publicly introduces a board member as “my boss,” (as I have overheard more than once) there is a problem. It’s true that both parties—CEO and board member—have specific roles in the success of a nonprofit organization. But the hierarchy of authority should be deemphasized when it comes to interpersonal connections. The most effective mindset for CEO and directors is to view each other as partners in working to achieve the organization’s mission and their impacts.

The CEO’s efforts to cultivate such relationships are key. The following are some initiatives that he/she can utilize: * (more…)

What are the most productive types of relationships between board & staff?

What are the most productive types of relationships between board & staff?

By: Eugene Fram  Free Digital Image by Stuart Miles

In the 21st century, building transparency and trust are two critical elements for good governance. In nonprofit organizations, these elements take on additional importance because organizationally staff members may only be or two levels below the board. Consequently, nonprofit staffs are probably more attuned to board changes and directives than their counterparts in a business setting. With more frequent rotations of nonprofit board members, many staff members can feel insecure. They have observed some nonprofits at which new board members sometimes can quickly bring about detrimental changes–it is not unusual for community boards to limit vetting new board members to friends and family. (more…)

Mismanagement Causes Huge Agency Failure—A Word To The Wise Nonprofit?

Mismanagement Causes Huge Agency Failure—A Word To The Wise Nonprofit?

By Eugene Fram

Rarely do failed for-profit or nonprofit organizations get a posthumous review of what actually went wrong. The collapse of one of the largest nonprofits in the US, the Federal Employment Guidance Service (FEGS) of New York City, is a noteworthy exception. Details of the causes that led to the human service’s demise were aired widely throughout NY media. * This organization had a $250 million budget, with 1900 employees who served 120,000 households covering a range of mental health and disability services, housing, home care and employment services.

Following are my interpretations of what its board should have done to avoid such a tragedy.

Failure of nonprofits: Failure of small nonprofits is rampant for a wide variety of known reasons. For example, “Nonprofits tend to be more trusting of their employees and have less stringent financial controls than their for-profit counterparts.” **

Outside of fraud being involved, the FEGS failure demonstrates that no nonprofit is too big to fail, probably because of a lack of board due care. Boards have to be acutely aware of the professional financial competencies of their CFO and CEO or well-meaning people who naively believed that loans could be easily repaid. There should have been a well-documented financial l strategy. The nonprofit closed with $47 million in loans/liabilities/debts.

Symptoms of impending collapse: Clearly with $47 million being owed, common financial ratios should have alerted knowledgeable board members to the coming catastrophe. But in the nonprofit environment, it is not unusual to that find directors, even business executives, are unfamiliar with the fund accounting approach used by nonprofit organizations.

In addition, contracting city and state agencies failed in their reviews of the organization’s finances. However, some nonprofits, either intentionally on unintentionally, can saddle contract reviewers and directors with so much information that even the most conscientious can’t spot problems. (Humorously, directors in this category are referred to as “mushroom directors” because like growing mushrooms, they are kept in the dark an covered with excrement. But this type of tactic was successfully used against IRS auditors in the Madoff debacle.)

Government or Foundation Contracts: In accepting these contracts, nonprofits must be realistic about whether or not there is enough money to cover full costs. They can’t be blinded by what the contract can do for the organization’s client. If adequate overhead funding is not attached to one or more of these agreements, they eventually can cause bankruptcy, because the nonprofit eventually will have to borrow or seek additional donations to cover them.

How Nonprofit Boards Can Avoid Problems

Review Financials: Current financials need to be given to directors monthly, or at least quarterly if the board meets less often. The very detailed budget data can often be difficult for those without budget experience. At the least, everybody on the finance committee needs to be able to intelligently review the income statement and balance sheet. Also they need to be aware that funding accounting permits some unusual twists—food donations, for example, can be included in revenues, based on an estimate of their value. Consequently, cash revenues and expenditures need to be a focus for directors’ analysis.

Make certain that financials are delivered on timely and complete bases. Problem Example: One CFO didn’t submit accounts receivable reports for nine months because he said he was too busy to compile it. Neither the board nor the CEO demanded issuance of the report. When finally delivered, it was clear that the CFO was listing a substantial number of noncollectable accounts as active ones. Both the CFO and CEO were fired, and the nonprofit had to hired expensive forensic accountants to review the impact.

Gaps Between Revenues and Expenditures: This is the ultimate red flag, if not followed carefully. It may vary from period-to-period in a predictable pattern that everybody understands, but if the gap continues, say for four to six months, strong board action is necessary.

Adopt written financial policies: These are necessary to make sure all concerned with finances are on the same page. Since interpretation is often required in financial decisions, nothing should be left open to broad interpretation.

Contracts with governments, foundations and others: Make certain that reimbursements for indirect costs are included. If not included, have a benefactor ready to step in to cover the costs.

An old Chinese proverb, “A wise man (or woman) learns from his/h own experience. The wiser man (or woman) learns from the experiences of others.” One hundred twenty thousands households and individuals lost services from an 80 year old human service nonprofit. There is much to learn from the collapse of FEGS.

* https://www.councilofnonprofits.org/thought-leadership/what-we-learn-when-nonprofit-closes-its-doors

**https://www.blog.abila.com/nonprofit-fraud-facts-2016-global-fraud-study/

Going For Impact: A Non-Profit Blueprint For the Second Half of the Year  

 

Going For Impact: A Non-Profit Blueprint For the Second Half of the Year

By Eugene Fram     Free  Digiatl Image

For organizations and individuals, the end of the calendar year is the traditional planning period – the time used for self-assessment, strategizing and putting in place “game plan” for improvement and growth for the 12 months to come.

For many nonprofits, June 30th is the end of the fiscal and planning year. Yet the blueprint also offers the same opportunities to focus on improvement and growth.

But in today’s volatile, hyper-competitive and uncertain environment, this one-a-year exercise isn’t enough.

It just isn’t. Especially for nonprofits. And their boards of directors.

Here’s the good news: The year’s midpoint – upon us now – is a great point for an interim review. It’s a good time to review your game plan. Develop a vision goes beyond reviewing current budget projections against actuals and other compliance requirements.

I have identified five areas of focus – the last being a kind of “action plan” you can use to implement what’s of interest. Adopting just one of the many suggestions can yield a substantial return on investment.   They are: 

  • Your Leadership
  • Your Talent Pool
  • Your Fundraising
  • Your Impact Data
  • Your “Fix-It” Points

(more…)

Nonprofit Board Members Have The Potential To Become Great Ambassadors!

Nonprofit Board Members Have The Potential To Become Great Ambassadors!

By: Eugene Fram        Free Digital Image

There is no shortage of able communicators on most nonprofit boards. Board members usually bring a degree of passion, purpose and special abilities to their term of service. Many come from business or professional environments that require at least a measure of experience in advocacy, often referred to as “selling” an idea or product!

But rarely do Board Chairs and CEOs avail themselves of the opportunity to develop nonprofit board members as fully functioning ambassadors for the organization. With a constantly rotating board and emerging crises, it becomes difficult to find the time and energy to coach board members in the art of putting the organization’s public face on view. In some cases the CEO simply doesn’t encourage contact between the board and staff. At other times, they fail to include selected directors in important conversations with key public figures and/or major donors or foundation executives. Such omissions represent a major talent loss in the advocacy process. (more…)

Preparing the Nonprofit for the Unexpected Crisis

Preparing the Nonprofit for the Unexpected Crisis

By: Eugene Fram      Free Digital Image

Nonprofit boards and management, large and small, can suddenly be subjected to the trauma of an event that will shake the organization to its roots! While I am sure that larger nonprofits like the Red Cross have crisis management plans in place. I have yet to encounter a mature mid-sized nonprofit that has even considered anything beyond a temporary replacement for the executive director should he/she is incapacitated.

Yet it’s essential that every board chair know what to do if the executive director calls at 3AM to report that the nonprofit facility is on fire! With about 16% of all fraud losses emanating from nonprofits, how should the board chair respond when a new auditing firm reports that the executive director has been using thousands of agency dollars for personal expense?

In either of these instances, the board chair and members must be prepared to step into leadership positions that are frequently out of their comfort zones. A plan to deal with a crisis of any sort should be in position and reviewed by board and management on an annual basis. Here are some suggested topics that need annual updating:  (more…)