Boared meetings

Is there truth in the statement that ALL nonprofits are actually businesses,and they need to be run like businesses?

Is there truth in the statement that ALL nonprofits are actually businesses,and they need to be run like businesses?

By Eugene Fram

In my opinion, too many board and staff members in the nonprofit environment:

Do not realize that a nonprofit can focus even more effectively on “caring” missions, visions and values while operating under a business model. Many functions of a business and are the same for both types of organizations — financial operations, human resources, marketing, board governance, etc. (more…)

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Why Are Some Nonprofit Boards Missing the Mark? What to Do?

Why Are Some Nonprofit Boards Missing the Mark? What to Do?

By Eugene Fram     Free Digital Image

Stephen Miles of the Miles group (http://milesgroup.com) recognizes that many business boards are coming up short in performance. As founder and CEO of a strategy and talent development agency, Miles has identified five areas of potential improvement for commercial boards. I believe these categories are also quite relevant to nonprofit board operations in the following ways:

Knowledge Gaps

Many new board directors are in the dark about some of the operating issues facing their organizations. Such information gaps are less prevalent in trade and professional associations because most directors are in associated fields or are in practitioner positions. However, new directors of community based charitable organizations and human services focused nonprofits should be much more attuned to discussions at initial board meetings. Current methods of orienting new directors don’t seem to be doing the job. This is critical for those boards with rapid turnover. For example, one board with which I am acquainted has 80% of its membership with no more than 18 months tenure.

Orientations can take a variety of forms, ranging from brief pre-board session to pre-meeting phone calls from the CEO or Board Chair. These updates will provide the new board member with information that should make his/her participation in the board meeting more meaningful.

Lack of Self-Assessment

“When it comes to the (business) boards (assessing their) own performance, this is often done by using the check-in-the box exercise, (along) with some form of gentle peer review,” reports Miles. In the nonprofit environment, board self-assessments are not usually a priority because nonprofit directors often have time constraints. In addition, nonprofits need to more broadly examine qualitative outcomes, such as community impacts. But business boards are also beginning to move in the same direction, and at this time seem to be behind nonprofits!.*

The media, Internal Revenue Service, foundations and accreditation organizations are asking for more information and transparency to ensure that nonprofits have quality processes to overview management impacts. Few nonprofit boards can afford rigorous third party directed board self-assessment, the gold standard. However a self-review deficit might leave some board members with significant personal liabilities.** Consequently, it is my personal opinion that nonprofit boards need to make good faith efforts to have reasonable self-reviews, understanding that management and board members may hesitate to negatively reflect on volunteer directors who have adopted poor decisions.

Self-Delusion

“Management Capture” occurs when a board too readily accepts a delusional view from management that organizational performance is significantly better than reality. As a result, some board self-examinations may take place only after a crisis has been resolved. So it is mandatory that the boards develop rigorous impact measures, both quantitative and qualitative by which to judge organizational and board performance. Models for self- board assessments are available from professional groups and consultants.

Recruitment Shortcomings & Board Inexperience

Miles maintains that most for-profit directors lack real experience in succession planning: this is also true of nonprofit directors. Even in for-profit boards where a chief executive is temporarily incapacitated, there often is no plan for interim succession. Plus there is always the possibility that a CEO will leave quickly for a variety of reasons. Planning for his/her unanticipated exit should be an ongoing board concern.

One root cause for having a nonprofit culture of board inexperience is that often there are too few directors who have served on other for-profit or nonprofit boards and know how to be role models for newer recruits. Also, normally serving one or two terms, lasting three years, some experienced nonprofit directors may not be motivated to serve in this role because there are no financial incentives offered. However, as demonstrated in the Penn State debacle, a director’s reputational risks can be substantial. How a board evaluates and improves its organizational talent pool is critical to performance. Miles characterizes the optimal board as composed of ” … directors who are active in their roles engaging individually and collectively (to engage with) other directors and (overview) management.” It is a tall order in today’s nonprofit environment.

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.”

*For nonprofit qualitative outcomes, see: Jerry Talley & Eugene Fram (2010) “Using Imperfect Metrics Well: Tracking Progress & Driving Change,” Leader to Leader, winter, 52-58. For commercial boards see: Emily Chasan, (2012), “New Benchmarks Crop Up in Companies’ Financial Reports,” CFO Journal Section, Wall Street Journal, November 11th,

** For examples, see the Intermediate Sanctions Act, Section 4958 of the Internal Revenue Service Code. Also see the Expanded IRS 990 form guidelines for board structure and performance–38 new questions related to nonprofit governance.

Nonprofit Board Members Can Be Change Agents

 

Nonprofit Board Members Can Be Change Agents

By: Eugene Fram     Free Digital Image

Nonprofit boards should always support policies that will allow the organization to drive innovative actions. Following is a list developed from successful for-profits (in italics) that can be easily adapted to the nonprofit environment. *

Having a Succession Plan: This includes two elements: The first is a plan to avoid disruption in the event that he CEO is temporarily incapacitated. Hopefully it allows designating someone internally who may be capable to take the position. However in many nonprofits, I have encountered, the CEO has not developed this staff talent because of budget limitations. When this occurs, the board should have an experienced consultant in mind to fill the position for an interim period.   In my opinion, it’s not usually desirable to have a board person replace the CEO on an interim basis.   This can tend to blur the line between board and management when the position is permanently filled. The new CEO may hesitate to modify changes instituted by an interim board CEO. (more…)

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: * (more…)

Nonprofit Policy Development & Operations Management – Crossing Boundaries?

 

Nonprofit Policy Development & Operations Management – Crossing Boundaries?

By: Eugene Fram

“Nose in- fingers out,” is the commonly used guide for nonprofit directors’ relationships to operations. Translated into terms of governance-management relations, it means that boards have an obligation to overview management impacts and outcomes, but they need to avoid micromanaging the operations of the nonprofit. This is a particular danger with nonprofits because micromanagement often seems to be in the DNA’s of nonprofit boards.

On the operations side, strong experienced nonprofit CEOs can tend to be overly impatient and can easily make strategic or policy decisions that are the responsibilities of the board. In fact, I have seen a few CEOs step over the boundary and develop and execute board style policies. (more…)

Guidelines For Developing Authentic Nonprofit Board Leaaders

Guidelines For Developing Authentic Nonprofit Board Leaders

By Eugene Fram               Free Digital Image

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…)

Attention Nonprofits: If You Want to Avoid “The Squeeze,” Here’s the One Strategy That Can Help

With a competitive landscape in which spiraling demands are offset by a financing squeeze, nonprofits organizations have entered an era where only the strongest and best run will flourish, Prof. Eugene Fram, an author, consultant and nonprofit expert said in an interview. But that “strength” is easily attained, with a simple-to-implement game plan that strategically integrates the nonprofit’s board and executive staff.

“It’s a threatening squall – one I often refer to as ‘The Squeeze’,” said Prof. Fram, author of Going For Impact,” a guide to nonprofit dominance. “Just think about what’s happening. On one hand, because of slashed government budgets, there’s a growing demand for nonprofits to solve community challenges and societal ills. On the other hand, there’s the escalating challenge that nonprofits face because of a funding squeeze. Declining tax receipts are crimping many government budgets. The merger wave has slashed the number of companies that were traditionally big sources of giving. Even the recent tax cuts are squeezing funding. The competition for those fewer dollars is brutal. And that’s just on the funding side. There are also new challenges that nonprofits must address – challenges ranging from cybersecurity to sexual harassment. The bottom line is that nonprofit boards – and their directors or trustees – must be more vigilant, more informed and more proactive than ever. The good news is that the nonprofits that embrace this will be the organizations that emerge as healthy, even dominant. And the strategy isn’t that tough to enact.”

Dr. Fram recently sat down with veteran journalist William Patalon III – ironically, one of his former MBA students – to talk about the “State of the Nonprofit Sector,” and to explore what philanthropic organizations can do to “beat the squeeze.”

Here’s an edited transcript of their talk. (more…)