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Do Nonprofit Boards Neglect Oversight of Internal Leadership Development?

Do Nonprofit Boards Neglect Oversight of Internal Leadership Development?

By: Eugene Fram

Although the nonprofit CEO is charged with nurturing the development of his/h staff, the board is responsible for over-viewing the process. Research evidence shows both board and management are neglecting their duties in regard to this responsibility. Only 30% of nonprofit CEO positions are filled internally, a rate that is about half the rate of for-profit organizations. *

The same research shows that,“Hiring the more (internal personnel) can improve performance at the two-year mark by 30%.” These data are even more troubling when roughly related to those of large corporations that concluded that 40% of those hired from outside the organizations are replaced within 18 months. **

Why Are Nonprofit Boards Not Paying Enough Attention?

  • Board Turnover: The most common board structure is two consecutive 3-year terms. Board chairs most commonly serve two consecutive 1-year terms. This in itself can easily create a “short term” board culture.Board members and chairs know they have relatively short tenures and may want to take actions that show more immediate results. Leadership development can be the antithesis of such actions. It takes time andnurturing.
  • The Board-CEO Relationship: Nonprofit boards, as conservators of the organizations assets, are often hesitant to remove an incumbent CEO, sometimes, even when the person has been involved with nefarious activities. Consequently, many nonprofit CEOs are what I call “mind-the-store” types. They have small growth percentages each year, have their financial processes in order, but fail to have enough competent subordinates who are capable of promotion. As a result, those board members who want to establish a culture for leadership growth have to wait for the incumbent CEO to leave or retire. Most board members, as volunteers, fear the interpersonal conflict and added time commitment that follows a board initiated CEO termination. As a result, all plans for change, such as leadership development, can’t thrive without the active support of the CEO
  • The CEO’s Comfort Zone: Few, if any nonprofit CEOs I have encountered take pride in reporting that some of their direct or indirect subordinates have left for substantial success elsewhere. Many currently who have risen in the organization from a line position have had to acquire newer management skills. Consequently, less qualified incumbent CEOs may view more able but less experienced subordinates as a career threat, and they have little interest in promoting leadership development. Moving Leadership Development Into a Nonprofit Culture

Moving Leadership Development Into a Nonprofit Culture

A board member who serves for six years my have some opportunities to introduce leadership development into a nonprofit organization’s culture:

• When Interviewing A CEO Candidate: Ask about leadership development in prior jobs. Ask the candidate about his/h most outstanding direct report and the most problematic one. Look for answers relating to pride in developing subordinates and for engaging able younger managers throughout the organization. Also ask references about these issues.

• A New Strategic Plan: Have the board agree with the CEO that leadership development is critical at all levels and establish some modest mutual objectives when beginning the process of introducing a new strategic plan.

• When The Lack of a Process Affects the Nonprofit’s Impacts: Establish leadership development as a major CEO objective to be accomplished within a reasonable time frame. Seek a new CEO, if the person fails to perform.

Younger people often seek careers in nonprofit organizations because they want to contribute to the lives ofothers or to the social welfare of the greater community. After some years of direct service experience,some may discover they have leadership potential. Without a leadership development culture, nonprofits will lose these able persons to the for-profit sector, for better financial rewards, or find they will become staff persons who do their job adequately but look other outside activities, like political office, to satisfy their leadership ambitions.

* http:/hbr.org/2015/12/nonprofits-cant-keep-ignoring-talent-development

** Ibid

Nonprofit Board Disruption—A Board Member’s Reflections

By: Eugene Fram

A tsunami can suddenly erupt on a nonprofit board. Or, instead, dissension can smolder within the organization, and finally burst into flame. In any case, polarization of opinion can damage an organization unless skillfully managed. It can occur on many fronts: fraud, sharp division of opinion, staff morale or any number of issues. In turbulent times such as the Covid 19 environment, latent problems can swiftly escalate and create chaos.

Disruption on the Board can only be resolved with strong leadership. In most cases, the Board Chair (BC) assumes the responsibility of addressing the problem. In my 30+ years of board consulting and participation, I have had a number of opportunities to view nonprofit boards in trouble. In this post, I share some of the suggestions that have “worked” to resolve problems and help rebuild broken organizations.

When the BC has to accept the challenge of uprooting the problem, he/she is likely to be met with some resistance. Board members may resign from the board in anticipation of a substantial increase in meetings and time involved. Some may be concerned that their management reputation could be sullied or personal financial liabilities leveled by the IRS, the possibility of lawsuits.

If the BC is unable to persuade the distressed board members that their expertise is needed to achieve the nonprofit’s mission, and has made them aware of the Directors & Officers’ Insurance policy which will protect them from financial liability, it will be difficult to recruit new people in this period of instability.

However, the BC can ask former board members to return for another term or two. In one case, a human service organization persuaded a board member about to be termed out to stay for another two years. He happened to be a senior vice president of a listed firm–and a valuable asset to the nonprofit.   He accepted the offer to stay and agreed to become BC of the weakened organization. During his extended tenure, he successfully recruited some former members dedicated to the organization’s mission.

A Case of Disruption

One nonprofit long-tenured CEO retired. He was well-liked and had a “laid back” management style..

His replacement style was quite different. Soon after the new CEO had established himself with the organization, complaints from senior staff members reached the Board. They described his style as too “authoritarian.”

Board response was mixed—proposed solutions to the situation created polarization between two groups. One insisted on immediate termination of the newly hired executive. The other group suggested that he be retained and counseled by board members with significant management experience. A vote was taken and the latter group won by a small majority.

Three months later, the complaints escalated. The CEO’s “I’m in charge” attitude continued to cause friction and this time, he was replaced. The organization prospered for years under the newest CEO’s direction. In the interim between the two CEOs, a union hearing about the conflict, organized the professional staff. Because trust couldn’t effectively be restored, the union still represents the professional staff today!

Other Stakeholders

Other stakeholder groups will need the leadership of the BC or the BC and CEO.

  • The media: Assuming the nonprofit’s issues become public, either the BC or CEO should be designated as the organization’s spokesperson. If neither of these persons feels comfortable in assuming this role, another board member should be appointed to the position. It must be clear to others on the Board or in senior management that only the designated spokesperson speaks for the nonprofit.
  • Staff Personnel: Generally the CEO should be responsible for keeping Staff informed. Under no circumstances should Staff be first informed by a media source.
  • Donors: Significant donors, foundations, government officials and others need to be contacted by the BC or CEO. If other board members or the CEO are also needed to handle the task, a list of “talking points” needs to be provided.
  • Vendors: If fraud or other financial manipulation is involved, the BC needs to consult with legal counsel, to determine who best should be the contact person to assure that vendors know they will be paid.

Legal Considerations

  • Engage An Attorney? It all depends on the complexity of the situation. Consulting with legal counsel would be required when terminating a staff person with a contract. It might not be needed if a police investigation determines a staff person has been stealing the nonprofit’s assets.
  • Board Determines Theft Punishment? I read about a situation where a staff person stole money. The Board continued the person’s employment as long as he repaid the funds. I hope that the board reviewed the action with an attorney to determine if its action met the criteria for due care.
  • Friends Group: Nonprofit board dissensions may motivate a group of former board members, donors or employees to form an outside cohort to help solve the problem. In several situations I have observed or have been involved, they have assumed the name “Friends of…..”. Based upon my experiences and observations, these cohorts have not been effective.

Several years ago I was in contact with two nonprofit BCs facing board and/or membership disruptions issues. Both have reported their frustrations with this comment, “ I didn’t sign up for this, when I volunteered.” One has been able to settle the problem; the other is ongoing. I hope that other nonprofit BCs will keep the above guidelines in their repertories should they be placed in a similar position.

How Does Your Nonprofit Retain Termed-Out Board Members?

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Nonprofit board members whose terms have expired are typically recognized at annual meetings with gifts, plaques or certificates of service. In many cases, this is like saying, “Here’s your hat–there’s the door.” Rarely does the organization have a plan for continuing to connect with these folks, many of whom represent significant assets – i.e. talent and expertise – that can be meaningful to the organization for years. For the very best among them, there is no guarantee that replacements will have the same or superior skills and talents.

Here are some new and established ways to keep them engaged or to reengage those who have drifted away from the organization.

Advisory Board – Include them in an advisory board to the CEO and/or Board Chair. For prestige purposes, it is important that the board be clearly designated as a sounding board to the CEO and/or Board chair when both are appropriate. This group should include selected former board members plus others from the community or industry. Agendas should not be packed with detailed power point presentations, leaving only brief time periods for open discussion. My experiences with these boards are that they should meet three or four times a year. A reasonably large one, 15-20 people, is required; understand that on the average, not all will be able to attend.

Form an “Alumni Group” – Major consulting and business organizations (e.g., McKinsey and P&G) actively support a networking group of former employees who also may meet on an occasional basis. The organizations have newsletters which report on former employee professional changes and successes, and provide current membership rosters that offer tremendous networking opportunities. It also gives the group an opportunity to reconnect on their own with old friends/colleagues and to become updated on their families and activities. Obviously the costs and efforts for maintaining the activity are modest.

Nonprofits could improve on this model by also offering occasional short conferences, 1.5 days maximum, for former board members related to the mission of the nonprofit. They can be conducted locally or at some off-site retreat, so spouses or significant others can be included. The conferences can be operated on a self-sustaining basis if developed at a moderate cost that is divided among participants. Agendas will need to be carefully planned with a small group of potential attendees.

Continued Direct Contact – The nonprofit CEO needs to have informal contact with each current board member three or four times a year to update board members to new potential strategies and ongoing challenges faced by the organizations, a minimum of 45 informal personal or phone contacts a year to help solidify his/h relationship with the board.
Current board members may assist the CEO by performing the same function to keep former board members engaged through some informal contacts each year. To be certain that all responsible for making these contacts are on the same page with current information, some reorientation on current organizational policies and strategies will need to be developed.

Establishing Effective Nonprofit Board Committees – What to Do.

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Establishing Effective Nonprofit Board Committees – What to Do.

Following are ways that many nonprofit boards have established effective board committees using mygovernance model as described in the third edition of Policy vs. Paper Clips. ( https://goo.gl/QEL8x3)

• In the planning effort, focus board personnel and financial resources only on those topics that are germane to the organization at a particular time. For example, financial planning, long-range planning or short-rangeplanning. However the board needs to be open to generative planning if new opportunities present themselves or are developed via board leadership.

• Reduce the number of board standing committees to no more than five, even less if possible

• Use subcommittees, also known as ad hoc committees or task forces, to review a range of board levelt topics, as needed, such as personnel policies, OSHA requirements and long-term space needs.

• Generally the CEO should attend all major committee meeting. He or she may or may not serve on subcommittees, depending on the information and guidance needed by the group.

• Staff input is critical. Professional staffs make major contributions to board policy decisions. It needs to be remembered that nonprofit staff in most organizations are more closely related to the board than they are in for-profit situations. The nonprofit staff are only a few organizational levels below the board.

• The CEO needs to foster an atmosphere in which staff members feel free to express opinions to board members and administrative staff. Such an atmosphere benefits the organization and isn’t just social activity.

• When confronted with a particular difficult issue, an excellent means of communications is the board/staff workshop. The professional interaction between board and staff should enhance the quality of decision-making. There are also secondary benefits, as a workshop enhances professional communications between board and staff and engages board members in meaningful hands-on projects. In addition, the board can assess the capabilities of promotable staff. Many boards have been content to analyze proposals endlessly (i.e., engage in analysis-paralysis). Others to avoid conflict, have tended to rubber-stamp proposals made by vocal or overly aggressive board members or the CEO. Neither of these types of boards truly participates in the challenging act of establishing policy and direction for their nonprofit groups.

The times are currently changing very rapidly due to the introduction of AI. Nonprofit Boards are being held much more personally accountable for their actions by the community and by legal statute. For example, if a volunteer board chair assumes the ED/CEO title or becomes president/CEO, he or she may face increased exposure to liability for not meeting his or her duties to be beinging very current on financials, compliance regulations, organizational limitations, etc.

A Special Relationship: Nurturing the CEO-Board Chair Bond

By Eugene Fram             

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Here are suggestions to assure the best possible partnership between the board chair and CEO.

Keeping boards focused on strategic issues is a major challenge for nonprofit leaders.  This leadership crisis is intensified by the fact that board chairs tend to have short terms (according to BoardSource, 83% stay in office only one or two years). Thus, nonprofit CEOs  and board chairs need to bond quickly. For the good of the organization, they must come together swiftly and create a partnership that works. Here are golden rules for the CEO and board chair to follow:

1. Be sure the CEO and board chair share strategic issues with each other—negative as well as positive ones. A failure by either the chair or CEO to share information, such as a potential cash flow issue, can be disastrous for the nonprofit.

2. It’s critical for the CEO to conduct orientation sessions with a new chair, explaining the challenges facing the nonprofit, and reviewing the fundamentals of the mission. The CEO can help the chair keep the board focused on strategic issues, whether they’re programmatic or financial.  With many nonprofits electing a new president each year, the CEO needs to prioritize these tasks.

3. Make sure staff know who has the final say. Some employees mistakenly view the board chair as the ultimate authority, even when the organizational table lists the CEO as holding that position. As a result, they may try an end run around the CEO, asking the board to overturn the CEO’s decision about salaries, promotions, or programs, for example. Both the CEO and board chair must emphasize the fact that the CEO is the final authority. If they make this message clear enough, they can probably keep staff from attempting any end runs. If an end run still occurs, the board chair must refer the issue to the CEO for resolution, except if the CEO is being charged with malfeasance.

4. The CEO should arrange for individual board members to meet with management staff on occasion so that the board can gather information about how the organization is operated and obtain an understanding of the promotional abilities of managers. The Sarbanes-Oxley act (a federal statute relating to public corporation boards) recommends this process for for-profit boards, and it’s also a good one for nonprofit board members.

5. Give staff members opportunities to participate in strategic planning and to support board committees. The board chair and CEO should work together to arrange such board-staff interactions, including joint celebrations of organizational success.

6. The CEO and board chair need to agree on the use of ad hoc board committees or task forces and their relationship to standing committees. For example, should the HR/personnel committee be a standing one or only an ad hoc one to address major personnel policies? In the 21st century, a board should only have maximum of five standing committees, many can only have three.  If task forces are used to provide provide options for occasional policy issues, for example pension plan changes, there may be little need for a standing board HR/personnel committee.

7. The board chair and CEO should be the active leaders in fundraising efforts, with the CEO as administrative leader. The board chair and other board members must provide the CEO entrée to funding sources. They often need to accompany the CEO on fundraising visits. The CEO should keep the board chair informed of all entrepreneurial development activities being explored.

8. The board has only one major employment decision to make – to recruit and hire the CEO. It’s usually a long and exhausting process. But once it’s completed, the employment of all other staff personnel is the responsibility of the CEO and the CEO’s management team. For senior positions, most CEOs ask their chairs and/or other board members to meet with candidates, but the ultimate responsibility remains with the CEO.  The board also has a responsibility to overview staffing to make certain that adequate bench-strength in in place for succession placements,  at the CEO and the senior management

9. When hiring a CEO, or soon after employment, the board chair and CEO must face a stark reality—the need for emergency leadership should the CEO become temporarily incapacitated. These plans can either be established informally by the chair-CEO partnership or more formally via board resolution. The following are possible interim CEOs: a senior manager in the organization, a semi-retired experienced CEO living near headquarters, a consultant living in a neighboring city. CEO succession planning is an important issue for the partnership should the CEO decides to leave or retire.

10. The CEO can be helpful to the board chair in recruiting new board members by suggesting possible volunteer candidates or other contacts who have demonstrated an interest in the organization’s mission, vision, and values. Board candidates will want to meet with the CEO as part of the interview process. As a result, the two partners must agree on how to present the organization to board candidates.

11. The chair and CEO need to lead in establishing meeting agendas. The two partners must work together to assure there’s sufficient meeting time to discuss and resolve strategic issue While many nonprofits call their top executive the “executive director,” the term CEO or president/CEO is a more leader-focused.

12. For the current environment, board members should be ready and willing to be ready to involved in a heightened level of board activity.   If not, the board chair and board member should determine what constraints the member needs to be in place for his/h activity.

Can Virtual Meetings be Humanized?

Here are some suggestions:

More But Shorter Meetings:  Instead of monthly board meetings, schedule meetings every two months.. With the social intensity in the environment, some boards are being required to meet more frequently.  In advance of the meetings, ask the Nonprofit CEO to send a list of announcement types items, hopefully limited to one page.  (Have it understood that the one page may not meet the requirements of her/h high school English teacher!)

Onboarding New Board Members: A friend joined a nonprofit.  As a result of all virtual board and committee meetings she feels adrift of human connection. She might even not recognize some of her new colleagues if she passed them on the street.  This problem can be alleviated to some extent by arranging for the new member to have brief individual virtual meetings with other board members and senior managers.  It’s a hopefully a quick fix to a problem.

Strategic Planning. It was evident in the pre-corvid period that strategic planning needs to have a longer focus than the traditional three to five-year plan in order to achieve organizational sustainability. There are enough evidences of post-covid changes to continue strategic planning with small committees.  This involves more frequent, but shorter, virtual meetings for the planning committee and updates to the board.

Building Trust:  Having trust among board colleagues is critical to having a fully functioning board.  Talking directly to them, listening carefully and even watching body language or  face colorings.   Some people, for example, when agitated develop a flushed face.  None of this appears when meetings are virtual!  There are several actions Board Chairs and/or CEOs can take to help members to be better acquainted, hoping to lead to trusting relationships.

·      Good & Welfare Periods:  At the beginning or end of the virtual meeting ask members to share personal or professional events—promotions, marriages, children or grandchildren, etc.

·      Outside Presentation: At a virtual meeting, arrange for a local or national authority to  briefly talk about a mission related topic

·      Invite the board members’/managements’ spouses or significant others to also be involved. 

·      Other Interests: Invite board members/management persons to discuss unusual skills they have or other groups to which they belong that promotes the public interest.

·       Board Education:  Where possible continue board education via a virtual approach.  If staff persons participate, be certain presentations are rehearsed and that time restrictions are carefully followed.

Focusing on any of these four areas  in a time-compressed nonprofit environment can be difficult. In my opinion, nonprofit boards should review them to determine if they can help alleviate the obvious deficits inherent with virtual meetings.        

Board Member Networking Pays Off for Nonprofits

By Eugene Fram    

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 board members who are willing and able to network, I suggest the following: 

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Once Again!! A Nonprofit Board’s Most Important Job!

By: Eugene Fram

Many people believe as I do that a nonprofit board’s job is to find the best possible person to act as CEO of the organization, then stand back and let that person manage. If your board is in agreement, here are guidelines for action:

• Recruit Widely: Develop a rigorous vetting process. Well before the search begins, make certain that potential internal candidates have had an opportunity to demonstrate management acumen. If an internal candidate is somewhat less qualified than an external one, don’t let the decision be swayed by the fact that the internal candidate would be less costly to employ.
• Understanding The Partnership: The need for the CEO and Board to operate within a partnership framework is well documented and accepted. However, the CEO is both the senior staff manager and a de facto representative of the board-staff relationship. Normal communications to the staff must be through the CEO. The CEO can’t be an insecure manager by withholding negative information from the board.
• A Nonprofit Board Has An Overview Responsibility: Sometimes, this responsibility can devolve into micromanagement of the management and staff. If the overview, policy or strategy functions of the board are not being adequately executed, a lead director may need to be appointed to help focus on them.*
• In terms of organization and CEO measurement, the board must seek data and information on outcomes and impacts, not become overly involved with process details.
• Nobody Does His/Her Job Perfectly: The board needs to be highly tolerant of inconsequential CEO mistakes. However, if these mistakes persist over time, the board needs to assess reasons for their continuing. Major errors need immediate investigation, and the board members also must be honest with itself about their own culpability in its due diligence process.
• The CEO And Staff Must Be Evaluated Fairly: In a nonprofit situation, this must be done in partnership, not hierarchically. Everybody must understand the “rules of the game.” Outcomes and impacts need to be related to the mission of the organization.
• The Board and CEO Must Partner On Fundraising: An effective CEO must, in the 21st century, be the face of the organization to accomplish its mission. Nonprofit board members are part-time stewards. Consequently the CEO must accept a significant responsibility for fundraising.

These guidelines can be useful to nonprofit boards in self-evaluation projects. They can determine whether or not the board is facing the realities of standing back and letting the CEO manage. The CEO should have full operational authority, and the staff should function without an atmosphere of board micromanagement.

*International Journal of Not-for-Profit Law / vol. 14, nos. 1-2, April 2012 / p.57.

How Do Boards Develop Successful Business Practices In Nonprofit Organizations?

By: Eugene Fram    

Every nonprofit needs a business plan to implement marketing, financial, human resources, etc. activities. The goal of the nonprofit business plan is to maximize the achievement of the organization’s mission within existing resources.

Strong service and business practices should be the hallmarks of any nonprofit board that effectively focuses on four business factors: 

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What attributes does a nonprofit board member need to be a Change Agent?

By Eugene Fram

Be well acquainted with mission arena of the organization — This can range from current or previous employment in the arena or being a board member of an allied organization. The change agent must be able to “walk the talk.” Example: Ask the CEO of a counseling organization whether or not the treatment modalities used by the staff are current.

Must have a proactive style — Uninterrupted attendance at most board and committee meetings; asks questions that his/her board colleagues recognize as being perceptive ones; be well respected by peers internally and externally; responds well to the “give or get” policy of the organization and has a professionally cordial relationship with the CEO.

Needs to be patient and flexible — The frequent rotation of board personnel may mean that a process of convincing new board members that the change is in the best interest of the nonprofit’s clients. Be ready to change when outside circumstances require a modification of the shape of the effort.

Has excellent people skills — He/she will need to understand the various reactions to the change(s) being driven. These can range from board colleagues to management personnel, staff and even external stakeholders like funders.

Will “stay on message” in comments related to the change — Will be required to present arguments in a concise and understandable manner. Will be seen as a strong, but not overbearing, champion for the change.

The time issue — Most nonprofit board members are volunteers with full-time occupations and family responsibilities that must take time precedents. Becoming a nonprofit board change agent often requires these additional time commitments:

• Chairing a major board committee for a substantial time period.
• Possibly taking personal responsibility for research/ background efforts.
• Specialized training efforts may be required for other board members.
• A continual process of updating colleagues and seeking allies to whom some of the work can be delegated.
• Constantly being alert to legacy minded people who may impede forward moment toward the change goal.

Not every nonprofit board change agent will have all the qualifications cited above and all the time necessary to devote to marketing the change. But from those who have succeeded, others need to know what is potentially involved.

* https://www.linkedin.com/pulse/champions-change-agents-advocates-dr-jack-jacoby/