Good governance

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/

 

How Can A Chief Operating Officer (COO) Advance Your Nonprofit Organization?

In my decades of involvement with nonprofit boards, I have encountered several instances in which the CEO has failed to engage the services of a COO– when this addition to the staff was clearly needed. In each case and for whatever reasons, this reluctance to act left the nonprofit organizationally starved.

This means that the CEO continues to handle responsibilities that should have been delegated, some of which a predecessor may had assumed during the start-up stage. I once observed a nonprofit CEO with an annual $30 million budget personally organize and implement the annual board retreat, including physically rearranging tables/materials and cleaning the room after the retreat! When top leadership is deflected in situations as this, client services and the general health of the organization is likely being negatively impacted.

From a board perspective, the dynamics involved with the COO issue are best explained through field case examples:

CASE A: 

Peter Gilbert was CEO of a national association, with a budget of about $13 million. The association supported about 250 human services nonprofits throughout the United States. It also had a subsidiary for-nonprofit firm that generated cash flow for the nonprofit. Income was generated from members’’ dues, foundation grants, individual donations, plus income from the for-profit firm, publications and conferences. 

After about two years, Peter was doing an outstanding job with fund development and visiting individual members, but the internal organization was being deprived of leadership since he was traveling about 50% of his working time.

The board began to suggest that Peter needed a COO to assist him to improve internal operations. However, he said the budget was too tight to allow for the salary of COO.  

Comments & History: After about four years of discussions, Peter and the board decided to allocate salary dollars from the subsidiary for-profit to fund the salary of a COO. He and the new COO worked well together for many years. The organization has successfully merged several times since then and continues to prosper. 

CASE B: 

Steve Gilbert is a 10-year veteran CEO heading a community human service nonprofit with a budget of about $3million. He is well regarded in the community, and his nonprofit is considered well run, although it is the smallest of similar types of agencies in the region. He has 4.5 full time people directly reporting to him, and a total staff of 40 professional and other types of support staff. Since the organization is a relatively “flat” one, some board members want Steve to add a COO. For example, he recently had to make a decision on whether to buy a new or rebuilt carburetor for a van? Steve recognizes the need for a COO, and at one time even allocated budget for one, but without taking action on the budget allocation.  

Comments: The board in this case needs to make a determination as to whether or not Steve is managing the organization for long-term stability. In other words, does the nonprofit have the capacity to serve more clients with the addition of a COO? Considering Steve’s long tenure of acceptable service, is it appropriate for the board to be proactive in motivating Steve to appoint a COO? With his willingness to step in to the “weeds “ and work harder when agency gaps develop, it seems he is perpetuating a form of crisis management.

He may not realize that the nonprofit may not be functioning appropriately. This may include delegating too much of the fund raising effort to others and neglecting potential donors who want to interact with the CEO. He may fear that a millennial COO will encourage too many disruptions with the status quo.

Since the appointment of a COO is clearly Steve’s responsibility, there is little the board can do except to offer, “advice and consent.”

CASE C:

Jennifer Gilbert is a newly appointed CEO of a faith based nonprofit with an annual budget about $12 million. The organization has had some significant deficits over the last three years, causing her predecessor to resign.  Although she had been a volunteer board member of the organization, this is her first management position with a nonprofit. Her previous experiences included a series of middle management positions in business and entrepreneurial organizations. One of her first actions as CEO was to eliminate the COO position.

Comments: Obviously Jennifer needs to trim costs, but she/or others must assume the responsibilities now carried by the COO. Since she had been on the board of the organization, perhaps she felt she knew enough about the internal dynamics to eliminate the COO position without starving the nonprofit? On the other hand she may be leading the nonprofit to long-term difficulty once the current financial crisis has abated.

Summary

Nonprofit CEOs may knowingly or unwittingly reject the idea of adding a new “chief” to the management team. Some are victims of the “founder’s syndrome” and enjoy the high level of control that defines their current leadership. Others are concerned about the financial implications the addition of a new staff salary might have on a typically tight budget. Risk is carefully considered in the nonprofit environment. The board needs to exert its overview responsibilities and become advocates for the change when deemed necessary. Otherwise, client services will be impeded and the organization will become locked in its status quo position.

The Succession Dilemma: Why Do Nonprofit Boards Fail to Plan Ahead?

The Succession Dilemma: Why Do Nonprofit Boards Fail to Plan Ahead?

By: Eugene Fram             

There are many types of crises common to an organization. But one event seems to trigger a large proportion of the ensuing trauma. It frequently happens when a CEO or another top manager retires, resigns or leaves for other reasons.   The flow of leadership is about to be disrupted and there is no viable replacement for the departing executive.

This transitional panic happens in both for-profit and nonprofit organizations. The National Association of Corporate Directors (NACD)  reported that 50 % of public company directors concede that CEO succession planning needs to be improved. * In the nonprofit environment, only 27% actually have succession plans to replace a suddenly departing executive. ** This demonstrates the low priority nonprofits place on over-viewing talent succession to prepare for unexpected vacancies.

Here are some insights (in italics) from the NACD report that are applicable to nonprofit succession planning, be it management talent overview or implementing the replacement process.

The process …for succession planning should begin with determining the… organization’s future strategy.

This type of generative strategic thinking is difficult to accomplish in the nonprofit environment for several reasons. Currently, the planning cycle for most nonprofit boards that I have encountered is from three to five years. The median tenure for nonprofit board members is from four to six years. This means that most board members will only be actively involved with one planning cycle. My observation is that it not a motivating environment for longer terms nonprofit planning.   It tends to focus planning on known details instead of the more ambiguous “what if” questions.

At a minimum each cycle should have some considerations of the talents and skills that will be needed by senior managers to robustly complete the plan and to remain current for the next change.   Such a listing allows senior managers to plan for personal growth and for board governance committees to better understand the new skills and talents required for board members.

Examples:   A CEO may recognize that she/h needs further background in the applications of Artificial Intelligence to nonprofits.   In turn, the board has as an obligation to help the CEO to achieve this goal, even if the CEO might leave after taking advantage of this educational opportunity.

From the board’s perspective, the governance committee may decide that the board does not have a sufficient number of board members interested in fundraising to mount a capital campaign. The plan should how greater attention is needed to recruit candidates with comfort in fundraising.

Trying to achieve agreement on projection can cause disruptive discussions among board members. Legacy-focused board members may try to sidetrack projections especially when the organization has been reasonably successful under a popular leader. But the airing of the issues can be helpful, even if they become emotionally charged.

…Boards of directors are increasingly accepting culture as a hard issue, as opposed to a soft issue. that is measurable and has a direct impact on the organization’s performance.

In both the for-profit and nonprofit environments, the CEO must drive the organization’s culture through example and operational policy. In turn, the board must trust and verify that the CEO is managing in a morally sound and ethical manner.   Where questions arise related to the CEO, on these two issues, the board must start an investigation, often with the assistance of an outside party.

To maintain a healthy culture and the process of succession planning, nonprofit boards need to:

  • Have a healthy review of the nonprofit’s culture included in each planning cycle.
  • Be certain that the CEO has a strong cadre of managers capable of growing in their current positions and able to advance if the opportunity arises.
  • Become reasonably well acquainted with the strengths and limitations of key members in the cadre group.
  • Allow three or more years to plan a CEO transition.
  • Have a written plan in place in the even that the CEO becomes temporarily or permanently incapacitated.

Nonprofit planning cycles, like those in the for-profit world, rarely relate succession considerations to the planning efforts because the boards can have a constant churn of memberships. This tends to produce a short-term atmosphere not conducive to succession planning. Every planning cycle should include a review of culture as well as the growth and grooming of high potential staff.

*https://www.nacdonline.org/Resources/Article.cfm?ItemNumber=53191

** https://boardsource.org/fundamental-topics-of-nonprofit-board-service/executive-transition/

How Often Do Nonprofit Board Members Need to Question Strategic Norms?

How Often Do Nonprofit Board Members Need to Question Strategic Norms?

By Eugene Fram               

A new nonprofit board member has a lot to learn. Considering that his/h term of service will be relatively short (typically 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 board member 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.

Following are four nonprofit areas that call for strategic scrutiny and, if recognized by several other current board members as constraints on the future of the nonprofit, the process may allow individual directors to seek positive change:

Can Mission Creep be Good?? Dedication to the organization’s mission should be the board and staff’s primary focus. Often this focus can limit a conservative board’s vision if long-term risk may be involved. But nonprofits have an obligation to keep current in addressing emerging needs and may veto a client venture that has reasonable potential. This hard and fast adherence to mission parameters can be used as an avoidance mechanism to maintain the status quo. How do directors determine the initiative’s positive/negative impact on the organization? Boards need to wrestle with tough questions such as the following: As baby boomers retire, there will be an increased need for elderly housing. Should those nonprofits whose mission is to operate homes for children feel morally obliged to extend both their mission and operational expertise to develop separate or operationally related homes for the low-income elderly?

Nonprofit boards, in my opinion, try hard to acculturate new board members to the mission, as the current group of board members views it. The disadvantage is that expansion or even modification of the program implementation becomes difficult or even unacceptable. A field case: A moribund human services agency offered counseling services on weekdays from 9 to 5 and on Thursdays 9-8pm. The nonprofit had no provision for emergency services. For decades board members had been acculturated to the rigid service schedule and were resistant to change. Finally, a group of new board members, recognizing the urgency of the clients’ requirements was able, with support of new a CEO, to develop a cost-effective way to increase service to a 24/7 model.

The Ethos of Overhead vs. Development: When the need for a new staff-type management person arises, it is often hotly contested. Nonprofit organizations have usually operated on the ethos that about 80% of budgets need to be expended for direct client services. This ignores the fact that an increase in overhead costs, if carefully planned, can yield substantial increases to program budgets. One CEO who was adept at fundraising refused to engage a COO, citing increased overhead as the reason. After four years of board prodding, he relented and made the appointment. The result was positive on two counts—he was able to expand his fundraising prowess and internal operations improved significantly.

Board Culture: Many boards have a tendency to be a rubber stamp for management. This can be a significant danger with nonprofit boards whose culture encourages directors to “go along to get along.” Board members, as volunteers, often view the political and friendship costs of rigorous debate as being too high. Others surmise that management has more information in the field and are uncomfortable in challenging its expertise. This malaise in the nonprofit sector can have disastrous results, evidenced in the frequent reports of fraud due to board laxity. Occasionally, a board may even refuse to fire the perpetrator and the state attorney general must intervene.

There is nothing tactically sacred about the monthly two-hour board meeting and yet limited discussion and crowded agendas can inhibit any type of rigorous discussion at them. Board members who would like to suggest new ideas or question accepted norms are usually frustrated and discouraged from doing so. Although obsolete, the meeting format is rarely challenged. There are, however, alternative options. Board meetings, in my opinion, should be scheduled for longer periods such as 1½ – 2 days–or bimonthly meetings of 3-4 hours. Instead of merely current updates, the format, if carefully structured, could then accommodate substantive policy/strategy issues and allow board members to be heard.

Alternative Data Measurement Systems: Nonprofits often fail to develop  impact data that one could deem reliable. In my view, too many nonprofits fail to appreciate the benefits of rigorous performance basis measurement. This failure is caused by the substantial cost of developing some qualitative impact counts, e.g. impact of advocacy efforts. Nonprofits, however, can glean whatever value they can through imperfect metrics, gathering information and data that may be anecdotal, subjective, interpretive, qualitative or developed through small size samples. Over time, imperfect metrics can be continually improved and become useful in tracking progress and driving change. (http://bit.ly/OvF4ri)

Challenging the Nonprofit’s cultural DNA is daunting. Ties to traditional modes of governance are hard to sever. But with sensitivity and persistence, a board member can help move the organization forward, if at least several other directors also understand the need to question strategic norms.

Pressure Test Your Nonprofit’s Fund Development Efforts

Pressure Test Your Nonprofit’s Fund Development Efforts

Pressure Test Your Nonprofit’s Fund Development Efforts

By: Eugene Fram

It’s no secret that nonprofits do not excel in the craft of fundraising. A 2015 study reported that 65% ofCEOs gave their boards academic grades of “C” or below for efficacy on this front. Yet most will agree that without the continuous influx of financial support, the mission to which the board members have committed themselves will fail

I clearly remember examples of this deficit from my own board experience—one in which I served on the fund development committee for a small nonprofit which met monthly for about a year. A sincere and hardworking board chair headed it, but the meetings took place without the presence of the CEO.   Many ideas with merit were exchanged such as developing a reserve fund, “get or give” board requirements etc.There was a lot of talk but no implementation, and after a year of pure discussion, a new president, who convened a new committee, disbanded the group.

A review of the pressure points in key fundraising activities would have taken the group from talk to action and further implementation. Here are activities and their variations that I consider most critical to nonprofit development processes:

Board-CEO Partnership—Some Elements For Success

 To be successful in fundraising, both the board and CEO must be active partners. Board memberscannot fundraise alone as in the above example.

 Board members will never have the required depth of organizational knowledge to demonstrate nonprofit outcomes and impacts. Also the CEO and/or development director, if there is one, will be needed to build proposals for grants or awards. In addition, the CEO should have access to foundations in the mission field, so that appropriate responses can be initiated

. Although this is not always the case, the CEO needs to have the ability to interact with senior business and foundation executives. Where the CEO lacks these capabilities, the board has an obligation to offer the services of a management coach to help him/h to acquire such skills. Expenses involved can yield substantial returns!

 Hypothetically, the board must be continually seeking donors who will be interested in the nonprofit’s mission, quickly involving the CEO when an opportunity is identified. Similarly, the CEO has an obligation to agree with the board about what funding proposals should be pursued from foundations and individuals.

 While the board is one partner in the development effort, not all board members should berequired to be active in fundraising. At a minimum, all should be asked to report donor opportunities that they encounder.

 For nonprofits that have a diverse board, some training on how to seek and address opportunities will be necessary. These topics can range from knowing that their employers have a matching gift policy to recognizing something they see in a newspaper/magazine that might be reviewed as a funding opportunity.

 Three or four board members, willing and able to drive the effort, should shoulder major funding activity. Many of the others will be unable or unwilling to become involved, except to provide lead information. (A recent study shows although 90% of nonprofit directors believe fundraising is an important obligation, only 45% of organizations require board member to minimially fundraise.) *

 The board members focusing on development need to be able to be persistent and constantly on the lookout for new sources.   As one fundraiser said to me, “ I’ll keep after the opportunity until the donor tells me to “go away!”  He was directly responsible for a $1 million donation to his university for organizational support. As part of the partnership, the board and CEO will have to determine how much time and resources need to be given to fund development. This can become a difficult discussion because many CEOs will want to direct more of the budget to targeted mission projects. In some cases where an unusual opportunity arises, the CEO may have to expend substantial amounts of his/h personal time to be successful. He/she may also have to redirect staff time and resources to the project.*

Nonprofit fundraising is a team effort. In cases where the CEO does not actively involve some board members in the process, make certain the board is not being micromanaged by the CEO.

Nonprofit Boards And Internal Working Environments—No Pieces of Cake!

People who work in the business community sometimes view nonprofit organizations as “cushy” places to work. The truth is that today’s nonprofits have challenges that are very different from those of the corporate world–and typically struggle to accommodate parameters such as restricted finances, increasing wage costs that must aligned with ever expanding client needs. In addition, board members must be concerned about personal liabilities under special legislations such as completing the IRS Form 990 and The Intermediate Sanctions Act. * Not easy!

A article in the Wall Street Journal discusses the hypothetical release from “grind” pressures a business executive might experience when moving employment to a nonprofit. ** Following are some of the specific advantages cited by the article (in bold) followed, by some of my real world observations over four decades as board member and/or consultant.

“People, etc.

The importance of the mission to a nonprofit cannot be contested. It’s what attracts committed personnel to the field and motivates them to grow the organization. The problem is that this concept can lead to a low risk culture that impedes the CEO and senior managers from seizing client service opportunities, elevating the fundraising culture and developing innovative business plans that can demonstrate impacts. 21st century standards require nonprofit CEOs to be strong and aggressive entrepreneurs. But conservative boards often inhibit that behavior in the nonprofit sector

“For nonprofits, it is more difficult to measure success.”

No question about this statement when it comes to measuring objectives that are anecdotal, subjective, interpretative or qualitative, such advocacy for the homeless. ** Also the metrics can only rely on small sample data or those that are derived from situational data. On the positive side, both nonprofits and for-profits are beginning to utilize types of data often referred to as “non-financial metrics.” These are lean experiment style metrics *** that can be modified, long as as learning takes place.

“Generally speaking, nonprofits are much more process-oriented….”

Nonprofit boards often employ a process culture because they are responsible for public funds or charitable dollars. This often leads to a board micromanagement approach long after the nonprofit has exited its startup phase. Also it causes many nonprofits to limit their potential for maximizing client service.

“There are also multiple stakeholders (clients, donors, volunteers, the general public) whose viewpoints have to be considered.  

Both business and nonprofit organization have multiple cohorts with which they must be concerned in the 21st century. But the nonprofit has to tread the very fine line between various constituencies.   A board member angering a major donor can lead to the organization’s bankruptcy!

“Collaboration decision making replaces speed in this world.”

Nonprofit managers have to devote significant time to garner a high level of collaboration, some times at the expense of more important projects. Many nonprofits operate on a “consensus” format. But without board members having a financial investments in the organization, and the rotating director tenure system (4 to 6 year median), votes can be based on a personal need to “go along to get along.”  What should take place is rigorous and civil discussion, respectful of dissenting votes.

* International Journal of Not-for-Profit Law / vol. 18, no. 1, February 2016

**Ted Beck (2016) “Think You Want to Work For a Nonprofit?” The Wall Street Journal, September 12th, p. R10

** For a comprehensive explanation, see: http://onstartups.com/tabid/3339/bid/96738/Measuring-What-Matters-How-To-Pick-A-Good-Metric.aspx 

How Do Nonprofit Boards Keep Stakeholders Engaged?

How Do Nonprofit Boards Keep Stakeholders Engaged?

By: Eugene Fram                      

First, exactly who are the “stakeholders” in the nonprofit environment? Most board members would readily define the term as clients, staff, donors and board members. But what about other participants such as external auditors and significant vendors? Surely a nonprofit that depends on a vendor to supply groceries can be hobbled if the food is not delivered properly. And, last but not least, the backbone of the organization — the volunteers! Many cogs in the wheel make the nonprofit world go around and need consistent and careful attention. Following are some guidelines for engaging all types of stakeholders:

  • Don’t marginalize, dismiss, or ignore a stakeholder: Unfortunately, for example, termed-out board members * are often dismissed in more than one sense of the word. After serving the typical tenure of four to six years, the retired board members may only receive boilerplate materials or fund solicitations. Any residual interest or enthusiasm for the nonprofit is not encouraged unless the retiree initiates a desire to remain connected. The assumption is that the past board members are content with the disconnect.

For those board members who have been active participants during their term, this tactic may actually be counterproductive from many points of view—talent, expertise and development possibilities. I have observed several cases in which this unintended marginalization has resulted in losing substantial financial support and needed talent. In each case,  the retirees have declined to help, using the excuse that they have been too far away from the activities of the organization. Boards must be creative in finding ways of reigniting the former directors’ commitment to the organization’s mission. This can be accomplished in a variety of ways—in an advisory capacity, forming “alumni” groups and/or by including them in social events and other occasions.

  • Recognize who may be a true partner: Such a partner can range from a vendor that has supplied the organization or a volunteer whose interests have moved to another nonprofit to a legacy board member who has developed new insights.  “It is generally easier to build consensus, request help and engender trust when those who support you are well-informed, candidly and truthfully.” **
  • Stakeholders must know about the nonprofit’s challenges and needs: Even the best-managed nonprofits have their ups and downs. During the latter periods, educating stakeholders about the issues can help to dissuade some to avoid posting job cuts and other actions.
  • Self–perpetuating boards can became insular and lose touch with other stakeholders: “These boards tend to retreat into a silo-or bunker-mentality that only serves to intensify bad habits and practices, as well as preclude consideration of other perspectives.” ** At difficult times, the board can tend to lose trust in the ED even when the problem is beyond the EDs control. If the board is at fault, it may look for a scapegoat on which to hang the root cause of the problem, often people in senior management.

* http://www.huffingtonpost.com/eugene-fram/how-does-your-nonprofit-r_b_5393736.html

** https://www.linkedin.com/pulse/what-sweet-briar-reminded-us-alumni-engagement-mark-w-jones

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.