Board Learning Opportunities

Does Your Nonprofit Have A Process For Implementing Strategy?

 

Does Your Nonprofit Have A Process For Implementing Strategy?

By: Eugene Fram           Free Digital Image  

My observation is that intense interest in nonprofit organizational strategy only takes place  very three or five years when the strategic plan needs to be reviewed.  The cause, as I see it, is that substantial numbers of nonprofit board members and senior managers lack substantial strategic  backgrounds and interests to enable them to give the plan implementation attention. Most boards I have encountered are fortunate to have one or two  board members with broad based strategic experiences. With nonprofit board members rotating every four to six years, it’s likely that any board member will only participate in one strategic plan change experience.  Also some nonprofit CEOs and senior managers can be directly appointed from staff positions, lacking knowledge of strategy development.    

Based on a survey of commercial organizations by McKinsey, it appears that these boards and their managements have similar strategic challenges as nonprofits. * 

Following (in bold) are McKinsey’s three suggestions for implementing strategy development and my suggestions for adapting them to nonprofit organizations (more…)

Common Practices Nonprofit Boards Need To Avoid

 

Common Practices Nonprofit Boards Need To Avoid

Peter Rinn, Breakthrough Solutions Group, * published a list of weak nonprofit board practices. Following are some of the items listed (in bold) and my estimation of what can be done about them, based on my experiences as a nonprofit board director, board chair and consultant.

• Dumbing down board recruitment – trumpeting the benefits and not stressing the responsibilities of board membership. Board position offers frequently may be accepted without the candidate doing sufficient due diligence. At the least, the candidate should have a personal meeting with the executive director and board chair. Issues that need to be clarified are meeting schedules, “give/get” policies and time expectations. In addition, the candidate, if seriously interested, should ask for copies of the board meeting minutes for one year, the latest financials, and the latest IRS form 990.. These reports and the data revealed tell a great about the sustainability and impact of the nonprofit.

• Overlooking the continued absence of board members at board meetings, strategic and planning meetings. Many bylaws have provisions dropping board members who do not meet meeting attendance criteria established by the bylaws. However, such actions are difficult to execute because of the interpersonal conflicts that can arise. For example, one organization with which I am familiar had a director who did not attend any meetings, but did make a financial contribution to the organization. When his resignation was requested, he refused. Not wanting to create conflict, the board simply kept him on the board roster until his term expired and then sent him a note acknowledging the end of his term. The board chair, not the CEO, has a responsibility to have a personal conversation with the recalcitrant director. He/s needs to offer a “tough love” message in the name of the board.

• Taking a board action without conducting enough due diligence to determine whether the transaction is in the nonprofit’s best interest. Although each board member should sign conflict of interest statement each year, my impression is that this is rarely done. Board members should understand the potential personal liabilities that might be accrued as a result of violation of the federal Intermediate Sanctions Act (IRS Section 4958) and other statues. For example, under IRS 4958, a board member can have his or her personal taxes increased if involved in giving an excess benefit, such as selling property to the wife of a board member for less than the market rate. Some boards and their members need to be frequently reminded about their “due-care” responsibilities.

• Allowing board members to be re-elected to the board, despite bylaw term limitations. This often occurs when the board has given little thought to a succession plan, and the only person who seems qualified is currently in place. It also happens when the board has significant problems and nobody on the board wants to take the time to hold a time consuming position. Some boards, however, have a bylaw exception that allows a board chair, if scheduled for rotation, an extra year or two to be chairperson. Succession planning needs to be a yearly routine for top managers and for the board itself.

• Allowing board members to ignore their financial obligations to the nonprofit. To assess board interest in a nonprofit, foundations and other funders like to know that every board member makes a financial contribution within their means or participates in the organization’s “give/get” program. This topic should be discussed at the outset of recruitment so it can be full understood by all directors.

• Overselling the protection of a Directors’ and Officers’ (D&O) insurance and laws limiting the liability of directors. The importance of a nonprofit having a D&O policy, even a small one, can’t be overstated. I recently encountered a nonprofit that had operated for seventeen years without a D&O policy, although its annual budget was $500,000, and it was responsible for real estate valued at least $24 million. Each director should be knowledgeable about the potential personal liabilities involved with the board position. Frequently, board members assume that a D&O insurance policy covers too wide a range of situations.

• Allowing ignorance and poor practices to exist keeps leadership in control. Changing leadership and practice is difficult for both for-profit and nonprofit organizations. However, in the nonprofit environment it is more difficult because poor leadership and practices can continue for a long time period, as long as current revenues meet expenditures. They can even become part of the organization’s culture. In some situations, this state of affairs continues because the board has low expectations of management and staff. It’s critical that the leadership needs to be thoroughly evaluated annually.

There is much that nonprofit boards can do about avoiding common practices that weaken the effectiveness of the board.

* aka The Nonprofit Entrepreneur, Placitas, New Mexico

Anticipating Tomorrow’s Nonprofit Crises Today

 

Anticipating Tomorrow’s Nonprofit Crises Today

By: Eugene Fram            Free Digital Image

In the decades in which I have been a nonprofit/business board member or consultant, I fortunately have only been in the mire of a crisis situation twice.   In both cases, the board was totally unprepared to take appropriate actions to minimize the turmoil that followed.

Following some guidelines that nonprofit boards can use to plan to respond effectively to crises in the 21st century: *

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Should Mature Nonprofits Allow Board Micromanagement?

 

Should Mature Nonprofits Allow Board Micromanagement?

Commonly accepted View of  Nonprofit Micromanagement: Board members spend more time with the details of the operations instead of planning the organization’s short-term and long-term growth strategies. 

The Need for a Micromanaging Board
Board micromanagement is an appropriate approach when a nonprofit is in a start-up stage. Financial and human resources are modest, and the volunteer board members must assume some responsibilities normally executed by compensated staff. The chief executive often has managerial responsibilities as well as a list of clients to service. It is not unusual to promote a person who is only familiar with direct service to become the first chief executive of the organization. In turn , this neophyte manager has to depend on board members for managerial counsel and direction. A culture of board dependency is created out of necessity.

Problems Arise
The micromanaging board is a worthy model for smaller nonprofits that stay at a start-up level for a long time. Some nonprofits retain this governance model, with its dependency relationships, long after it is needed. Example: One nonprofit I encountered required its department heads to first discuss major issues with designated board members before reviewing them with the chief executive, e.g., the program manager follows instructions of the board program committee chair.

Major Organizational Impacts Of Continuing Micromanagement
• Management and staffs wait for board signals or instructions before taking action. One CEO reported: “I give the board options and let them choose the course of action.” Implication: I don’t want the responsibility for the action chosen. “The board told me to implement it.”
• It’s more difficult to hire talented managers with these types of organizations. Most, from CEO down, are “C” players. They fear “A” and “B” players and then hire more “C” players like themselves. More qualified personnel may reject offers.
• Management & staff just don’t have the “right stuff” to be creative. They don’t properly question authority. Boards are shown great deference.
• Impacts and outcomes at best are minimal, but this is not readily recognized by the community or sponsoring organization. As long as income meets expenses each year, the board does not note any long-term red flags.

Changing the Culture — The Important Issue
Governance and management changes do not occur easily when an organization has maintained a micromanagement culture well beyond the start-up period. Following are some ways that I have seen changes take place.
• Several forward-looking members of the board, including the chair, develop a plan to seek change. Opinion leaders or well-respected veterans must be included.
• Over time, often a year or more, a change plan is developed and then formally adopted by the board. This usually involves giving the chief executive full responsibility for operations, along with a robust annual assessment of the CEO and operations.
• During the process, all stakeholders must be informed about the proposed changes, and the reasons for change. Naysayers will quietly spread internal and external rumors about it. Actual Example: “We will be losing our family culture and our great interpersonal relationships.”
• The CEO must be in favor of the changes to be instituted. If not, the board needs to wait until the CEO retires or leaves. Of course, the board can terminate the CEO, but this will certainly lead to conflict with the staff and the stakeholder constituency he/s has developed.
• When a new CEO is engaged, make certain the person has a desire and some experience to manage and the interpersonal skills to relate to the staff at its current state.
• Some members of the board will become “displaced directors,” persons cemented to the older order. Look for them to resign quietly and/or take potshots at the new governance-management arrangement. Actual Example: In one organization, when the traditional ED title for the chief executive was abandoned and the title President /CEO instituted, a board member derisively questioned, “Do we call him ‘Presco’ ?”

Summary
The tendency of nonprofit boards to micromanage organizational operations is still prevalent. In fact, it appears to be part of the nonprofit’s DNA! With the huge problems confronting nonprofits, it’s high time for a 21st century culture change!

Do Your Board Members View Their Board Work As Being Meaningful?

 

Do Your Board Members View Their Board Work As Being Meaningful?

By Eugene Fram                  Free Digital Image

For several decades, I have suggested that nonprofit Board Chairs and CEOs have a responsibility to be sure that each board member perceives his/h continuing relationship as being meaningful. Following are some organizational guidelines that can assist Board Chairs and CEOs in this effort.*

  1. Developing or hiring strong executive leadership: Obviously when hiring externally it is necessary to engage a person with a managerial background. But many nonprofit CEOs can be appointed after years of being an individual contributor or leading a small department. These experiences condition them to do too much themselves, rather than to assume a strong management posture. This involves focusing more on strategy, on talent development, interacting more with the board/community and creating a long-term vision.

A strong CEO, if appointed internally, should understand the role changes that take place once appointed. He/s must delegate activities that were once performed within a comfort zone and seek new challenges. Examples: The new CEO needs to be enthusiastic about becoming a fundraiser.   She/h must become well acquainted with peer CEOs regionally and nationally to stay abreast of the state-of-art in both management and mission areas. He/s needs to become acquainted with cohorts in the business and public management communities. Over time, those involved with the nonprofit internally and externally must perceive the organization is lead by a capable executive.

  1. Creating impact: In the 21st century, funders, board members and other nonprofit leaders are attracted to organizations that create impacts as opposed to outcomes. A nonprofit can have great program outcomes with little long-term impacts on clients. Impact is often hard to measure, but it can be done, only if started with imperfect measures that are improved over time. ** For example, one local human services organization, with which I am acquainted, operates groups of apartments offering social services that allow elderly clients to live independently for years on their own, rather than in an assisted living facility. The impact in this instance is well-defined and an impetus to attracting board members and donors that find the impact meaningful.
  2. Building relationships externally and internally: Board candidates who have broad contact networks are sought by search committees to enhance community or industry relationships or to strengthen the organization’s fund development efforts. Little effort is directed to fostering closer relationships among current board members who often don’t get to know each other personally because of crowded board and committee agendas. Example: I consulted with one board where some board members complained that they might not recognize their board peers when they meet them in outside social situations.

To solve the problem, both the Board Chair & CEO must acknowledge that it exists—in the above example; it took an extensive personal interview board survey to highlight the problem.   Then creative tactics like the following can be employed.

  • One CEO has a weekly one-hour conference call with the board chair to discuss current issues. Other board members are invited to join the calls if they wish. This is an excellent way for new board members to quickly become attuned to the nonprofit.
  • Another CEO, each Sunday, sends a one-page e-mail summary of major events to board members. He reports that his high school English teacher would never approve of his grammar or structure, but he knows emails are reviewed. They are reflected in the level of discussions at meetings
  • Low-key self-funded social events for board members and significant others can help board members to become better acquainted and work together.
  • Another classical approach is to allow 10 minutes each meeting to allow board members to briefly report changes in their personal or professional lives.
  • Assuming an organization is successful in developing a cohesive board, what can be done to retain these efforts once they have termed-out? The answer is to ask them to join the organization’s “Alumni Association.”   The process can be found here: (https://onlinelibrary.wiley.com/doi/epdf/10.1002/ltl.20305)

  1. Organizational stability: Unstable nonprofits have common telltale signs—rapid employees or management turnover, excessive bank borrowing, reserve depletion, late report filings, etc. It’s difficult to provide meaningful board experiences under these conditions. However it is not unusual to find board members who will accept responsibility when the nonprofit is unstable, if they are dedicated to its mission. A few may  “enjoy” a board position  to be involved in the turnaround challenge.

While no nonprofit will be perfect, those with the best opportunity to provide meaningful board experiences will have a well formulated strategic plan that allows it to be stable operationally and financially.

*https://grantspace.org/resources/blog/high-impact-volunteer-engagement-six-factors-for-success/

** https://nonprofitquarterly.org/2012/07/24/using-imperfect-metrics-well-tracking-progress-and-driving-change/

 

Board Member Networking Pays Off for Nonprofits

Board Member Networking Pays Off for Nonprofits

By Eugene Fram    Free Digital Image

Over decades of nonprofit board membership and consulting, I have rarely observed volunteer board members effectively networking with their peers to develop best board practices. Also rarely do I see them accompany management to regional or national conferences related to the nonprofit’s mission. These types of exposures are necessary to have groups of board members capable of making generative suggestions.

For directors who are willing and able to network, I suggest the following: 

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What Makes A Great Nonprofit Board Member?  Some Unique Suggestions!!!

What Makes A Great Nonprofit Board Member?  Some Unique Suggestions!!!

By: Eugene Fram          Free Digital Photo

Viewers may question my taking time to develop this post when a Google search, using the above title, shows about 22 million listings recorded in 0.96 of second! The answer is that I located a board article with a few interesting insights, relating to for-profit boards, that also can be useful to the selection of nonprofit directors. * Following are some of the unusual ideas.

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Nonprofit Board Discourse: a Meeting of the Minds??

 

 

Nonprofit Board Discourse: a Meeting of the Minds??

By: Eugene Fram        Free Digital Image

Several years ago, a nonprofit board member complained to me that there was too little “conflict” at board meetings. Too few hands were raised to challenge or simply question the efficacy of certain important agenda items. Having participated in hundreds of nonprofit meetings, I have observed that this laissez-faire response still typifies a significant number of board member’s attitudes, especially for items that deserve vigorous discussion. Why is that? And why can the term conflict be  perceived as an asset to an organization that is determined to move forward?

Below are some answers based on my own experience in the nonprofit environment.

  • Major Focus is on Operations: As I have commented in other posts, focusing on operations seems to be a default option for many nonprofits. Unlike members of business boards who have substantial financial investments in their organizations, nonprofit board members are volunteers with little personal risk and with insufficient motivation to challenge the status quo. Since the median nonprofit director’s term of service is seldom greater than 6 years, a board member can lack significant interest in the nonprofit’s long-term future. In addition operational items are more concrete and inherently more interesting because many center on people related decisions. Then there’s the “nice guy” impulse—directors’ meetings are usually brief (1 to 1.5 hours) and board member are often reluctant to voice dissenting views that may offend colleagues and extend meeting times.

Encouraging “Constructive Conflict”

  • Preparation Is Critical: Review of governance agenda materials leads the way to more rigorous discussions.   This requires nonprofits to provide meeting materials at least one week in advance to facilitate fact- based discussions. Some may argue that busy board members will ignore materials well in advance of the meetings. But isn’t it a solid advantage to have some of the most interested board members well briefed for the meeting?
  • The importance of mission: As much as possible, the board chair needs to frame each agenda item in light of its impact the nonprofit’s mission.   This helps eliminate frivolous comments and questions, e.g., voting on the color of the menu at the annual diner. These distractions, like responding to tweets, detract from discussing substantive issues. Chairs can diplomatically eliminate them by simply suggesting the distraction  issue can be handled “off line.”
  • Recruitment: Nominating candidates for the board who have the abilities to interact effectively at meetings are important to improving the quality and quantity of meeting discussions.   While nonprofits often need a diversity of board members from different fields and backgrounds, they also must have a core of directors who know the differences between governance and operational activities, who understand what is involved in critical thinking, have demonstrated leadership elsewhere and have broad understandings of what constitutes strategic planning.   Otherwise the board, like the one I encountered, had many very busy middle level managers who did well on time-constrained specific projects, but they had no interest in governance or strategic planning.   The de facto result was that the Board Chair authoritatively operated the board.
  • Getting Together: Currently, most nonprofit board members live time-compressed lifestyles and only connect with others at formal board or committee meetings. To build an effective team decision-making, board members need to know each other personally and professionally.   Board chairs and CEOs must take steps to provide social or professional occasions for the board at which directors can interact.   Sometimes a simple 10-minute agenda item at a meeting asking each member to briefly review personal or professional events can help—as proven by organizations like Rotary.

The absence of conflict reflects blind trust rather than a good professional relationship.  Likewise, professional tensions between the (board and management) are signs of a well-performing board. We should habitually become suspicious when we observe boards where dissent is absent.*

Passion vs. Passivity: The nonprofit board member who lamented the absence of “conflict” in the boardroom recognizes that an engaged and often challenging governing body is in the best interest of a healthy and forward moving organization.

*http://boardagenda.com/2016/10/08/conflict-makes-for-effective-boards/

Once Again: How to Keep a Nonprofit Board Informed.

Once Again: How to Keep a Nonprofit Board Informed.

By: Eugene Fram    Free Digital Image

With high performing nonprofit boards, board members 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 board members informed of significant developments. Still, there’s no need to clutter regular board meetings by reporting endless details about operations.

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Should All Board Members Be Required to be Involved With Fundraising?

 

Should All Board Members Be Required to be Involved With Fundraising?  Updated Version

By Eugene Fram        Free Digital Image

Based on my experiences, I suggest those who have done it before or are willing, with some coaching, to try it.  However, board members also need to maximize their colleagues’ contacts.  That may involve teaming someone who does not usually get involved in fundraising with an experienced hand, if the inexperienced person knows a potential donor.

The CEO will also need to be an assertive leader when it comes to fundraising, but all board members will need to play an active or supportive role.  Neither board members nor CEOs can abdicate their fundraising roles.

Everyone on a nonprofit board should make an annual contribution.  This is accomplished by a Give and Get Policy.* Certainly, the amount depends on each director’s personal situation, but even a token amount is significant or useful contributions in other ways are in line with the policy.  When developing 21st century funding grant proposals for foundations or corporations, funders want to know whether or not all members of the board have a personal interest.

*https://www.amyeisenstein.com/set-give-get-policy-for-your-board/