Consistency

Once Again! Should a Nonprofit CEO Be a Voting Member of the Board of Directors

   By:  Eugene Fram         Free Digital image

BoardSource, a professional governance organization, reports that this question is one of the most asked. Google reports about eight million citations, in a brief .52 second search, related to the issue or related issues. The question continues to be debated, and the need for comment and opinion seems insatiable. (more…)

Is Your Nonprofit Forward-Focused or a Prisoner of the Past?

By: Eugene Fram            Free Digital Image

Governance arguably suffers most … when boards spend too much time looking in the rear view mirror and not enough scanning the road ahead. *

It has been my experience that nonprofits rarely address the possibilities and perils of “…the road ahead.” An endless stream of current and pressing issues can cause both Board and CEO to take a myopic view of their nonprofit responsibilities — either totally ignoring strategic issues or procrastinating a discussion of the subject. The results can be damaging to the organization. Here are some “prompts” that might guide nonprofit board members and CEOs as they attempt to provide leadership in this important but neglected area:

Balanced Agendas — Include and highlight strategic issues on every board meeting agenda (not just when a committee report is presented) until they are resolved with action plans, policy development or thoroughly discussed and removed. This constant emphasis on planning can go a long way towards achieving concrete actions on topics of future concern. A discussion of immediate issues juxtaposed with ongoing strategic concerns will provide a balanced meeting format that may possibly discourage board member’s attempts to micromanage, a very common tendency in nonprofit boards!

Short Term Focus — In a BoardSource report,  “…only 33 percent of nonprofits report that their board members are actively involved in advocating for their missions, and many organizations aren’t advocating at all.”** To inspire and challenge board leaders to actively serve as ambassadors.  The explanation for weak performance in this area is often attributed to the fact that the directors’ terms of service on the board are usually three to six years during which time people’s interest in the long-term future of the organization may be compromised. Some boards may be disproportionately represented by “millennials” whose participation comes with heavy time constraints. Problems of this type can be mitigated by seeking board members who are partially or fully retired. They are likely to be better equipped to focus on the important governance functions and the fundamentals in which the nonprofit operates. Boards need to look to look further out than anyone else in the organization… There are times when CEOs (those operationally concerned with strategy) are the last ones to see (environmental) changes coming.

Board Recruiting — Nonprofit recruiting can be a hit-or-miss process, often producing candidates who are readily available and familiar to the current board. Rarely will the committee seek out people who have strong track records as strategists and/or competent visionaries. This is a real challenge, but a forward focused board should make every effort to identify potential directors who have these types of experience and skills. The topic of recruitment is a challenging one and the process should have continual annual evaluation.

Can Nonprofit Boards Work Smarter Not Harder?
As noted earlier, nonprofit board people are often limited in the amount of time they can devote to board participation. Given these constraints, the board chair and CEO can choose from a range of options that will help orient directors to better understand the external landscape in which the organization operates. These initiatives can include visits to comparable facilities, opportunities to attend field related conferences or inviting experts in the same or similar organizations to interact with board members. The purpose is to infuse each member of the board with an informed view of the organization’s long-term future and prepare them to take the appropriate action. The CEO and board chair must address this question with a viable plan: What actually helps… (to develop) a board environment that encourages participation and allows board members to derive meaning, inspiration and satisfaction from their (board) work?

Talent: The Key to Nonprofit Success — A nonprofit board has one hiring decision to make: the engagement of the CEO. But it also has a significant responsibility to overview long-term talent development in the staff and management. The board of a family service agency needs to assure that its counselors are up to date on current modalities of counseling. A recreational organization must be operating in the context of accepted fitness practices. Annual talent reviews need to be scheduled with CEOs and the appropriate staff. In addition, individual board members, with the concurrence of the CEO, may want to have occasional professional contact with key people below the senior management.

Make strategy part of the board’s DNA — (Many nonprofit) … CEOs present their strategic vision once a year, the directors discuss and tweak it at a single board meeting (or a short retreat), and the plan is then adopted. The board’s input is minimal and there’s not enough in-depth information to underpin proper consideration of the alternatives.

An educated nonprofit board will have the depth of understanding to be alert to the future needs and problems of its organization. Typically there is usually an unanticipated “fork” in the road ahead. Status quo, “minding the store,” participation by rote are all too easy mindsets that will only hobble the progress of an organization. Board chairs and CEOs are key actors in turning an existing board environment into one that is focused on moving forward.

*Christian Casa and Christian Caspar (2014) “Building a forward-looking board,” McKinsey Quarterly, February. Note: Quotations from this article are presented in italics.

**https://boardsource.org/research-critical-issues/

 

Using A Nonprofit’s DNA In Planning?

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.

Board Structure: Nonprofit boards must effectively operate with a series of board committees. The number of committees varies widely. I have observed some with as few as three committees and others with as many as 15 committees. The latter group rationalizes the number by suggesting board member involvement leads to better understandings of missions, vision, and values. More desirable board candidates live time-compressed work and lifestyles and can’t become involved with committees that meet without defined charters or try to micromanage management decisions.

Three to about six committees seems to be optimal for a mature board in the 21st century. A startup board will require more committees to allow board members to assume operational roles. One warning! If this large committee DNA format is allowed to carry over into maturity, it can lead to a dominating board that will be difficult to change.

Strategy: “A Board must act strategically—not tactically” ** In terms of its DNA, strategy must be the “lifeblood” that helps relate all major decisions to the nonprofit’s mission.

Start-up nonprofits often focus on tactical discussions at Board meetings. Founders and board members must address tactical issues because board members have two responsibilities. They must govern and act as part or full-time staff.  But as the organization matures it becomes essential to fashion all agendas on policy/strategy issues. The responsibility for action resides with the Board Chair and CEO. The Board Chair, however, has a special obligation to proactively discourage lengthy discussions of tactical issues, frequently characterized as “weed discussions.” It should be emphasized that these are operational and management responsibilities, not Board agenda items. 

Sustainability: This factor involves several critical keystones. First is the sustainability of income sources. If, for example, the nonprofit is heavily dependent on governmental funding, to what extent is the nonprofit able to secure private and foundation sources should governmental support abruptly decline? Managers and audit committee members need to be continually alert to seeking new funding sources.

A second keystone involves succession planning. The Board has direct responsibility for CEO succession and must overview staff succession. The latter involves knowing who among staff personnel are promotable, or, with training, be able to fill managerial positions. In my opinion, most nonprofits boards don’t provide significant overview attention to staff promotions.

Relatively short board terms or tenures for most board members (4-6 years) allow the board to introduce new thinking. However, they may not motivate board members to come to grips with issues related to long-term sustainability. Board members are traditionally active for one planning cycle, assuming strategic planning takes place every three to five years. From a sustainability perceptive, this restricts discussions of DNA changes that may impact stakeholders in the seven to ten-year time frames.

Relevance: Two keystones are also important here. First clients and funders must be able to perceive that the nonprofit is fulfilling its mission with integrity and a focus on stakeholder satisfaction.

The second involves maintaining a strongly committed board. To achieve this goal, the Board Chair and CEO must take actions to make certain that each board member perceives that her/h contributions are meaningful.   These perceptions can only be determined from candid conversations with each board member. It’s the responsibility of both the Board Chair and CEO to annually assess that each board member is involved with meaningful activities.

Unlike humans, the DNA of nonprofit organizations can change with careful interpersonal adjustments. For example, assumed it is desirable to have emergency client services available 24/7 instead of the normal 40-hour working week. Then management and staff should work together to modify the DNA (fair scheduling hours, etc.,) to accommodate the change.

Performance: The approaches to assessing the value of nonprofits have recently changed. Focus has changed from assessing program outcomes to assessing program impacts. ***

Program objectives can be achieved, but they can have little impact on clients lives. For example, marriage counseling can be helpful in eliminating symptoms of problems to meet client satisfaction, but the results may lack impact because they don’t address the problems’ root causes. Data analysts are being employed by some nonprofits to model impact information that is being requested by foundations and donors. The task, however, can take a long time to implement.

Suggestion: Most well-run nonprofits review their missions, visions, and values every three to five years. A review of their DNA factors, prior to the planning cycle can enhance the process.

 

Raising the Bar for Nonprofit Board Engagement

 

Raising the Bar for Nonprofit Board Engagement

By Eugene Fram                            Free Digital Image

It’s no secret that some board members cruise through their term of board service with minimal involvement. McKinsey Company, a well-known consulting firm, has suggested five steps that can be used to counteract this passivity in for-profit boards. * With a few tweaks, McKinsey suggestions (in bold) are relevant to the nonprofit board environment where director engagement is often a challenge.

Engaging between meetings: Nonprofit boards traditionally meet monthly, bimonthly or quarterly. Unless the board is a national one, these meetings range from one to three hours, with the three hours being typical of quarterly meetings. The meeting agendas are usually packed, and they leave little time for individual directors to enhance discussions. ** In addition, a sense of anonymity develops among board members who do not know each other personally, a significant barrier to team building. I have encountered nonprofit boards where disconnect between board colleagues is simply a nod—or less– when passing each other.

Board cohesion based on interpersonal relationships has an important impact on the quality of board discussions. It allows a board member to more fully understand the perspectives and goals of his/her fellow board members or “where they’re coming from.” With this information at hand on both sides of a discussion, it increases the possibility of creating “win-win” impacts for the nonprofit.

Responsibility for promoting between-meeting engagements needs to rest with the board chair. As a staring point, the chair can sponsor a few informal Jefferson dinners. The topic should be a cause which can excite the invitees. It needs to be, a challenge to the directors. ***

Engage with strategy as it’s forming—do not just review & approve it: Traditionally most of what becomes an organization’s strategy will emanate from the management and staff. But the board must proactively help to form strategy or step in to fill gaps when the management refuses to do it.

In forming strategy the board has an obligation to make certain all viewpoints are heard. Staffs as well as management ideas need to be considered. In addition, the board may need to take direct actions when the organization fails to fulfill a mission obligation. Example. A counseling agency only offered services during normal business hours–9 am to 5pm, five days a week. Its board required management to offer services, 24/7 with an emergency line when the office was not open. The management, a creative group, found a way to do it, without increasing costs.

Cultivate talent: The nonprofit board has several responsibilities in regard to talent.   First, it must engage and then evaluate the CEO. This is a complex duty because the vast majority of the board members are not full-time employees and many have only tangential attachments to the organization’s mission field. Second, the board must overview the quality of the staff talent so that it is in line with budget constraints. Third, it must be aware of those within the staff who may be promotable to management. Finally it must be alert to succession opportunities internally and externally in the event the CEO were to leave abruptly. Succession planning for the CEO must also include considerations about the talents that will be needed beyond the current one.

Engage the field: Since nonprofit board members have full-time occupations outside the mission field, it’s important that they receive a flow of information about leading edge changes taking place outside the organization. However, CEOs sometime can operate a “mind the store” nonprofit, by looking at past successes without a visionary component. To help avoid this occurrence, specific directors might be assigned to become more deeply familiar with key projects in order to assess their progress.

Engaging on tough questions: A difficult task on a nonprofit board where politeness is an overriding value. Peers are friends and business associations and generally there are few potential penalties for “going along to get along.” In all my decades as a nonprofit board member, I have yet to see one board member ask that his/h dissenting vote be recorded in the minutes. A necessary action when he/she feels that the vote being passed by the majority may lead to harming the organization.

*http://www.mckinsey.com/business-functions/organization/our-insights/changing-the-nature-of-board-engagement

** In California, the Brown Act might prohibit such meetings. The Brown Act covered concerns over informal, undisclosed meetings held by local elected officials. City councils, county boards, and other local government bodies that were avoiding public scrutiny by holding secret “workshops and study” sessions.

***For details on the background and planning for Jefferson dinners see: http://jeffersondinner.org/jefferson-dinner/

People Problems Can Put Nonprofits at Risk

People Problems Can Put Nonprofits at Risk

By: Eugene Fram   Free Digital Image

Like the Streisand song lyric, nonprofit people who need people must first have the know-how to choose and cultivate those people! If not, the risks to a board can range from modest to substantial. It all begins with making the right choices and vetting board and CEO candidates.  Most nonprofit board members know that they are only required to make one hiring decision—the engagement of the CEO. This is a process that always involves some risk factors. Take the case of the university that has expended substantial amounts to engage a CEO. After a brief “honeymoon period” it was determined that the candidate lacked the requisite background to move the organization forward. His resignation was forthcoming, and with it, a disruption that was costly not only in dollars but in board/faculty morale and public confidence.

A nonprofit board is usually confronted with several people risks. Following are some that should be noted by board members.

(more…)

Is Your Nonprofit Strategically Deprived?

 

Is Your Nonprofit Strategically Deprived?

By: Eugene Fram     Free Digital Image

A vital concern to the future of any nonprofit organization is frequently neglected. Responsibility for the lack of strategic planning must reside with the chief executive, board members and the tactical challenges that inevitably flow to the board.

Before a nonprofit board can begin successful strategic planning, it must:
• fully understand the difference between strategic and tactical planning.*
• have a fully engaged chief executive involved with the board in the leadership of the strategic planning process.
• have a proportion of board directors with some specific types of strategic oriented experiences.

For example, one faith based organization recreational facility I know built a modern new building. However, the leadership was unaware of the quietly growing demand for preschool education in the area. As soon as the new building was opened, several parts of the structure had to be remodeled to accommodate a growing preschool population.

While I admit that planning for coming societal and behavioral, changes is difficult, like the one in the example, I suggest that any nonprofit board needs to take “inventory” of the following backgrounds of the current chief executive and board members.

How strategically capable is the organization’s chief executive? Does he or she stay at the leading edge of the field? Has the board recruited the chief executive for a strategic acumen or for just keeping the organization on a stable course?

How successful has an organization been in recruiting some of the following types of board members?
1. Those with enough time to become thoroughly acquainted with field related to the mission, visions of the organization’s operations. After all, many nonprofit directors serve on boards whose fields of focus are quite different from those in which they have working experience.
2. Those who can distinguish between a strategic plan and a tactical plan?
3. Those capable of critical thinking, questioning past assumptions as they relate to the future assumptions.
4. Those who have had successful strategic planning experiences at a high (not tactical) levels on other FP or NFP boards.
5. Those who have innate visionary abilities to assess future opportunities or roadblocks.
6. Those who have failed with past unsuccessful strategic plans but learned from their mistakes.
7. Those who can realistically project the financial challenges a strategic plan will develop.
8. Those with significant prior NFP or FP experience who can be models for younger directors with time restrictions who contribute via time limited task force assignments. But they need much more seasoning with understanding governance functions because they often rubber stamp board chair or CEO suggestions.

Addressing these recruitment issues in a forthright manner should enable nonprofit organizations to determine if they are strategically deprived. This move also might improve nonprofits’ records for strategic planning.

*  “strategy is the action plan that takes you where you want to go, the tactics are the individual steps and actions that will get you there”.

https://asana.com/resources/strategy-vs-tactics

 

Tightening the Oversight of Nonprofit Boards?

 

By: Eugene Fram   Free Digital Image

Tightening the Oversight of Nonprofit Boards?

By: Eugene Fram      Free Digital Image

Clearly the purpose of a nonprofit board is to serve the constituency that establishes it-be it community, industry, governmental unit and the like. That said, the “how” to best deliver those services is often not so clear.

The fuzziness of boundaries and lack of defined authority call for an active nonprofit system of checks and balances. For a variety of reasons this can be difficult for nonprofits to achieve. (more…)

Can Nonprofit Boards Afford To Underinvest In Management Leadership Development?

Can Nonprofit Boards Afford To Underinvest In Management Leadership Development?

By: Eugene Fram:     Free Digital Image

McKinsey & Company has published a substantial nonprofit study: To better understand the state of (nonprofit) leadership in the US social sector… The findings suggest that chronic underinvestment in (management) leadership development for 337,000 small or midsize nonprofits,..(may risk) the sector’s capabilities to fulfill emerging missions effectively and to adapt to fast-changing demands.

(more…)

Nonprofit CEOs and Board Directors: How Expert Is Your CFO?

 

Nonprofit CEOs and Board Directors: How Expert Is Your CFO?

By: Eugene Fram        Free Digital Image

When hiring a chief financial officer (CFO), nonprofit organizations often find themselves with a major challenge, since many financial and accounting functions and compliances are identical with those of for-profit organizations. To compete, the nonprofits may need to offer higher salaries than typical for nonprofit organizations. Some may trim the level of expertise required to fill the position.  They hire a person with a bookkeeping background when the organization needs somebody with financial analysis skills.  This is a dangerous move, especially when the organization is growing. It is difficult to terminate a financial person who is satisfactory for a startup, but isn’t able to navigate the challenges of rapid growth.  Also it is a continuing challenge for the Board and CEO, to make certain that the person in the position now has the requisite skills.  A mistake by a person who is not current with financial changes and compliances can make a major error that will harm the organization’s reputation, leading to a board restructuring and/or firing the CEO.

Both the nonprofit CEO and the board need to assess the CFO’s expertise annually by:

*Asking knowledgeable board members if they are receiving financial data and analysis in a format helpful for decision-making.

*Having an executive session with the external auditors yearly to obtain the firm’s assessment of the expertise of all financial personnel with whom they had have contact.

*Keeping track of reports that are submitted late. Something might be radically wrong. (I know of one case where the Board and CEO were only receiving a subsidiary report intermittently. The problem was the data reported involved old accounts that should have been written off months ago. The organization had to hire forensic accountants to determine what needed to be done to resolve the situation. The board terminated the CFO and then the CEO.)

*Making certain all financial personnel take two weeks vacation each year, so that a substitute needs to handle the duties.

*Having the CEO review the CFO’s expertise annually with knowledgeable board members, external accountants or others.  Acknowledging the growth point when the nonprofit needs a CFO with analytical abilities as opposed to bookkeeping ones.  

*Reviewing the causes for a high turnover rate among financial personnel.

*Providing local financial support for the  CFO and others to stay current with accounting and compliance regulations. 

For a current case of a board that evidently failed to adhere to such guidelines see:

http://www.nonprofitquarterly.org/management/23235-existence-of-a-reserve-fund-in-this-nonprofit-threatens-its-future.html

 

 

 

 

 

 

Is Your Nonprofit’s Strategy Only Stating Ambitions Rather Than Solving Problems?

 

Is Your Nonprofit’s Strategy Only Stating Ambitions Rather Than Solving Problems?

By: Eugene  Fram                Free Digital Image

McKinsey & Company in a recent article interviewing author and academic Richard Remelt discusses this strategy question for business organizations.*  Following is my estimation how the article’s information might be applied to the nuances encountered in nonprofit strategy development. 

Strategy Results

In evaluating strategies, nonprofit boards often only use the easier to measure results, for examples, membership size and financial ratios.

But progress for nonprofits often also must be measured in qualitative formats.  “Not being able to afford the time and money to develop excellent qualitative metrics (e.g., enhanced life quality, community commitment), to glean whatever they can from using imperfect metrics.” **

Richard Remelt suggests there is a big difference between strategies developed for actions versus ambitions.  My experiences with nonprofit strategy development suggest that many nonprofits focus on ambition rather than the problems to be solved by the next three-year plan.  He calls a strategy based on ambition “bad strategy.”   “Bad strategy is almost a literary form that uses PowerPoint slides to say, ‘Here is how we will look as a company in three years.’  That is interesting,  but it’s not a strategy.”

For nonprofits, his analysis also relates to the difference between program outcomes and program impacts. For example, A human services strategy can have good program outcomes but fail to have client impacts because basic causes aren’t/can’t be addressed. 

Board Member Motivation

The median nonprofit board member serves a term ranging from four to six years. In contrast, the average tenure for a public board member is 9.7 years.

Assuming this frequent turnover, the nonprofit director/trustee will only be involved with one strategic planning cycle. Even with a board member highly dedicated to the mission’s objectives, the brief tenure structure can dampen motivations to rigorously participate in strategic planning.  

I have seen this evolve frequently, especially when the board approves the performance of a “mind-the-store executive director,” as opposed to an “entrepreneurial” type.  Operationally, the former executive director can be described as one seeking stability over innovation.  She/h can produce modest income increases with balanced budgets, often supported by substantial legacy financial endowments.

Involving Staff in Strategic Planning and Other Insights 

  • Rumelt suggests limiting the number of persons involved in strategic board planning.  For larger nonprofits, this might only include senior and/or division management.  For smaller and midsized nonprofits, this might involve management and some professional staff. Organizationally, in these nonprofits, the two groups may be only one or two levels apart.
  • Ask simple questions like: “If our organization were to disappear, who would miss us?”  “If we were to establish a new agency, who among the staff, would we take with us?”
  • “Boards may not need strategy committees, but they just need a sense of best practice, just as ..(accountants).. have well-established best practice in accounting:”  I agree that nonprofit boards do not need a standing strategy committee.  The development and maintenance of the strategic plan is the joint responsibility of the CEO and Board Chair. Together they can use a simple maintenance device by relating most 
     problem-solving efforts, generated in nonprofit board meetings to the 
     strategic plan. 

* https://www.mckinsey.com/capabilities/strategy-and-corporate-finance/our-insights/why-bad-strategy-is-a-social-contagion

 

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