Dysfunctional nonprofits

Developing A Sustainable Nonprofit–Post Covid-19

 

Developing A Sustainable Nonprofit–Post Covid-19

By: Eugene Fram         Free Digital Image

An analysis of the current pandemic environment should be a clarion call for nonprofit board members. It can be summarized in a couple of sentences:

Great crises tend to bring profound social changes, …. . We seem to be at another point when society will make adjustment for good or ill. * 

As nonprofit board members or managers, are you ready to identify and confront these adjustments as they already have developed or will challenge your nonprofit within the next 10 years? Hopefully, a large portion of nonprofit boards will accept the challenge and begin strategic planning for the post Covid 19 period now!   (more…)

Eliminating the Nonprofit Board’s Addiction to Micromanaging

Eliminating the Nonprofit Board’s Addiction to Micromanaging

By: Eugene Fram        Free Digital Image

Micromanaging is the DNA of many nonprofit boards. It all starts with the community model culture of start-up periods. Board members have to assume staff roles to drive the nonprofit operations. But it often continues long after an adequate staff is in place. By habit, the board still focuses on operational details—also known as “reviewing the weeds.”   I recently observed a board that was making a policy decision about the change in timing of an annual development event.   Once the decision was made, the directors continued a “weed type” discussion about table locations, invitations and other issues that were in the job of management to implement. The nonprofit is about 50 years old and has a budget of $10 Million with a 100 person staff. (more…)

What Nonprofits Can Do To Maintain Liquidity

 

What Nonprofits Can Do To Maintain Liquidity

By: Eugene Fram    Free Digital Image

It doesn’t take a pandemic to make a nonprofit question its capacity to survive. Events such as a loss of major funding, a damaged reputation, huge unpredicted expenses could swiftly reduce the lifeblood of the organization, plunging the nonprofit into deep concern for its long-term survival.

Any nonprofit CEO has the data to predict how long the organization can stay afloat without income. This, however, would be only one rough measure of the nonprofit’s liquidity. Board members need to take the discussion further. They need to realistically appraise total liquidly from fixed/variable expenses and income venues as they relate to mission accomplishment. (more…)

Business Board Experts Offer Nonprofit Board Gems!!

   

By: Eugene Fram                                  Free Digital Image

The wise person learns from his/h own experiences. The wiser person learns from the experiences of others

The CEO Forum published an article covering the governance views of five business board members, known for their wisdom and vision.   Following are some of topics in the article that relate to nonprofit boards. *

Good governance is dependent upon well-curated boards. This means that nonprofit boards must look beyond the functional competencies (e.g. accounting, marketing, law, etc.) for candidates. Within these groupings, they need to seek candidates who have strategic outlooks, are comfortable with critical thinking and have documented leadership skills.   This requires recruiting and vetting efforts that go well beyond the friends, neighbors and colleagues who traditionally have been the sources for board positions. Also related is the issue of board succession, since that many will leave the board after a four to six year period. The current board(s) has an obligation to make rigorous recruiting and vetting become part of the nonprofit’s culture.

Assessing long-term sustainability. In the past, nonprofits have projected longevity because there will always be a need for the services or products they provide. This is no longer an assured proposition. Nonprofit day care centers now must compete with those that are for-profit. Improvements in medication have decreased the need for individual counseling and many new technologies can quickly solve problems that are embedded in the nonprofit’s mission.

Review governance best practices carefully! Know who is suggesting them and make certain they are appropriate for a specific organization. For example, some experts suggest that executive committees should be eliminated. However an executive committee that is responsible for a slim board committee structure can be effective in driving change and promoting better communications throughout the organization. **

Changing public accounting firms. Nonprofit accounting practice suggests changing public accounting firms about every five years. However one expert suggests, “It is important to ensure that judgment areas such as nonGAAP disclosures are well-defined, supporting calculations are well-documented and that the definitions and calculations are consistent across reporting periods.” At times of accounting firm change, nonprofit board members need to be able to add these issues to their question that they pose to management.

Ethics & Compliance. Like business organizations, nonprofits are subject to significant lapses in ethics and compliance. One study of  nonprofit fraud found that it 46% involved multiple perpetrators.  ***  As shown in the recent Wells Fargo debacle, establishing the tone for rigorous applications of a standard needs to start with the board and flow through all management levels. In the current environment, audit committees have to be especially alert and take immediate actions when red flags arise in either the ethics and/or compliance areas.   In my opinion, a nonprofit audit committee that meets only once or twice a year is not doing the necessary job.

Strategy. The nonprofit board has an obligation to help management see “around the next corner.” This involves board members assessing coming trends and sparking civil and meaningful board and committee discussions.

Board member comfort zones. Like their business counterparts, few nonprofit board members are “comfortable testing how to rock the norms.” It is easier to acculturate new directors to the current norms, a process that is inward bound and self-defeating. But a start can be initiated with questions such as, “If we were to start a new nonprofit across the street, what would it look like and who of the present board and a staff members would we ask to join us?

*https://www.forbes.com/sites/robertreiss/2017/05/22/americas-five-governance-experts-share-perspective-on-boards/#2a2ee326659a    

**For documentation see: https://goo.gl/QEL8x3

***https://nonprofitquarterly.org/nonprofit-fraud-its-a-people-problem-so-combat-it-with-governance/

 

Director Independence: a Nonprofit Board Issue?

 

Director Independence: a Nonprofit Board Issue?

By: Eugene Fram       Free Digital Photo

In the best of all nonprofit worlds, every board member is an independent agent whose ability to make critical decisions on behalf of the organization is regularly uncompromised by outside pressures. This, unfortunately, is not always the case. Based on field observation I have concluded that questionable practices can plague nonprofit boards when social or political pressures are brought to bear on a board member. In governance terms nonprofit decision-makers should be “outside directors,” not overtly or covertly susceptible to management or board colleague personal pressures.

Discerning recruitment committees can screen candidates to be certain they are not subject to influences that might impair their judgment as board members. Lack of independence could easily divide and perhaps polarize the board as has happened in our country’s Congress. A candidate who is “sponsored” by a major donor and maintains personal ties with the donor can create a “hornet’s nest” for the recruitment group. There are no easy solutions to these problems. (more…)

Nonprofit Board Disruption—A Board Member’s Reflections

 

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 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. (more…)

The Devil’s Advocate on a Nonprofit Board: Asset or Liability?

The Devil’s Advocate on a Nonprofit Board: Asset or Liability?

By: Eugene Fram              Free Digital Image

An unwritten rule for nonprofit board membership is that it is best to “go along to get along.” But sometimes a nonprofit director’s “no” vote to an action that has had inadequate discussion can allow him/h to avoid tax penalties that have been levied on other board members for lack of due care.

Stanford University research results indicate that groups with a lone minority dissenter outperform other groups where all members agree. In addition, these groups…”are more successful than (groups) in which all members disagree and fall prey to escalated emotional, difficult-to resolve (group) brawls “ *

The key to success, according to these data, is to,” … have a devil’s advocate (DA) on the nonprofit board. … This is a person or a small board minority that “has the sensitivity to see the differences, perceives them as conflict, and then communicates about the differences in non-confrontational ways.” **

(more…)

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

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

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.

But here are the issues as I see them:

State Legislation: Most nonprofit charters are issued by states, and it appears that the vast majority of American nonprofits are governed by these regulations. California permits the CEO to be a voting member. Until a recent change, New York did allow the CEO to become a board member. The motivations behind the legislation center on preventing a CEO developing conflicts-of interest, especially as they relate to salary decisions. Also, there is a feeling among some nonprofit directors that the board must be the “boss.” This attitude can even go as far as one nonprofit board member’s comment: “We have a real board, we tell the CEO exactly what to do.”

It appears that the restriction is considered a “best practice.” Some nonprofits move around it by naming the CEO an ex-official member of the board, a member without a vote. However, there is a “better practice,” available where permitted by legislation.

Developing An Even Better Practice in a Nonprofit

Start At The Top: Allow the CEO to hold the title of President/CEO and allow the senior volunteer to become Board Chair. This signals to staff and public that the board has full faith in the CEO as a professional manager. In addition, the change absolves the senior volunteer of potential financial liability, not unlike the volunteer who unwittingly received a $200,000 bill from the IRS because it appeared he had strong control of a bankrupt nonprofit’s finances and operations.

Ask The CEO: Make certain the CEO is willing and able to accept full responsibility for operations. Not all CEOs, designated as Executive Directors, want the increased responsibilities attached to such a title and to become a board member. These managers frequently feel comfortable with having the board micromanage operations and often openly discuss their reservations.

The CEO Becomes A Communications Nexus: Under the CEO’s guidance, board-staff contact takes place on task forces, strategic planning projects, at board orientations and at organization celebrations. It openly discourages the staff making “end runs” to board members, not a small problem in community-focused nonprofits

Brand Image: As a board director, the CEO can be more active in fund development. The board position and the title can easily help the CEO to build the organization’s public brand image through the clear public perceptions of the board’s choice to lead the organization. This provides leverage to make greater use of the board-CEO relationship required to develop funds. It can allow the CEO to be the spokesperson for the organization’s mission and to quickly become the center for public statements when a crisis develops.

Peer Not Powerhouse: Probably descending from early religious nonprofits, its personnel may be seen by part of the public as not being “worldly.” They must be over-viewed by a group of laypersons that encounters the real world daily. The CEO, as a voting member and a board team peer, takes on increasing importance to reducing these attitudes. As long as the CEO works successfully as a peer not a powerhouse, there should be substantial benefits to the organization.

 

 

 

 

Guidelines For Developing Authentic Nonprofit Board Leaders

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) (more…)

A Nonprofit Board Must Focus On Its Organization’s Impacts

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 stakeholders. These include the community, donors, foundations and clients, but not the staff as some nonprofit boards have come to believe. The failure of nonprofit boards, as reported almost daily by one blog site, ** shows something is wrong.   Following are some inherent problems. (more…)