Nonprofit boards need to expand their evaluations of nonprofit managers and their organizations adding more behavioral impacts * to their evaluations.
For example, a nonprofit might count the number of volunteers that have been trained. But boards must go to the next level in the 21st century. In the case of volunteers, they must seek to understand the impacts on those trained. They need, for instance, to understand how well these volunteers are assisting clients and how they are representing the nonprofit to the clients. The training is a process, but it determines their relationships with clients and yields impact data.
Qualitative data must be developed to the next level, and the average nonprofit CEO will argue that he/she doesn’t have the staff or expertise to develop impact data. Engaging an outside organization to complete a simple project can cost thousands of dollars.
Gene Takagi, noted San Francisco attorney, who specializes in nonprofit organizations published an article listing 12 reasons for resigning from a nonprofit board. It is worth reading.*
BUT
Nonprofit board members often become impatient with the slow pace of progress toward positive change. Here are some actions that may change the situation, improve service to clients and prepare the organization for any long-term mission disruptions.
• Talk With The CEO: He/s may feel the same frustrations and be delighted to find a board member who shares his goals. In fact, she/h may be thinking of leaving or be wedded to the current area only because of a family situation. As a result, your conversation may give a chief executive new hope and energy. On the other hand, if the CEO is too aligned with the past, it will be unlikely that the board will terminate the current CEO, unless there are some performance malfeasances involved. Then, estimate the CEO’s remaining tenure and use remaining time to find opportunities to make modest increments in change.
• Talk With Other Directors: Between board meetings, have informal coffee sessions with other directors to determine their views on the areas in which you feel change is necessary. Three or four board opinion leaders can garner positive movement, assuming there are no strong objections from the CEO.
• Outside Validation. If sufficient budget is available, ask the board to engage a consultant to examine the potentials for change. The rationale for the request might be: “We are doing well, let’s determine how we can better serve our clients.” If budget isn’t available or the CEO is against the expenditure, try to have the board arrange, for an outside speaker or two who might validate the need for change. This might be a person from the field or a local professor who has some insights aligned with change-focused board members .
• Seek Outside Financing: Personally seek sources for capacity grants that, if awarded, might be developed to further help clients. Ask the board to take leadership in applying for several of these grants. A single successful grant might be the linchpin to promote the type of change desired by the group having similar views.
• Chair The Nominations Committee: As chair, the director can be in a position to search for candidates who are forward looking. In addition, the committee, under the urging of the chair, can seek candidates who have served on other nonprofit boards and who have proven their meddle to bring about change.
Summary For any single board member of a status quo nonprofit to lead a change on organizational culture will require tenacity, time and patience. The person will need to be extremely dedicated to the organization’s mission and want to improve the services to its clients. Very few board members have the grit to lead such a change. However, a small-motivated group can be an advanced guard to initiate some actions in the right direction. But the group will have to keep Peter Drucker’s insight in mind when the going gets tough, “Culture eats strategy change for breakfast.”
An unusual case of an ED accused of serious malfeasance, but the board refused to fire him. http://bit.ly/1om6XUw
Does A New Nonprofit Board Member Really Understand Your Organization? The New Board Member Nurturing Challenge!
By: Eugene Fram Free Digital Image
The careful nurturing of a new board member, whether for-profit or nonprofit, is critical. The pay-off of a robust orientation process is an informed and fully participating board director. The following are very similar occurrences in both for-profit and nonprofit boards:
The CEO of a transportation firm agrees to become a board director of a firm developing computer programs. He has risen through the transportation ranks with a financial background, but he knows little about the dynamics of the computer industry.
A finance professor is asked to serve on the board of a nonprofit school serving handicapped children. She has no children of her own and has never had any contact with handicapped children, social workers or teachers serving handicapped children.
In these similar cases, the new board member needs to become reasonably conversant with a new industry or a new human service field in order to be able to better apply policy development skills, strategic planning skills and to allow generative thinking.
On nonprofit boards, the problem is exacerbated when the new board member often is asked to immediately join a specific board committee without being able to understand the board perspectives and the organization’s mission vision and values. Following are ways in which the nonprofit board can resolve this problem:
Don’t appoint the new board member to committee until she/h has completed a board orientation program including a review of board procedures, attending several board meetings, has had visits with the staff, as they normally operate, and becomes alert to the major trends in the field. This ideally should take about six months assuming the board member is employed full-time elsewhere.
During this time, the chief executive and board president should be available to visit with the new board member as frequently as she/h wants in order to respond to questions.
Hopefully, the chief executive would informally meet the new board member (and each established director) quarterly to review current issues and opportunities. In addition to the information presented at the board meetings, this will provide a better perspective of the board’s mission, vision and values.
Ideally, the board volunteer should attend one staff meeting and one outside professional meeting to acquire a feeling for the topics reviewed at these gatherings and the field terminology.
During the first year, a senior board member needs be seated next to the new person at meetings to act as a “host” for the new board member.
If most of these actions can be accomplished within a six-month period, major blind spots are removed, and the new board member can then join a standing board committee or an active task force. Now, reasonably understanding the organization and her/h own participation on the board, she/h has a background to make a substantial contribution for years to come.
Applying Fundamentals of a Nonprofit’s DNA To Enhance Planning
By: Eugene Fram Free Digital Image
No two nonprofit organizations are identical. Each may reflect similar missions visions and values but—because of basic differences in their DNAs * —are clearly impacted by distinct characteristics that may have developed over a long time period.
Bob Harris, CAE, suggests a nonprofit’s DNA consists of five elements. * * Following are my thoughts on how they can be applied, if a nonprofit board wants to develop an understanding of the “real world” applications of the Harris DNA elements. This needs to take place prior to the planning efforts.
Guidelines For Developing Authentic Nonprofit Board Leaders
By Eugene Fram Free Digital Image
The problems of Wells Fargo and Enron 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)
Measuring Nonprofits’ Impacts: A Necessary Process for the 21st Century
By Eugene Fram Free Digital Image
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 non starter 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.
The Possibility Of Fraud – A Nonprofit Board Alert
By: Eugene Fram Free Digital Image
“According to a Washington Post analysis of the filings from 2008-2012 … of more than 1,000 nonprofit organizations, … there was a ‘significant diversion’ of nonprofit assets, disclosing losses attributed to theft, investment frauds, embezzlement and other unauthorized uses of funds.” The top 20 organizations in the Post’s analysis had a combined potential total loss of more than a half-billion dollars. *
One estimate, by Harvard University’s Houser Center for Nonprofit Organizations, suggests that fraud losses among U.S. nonprofits are approximately $40 billion a year. **
Vigilant nonprofit boards might prevent many of these losses. Here’s how:
• Have an audit committee charged with reviewing the overall results of a yearly independent audit conducted by an outside auditor. • Carefully oversee executive compensations, pension benefits and other finance activities. • Conduct a yearly review of conflict-of–interest policies, have employees/board members sign a conflict-of-interest statement and have board members involved with development of IRS Form 990 before submission.*** • Assure new hires are well vetted for honesty by searching background. • Meet with external auditors at specified times, including an executive session without management present.
• Ask the auditors: 1. Have they perceived any fraud problems? 2. Are internal controls adequate, e.g., those handling financial matters must take at least two weeks vacation per year so their duties can be temporarily assigned to others? 3. Are financial records accurate? To what extent were material mistakes located or was there an increase in non-material mistakes? 4. Do the proper managers or officers properly authorize activities and expenditures? 5. Do all assets reported actually exist? 6. Is the organization performing any activities that might endanger its tax-exempt status? For example, provide misinformation on the IRS Form 990. 7. Is the organization paying its payroll taxes, sales taxes and license fees on time? ****
Trust But Verify
Some board members argue boards can do little to prevent fraud. I argue that every member should know enough about finances to raise issues about questionable activities. At the least, everyone in the organization should be alerted to the fact that board members are paying attention to the possibility of fraud. That knowledge, in itself may deter some people from trying to steal.
* Joe Stephens & Mary Pat Flaherty (2013) “Inside the hidden world of thefts, scams and phantom purchases at the nation’s nonprofits,” Washington Post, October 23rd.
**Janet Greenlee, Mary Fischer, Teresa Gordon & Elizabeth King, “An investigation of the fraud in nonprofit organizations: occurrence & deterrents, “ Working Paper#35 hauser-center@harvard.edu.
****More actionable details can be found: Eugene Fram & Bruce Oliver (2010) “Want to avoid fraud? Look to your board,” Nonprofit World, September-October. Eugene Fram (2013) “Preventing and managing leadership crises in nonprofit organizations, “ in Handbook of Research on Crisis Leadership in Organizations, Andrew J. DuBrin, editor, London, Edward Elgar International Publishing.
A Nonprofit Board Must Focus On Its Organization’s Impacts
By: Eugene Fram Free Digital Image
“One of the key functions of a (nonprofit) board of directors is to oversee (not micromanage) the CEO, ensuring that (stakeholders) are getting the most from their investments.” * State and Federal compliance regulations have been developed to make certain that boards have an obligation to represent all stakeholders. These include the staff, community, donors, foundations and clients, but not only the staff as some nonprofit boards have come to believe. Following are some inherent problems.
How Often Do Nonprofit Board Members Need to Question Strategic Norms?
By Eugene Fram Free Digital Image
A new nonprofit director has a lot to learn. Considering that his/h term of service will be relatively short (typically four to six years), he/s must quickly learn the “ropes” to participate in a meaningful way. In this process, colleagues and leadership will acquaint him/h with prevailing board systems and culture—often ignoring the depth of expertise she/h can employ. Example: An expert in financial strategies may be asked to assist the CFO with accounting details, far below the person’s skill level. Oftentimes the new board member also is greeted with a mantra that says, “We’ve always done it this way.” As the director moves in his path from novice to retiree, during a short tenure, there is little opportunity to suggest innovations that differ from the accepted fundamentals and to successfully advocate for change.
Nonprofit Management 