Long-term Sustainability

NONPROFIT BOARDS HIRE AND CEOs MUST ACT!

NONPROFIT BOARDS HIRE AND CEOs MUST ACT!

By: Eugene Fram               Free Digital Image

Whenever the time is ripe to select a new nonprofit CEO, I think of the old joke that says “…every person looks for the perfect spouse… meanwhile, they get married.” By the same token, nonprofit board members seek perfection in a new ED/CEO– and find that they must “settle” for less. But there are certain definitive attributes that are essential to his/her success in running the organization. With the pressures of increasingly slim budgets, fund development challenges and the difficulty of recruiting high quality employees, the 21st century ED/CEO must be action oriented and come equipped with at least a modicum of the following abilities: *

  • Visionary: It’s all about the organization’s future. The ED/elect should bring or at least begin to cultivate a deep concept of where the nonprofit is, should be and what the trajectory should look like. He/she can do that by immersing himself in the mission field—reading widely and remaining in contact with regional and national leaders in the field. A state-of-the-art CEO should be available for consultation with colleagues with similar issues. Included in his span of vision are potential disruptions that might affect the organization– and how to help the board focus on and implement appropriate change.
  • Board Enabler: The new chief understands the limits of his/h operational responsibilities and the governance overview role required by the board. To build trusting relationships with the board, she/h realizes that transparency is key.
  • Fundraiser: The optimal fundraising relationship is a partnership between the CEO and the board. Board members must be alert to outside funding opportunities and the CEO, alert to funding opportunities from sources related to the mission field. Once an opportunity is identified, the CEO and the board work closely together to develop a proposal and to meet with the donor(s). If the organization has a development director, the person filling the position must be brought into the discussion at an early stage.
  • Communicator: To be organizationally successful, the Board and CEO must be in a position to interact with a variety of stakeholders: government officials, donors, vendors, clients and their surrogates, foundations, etc. One area in which many nonprofit CEOs need improvement is communications with the business community. It goes beyond simply joining the Rotary or Chamber groups. Nonprofit CEOs must have rudimentary knowledge of many businesses so they can interact intelligently with business leaders they encounter in development efforts. This information can be about specific organizations they are approaching or general knowledge acquired from perusing publications like Business Week or The Wall Street Journal.
  • Spokesperson: Although some suggest that the volunteer president must be the spokesperson for the nonprofit, I suggest that the Executive Director/CEO must hold this position for several reasons.
  1. If a volunteer becomes a president/CEO, he/s may acquire some liabilities that other directors don’t have. The executive director must be the CEO. Some nonprofits have given the chief operating person the title of president/ceo and the senior board person, board chair.  This eliminates confusion that often surrounds the ED title when contacting business or government officials.
  2. The volunteer president does not work in the organization daily and does not understand its nuances as well as the CEO.
  3. In a crisis situation, the media may contact board members.   It should be clearly understood that the CEO is the only person to comment to the media.
  4. In ceremonial situations, it may be appropriate for the president to be a spokesperson.
  5. The CEO needs to become the “face” of the organization because volunteer presidents come and go, some annually.
  • Team Builder: She/h needs to build a strong management team, some of whom, over time, may become capable of becoming an Executive Director. The CEO, as head of the management team, needs to be sure all staff are performing well with some being bench strength to move to higher positions.
  • Tone Setter: The CEO needs to set an ethical tone where everybody feels free to express their suggestions for improving the organization. This tone, in various ways, must also be communicated to all stakeholders by the Executive Director..
  • Performance Monitor: Hopefully the board has a rigorous and fair system for evaluating the CEO and the organization, and the values of this system are embedded in staff evaluations.

* http://nynmedia.com/news/lucky-13-what-should-we-expect-from-a-nonprofit-ceo

Unwritten Protocols for Directors Can Boost Nonprofits’ Effectiveness
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Unwritten Protocols for Directors Can Boost Nonprofits’ Effectiveness

By:  Eugene Fram                                        Free Digital Photo

Nonprofit boards are governed by a series of obligations —some are clearly defined as legal responsibilities such as financial actions. Others, however, are less clearly defined and relate to people who are, in some way, associated with the organization. Guidelines to these diverse interactions are not typically archived in policies but are important to the overall professionalism of the board. They include consideration of its: board structure, internal operations, recruitment methods and leadership style.

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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.

Some typical examples of the apparent loss of independence:

• The legacy challenge. A board member is appointed to the board largely because his family has served on the board for generations, not because of his talent and/or commitment to the mission. If there are too many “legacies” on board, the optimal range of perspectives is narrowed resulting in inadequate discussion of potential actions.
• The chief executive does not keep a professional social distance from the board chair and/or other board members. For example, their families are frequently engaged socially.
• In “prestige boards,” a business or professional person persuades the board to accept a candidate who is business associate because he/she is a “good person” who needs board experience for networking purposes.
• A candidate for a directorship has significantly caused problems on another nonprofit board, but a current active board member, a friend of the candidate, wants him to be elected so that he/she can be given a second chance.

What Can Be Done? Sometimes Nothing: But:

• Clearly acknowledge the challenges where they exist and then seek new candidates without such encumbering ties.
• If possible, try to confront the situation directly, if it does not cause a schism within your board. Develop a policy, not a rule, which allows someone to open discussion if one of these issues arises.
• Make independence one of the characteristics desired for board candidates and clearly acknowledge what is meant by the term.
• A nonprofit board member can serve only one master—the organization’s mission. On the other hand, no nonprofit board that I have encountered is totally independent.
 As long as a board has enough members who are not beholden to other interests there should be no impairment in achieving the organization’s goals.

This type of subtle influence is rarely discussed, and to my knowledge, has never been researched. But, if left unattended by nonprofit recruitment committees, it can lead to political board schisms that seriously impact the organization.

Can A Nonprofit Organization Have An Operational President/CEO & An Executive Director?

Can A Nonprofit Organization Have An Operational President/CEO & An Executive Director?

By: Eugene H. Fram.      Free Digital Image

Yes, if the organization has the following structure:

Board With A Volunteer Chairperson
Full-time President/CEO With Full Authority for Operations
Executive Director for Division A
Executive Director for Division B

However this structure can be confusing to persons in the nonprofit arena. The executive director should have final authority for all operational matters related to the organization, except those designated for the board in the bylaws. For example, pensions plan changes.

The big question is who carries the CEO title. Some nonprofits, in their early stages, have a volunteer, part-time, President/CEO and an operational Executive Director. This signifies the volunteer, representing the will of the board, can have final authority in implementing board operational policies/strategies. This is not a good structure because the CEO title might lead to the volunteer having liabilities that other board members don’t have.

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How Do Nonprofit Boards Keep Stakeholders Engaged?
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How Do Nonprofit Boards Keep Stakeholders Engaged?

By: Eugene Fram                       Free Digital Photo

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

A Nonprofit Paradox: Weak Leadership Pool, Positive Organizational Outcomes?

A Nonprofit Paradox: Weak Leadership Pool, Positive Organizational Outcomes?

By:  Eugene Fram                   Free Digital Image

It happens: one or both of the two nonprofit engines—governance and/or management — sputters out, yet the organization continues to meet its goals and deliver adequate service to its constituents. Some examples: a child placement agency manages to maintain the quality of its oversight while struggling to deal with an admittedly inept board and CEO. Another example: An ineffective volunteer board at a youth center, meeting quarterly for a couple of hours, allows the CEO to really manage the board and to motivate the staff. The CEO realized she and the agency were in dangerous positions without an innovative board providing standard oversight, although client services were positive. (more…)

Are Nonprofit Boards Capable of Evaluating Themselves?

Are Nonprofit Boards Capable of Evaluating Themselves?

By: Eugene Fram       Free Digital Image

A study of business boards by Stanford University yielded the following results:

  • Only one-third (36%) of board members surveyed believe their company does a very good job of accurately assessing the performance of individual directors.
  • Almost half (46%) believe their boards tolerate dissent.
  • Nearly three quarters of directors (74%) agree that board directors allow personal or past experiences to dominate their perspective.
  • And, perhaps most significant, the typical director believes that at least one fellow director should be removed from the board because the individual is not effective. *

Given that many of these business boards have the financial power to employ legal counsel or consultants to conduct a rigorous impartial evaluation, what can a nonprofit board, with limited financial resources, do to make sure that the board and its members are being fairly evaluated to drive change?

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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 frequently by local national blog sites, show something is wrong.  Following are some inherent problems that derail boards from focusing on impacts.

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Once Again!  The Possibility Of Fraud – A Nonprofit Board Alert

Once Again!  The Possibility Of Fraud – A Nonprofit Board Alert

By: Eugene Fram              Free Digital Image

“According to a Washington Post analysis of the filings from 2008-2012 … of more than 1,000 nonprofit organizations, … there was a ‘significant diversion’ of nonprofit assets, disclosing losses attributed to theft, investment frauds, embezzlement and other unauthorized uses of funds.” The top 20 organizations in the Post’s analysis had a combined potential total loss of more than a half-billion dollars. *

One estimate, by Harvard University’s Houser Center for Nonprofit Organizations, suggests that fraud losses among U.S. nonprofits are approximately $40 billion a year. **

Vigilant nonprofit boards might prevent many of these losses. Here’s how:

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How Does Cultural Intelligence (CQ) Impact A Nonprofit Board?

 

 

How Does Cultural Intelligence (CQ)* Impact A Nonprofit Board?

By: Eugene Fram                   Free Digital Photo

There are many ways to assess the balance of capabilities on a nonprofit board. EDs and board chairs are generally familiar with the implications of terms like IQ (cognitive ability) and EQ (emotional intelligence). New research has added a third characteristic— cultural intelligence or CQ.  Obviously, CQ comes into focus when boards are dealing with global or international issues. But its usefulness is still germane to community-based and/or domestically focused professional/trade associations. Making a change in board strategy is at best a challenging process. But when that plan collides with cultural differences, board culture will trump change. To paraphrase Peter Drucker’s pronouncement—“Culture Eats Strategy for Lunch.”  Following are a few of the many types of nonprofit CQ divisions that I have observed:

 Baby Boomers vs. Millennials: Up to this point in their history, NFP boards have tended to be organizationally conservative, but this may be changing rapidly. One of the most prominent developments is the influence of the millennials, those born rough between 1980 and the turn of the new century. The new cohorts tend to have cultural values that are quite different from those  of their parent or grandparents.Millennial work patterns, for example, are more informal, often spanning long hours and ignoring 9 to 5 routines. All of this can create a cultural gap between themselves and their boomer board colleagues and between baby boom management and millennial staffs. As they move into senior management positions,will they collide with those who have adhered to traditional conservative nonprofit cultures?    Currently their social values align with those of many human service nonprofits. But in the future, will cultural values they encounter frustrate them to the point of turning their energies toward other career opportunities? One current report concludes, “Despite what you may have heard, millennials aren’t lazy.  In fact they’re downright work-obsessed–and it’s making life worse for everybody.” 

 Entrepreneurs vs. Public Service Backgrounds: Persons with public service backgrounds tend to move slowly in bringing about change. For example, the challenge of developing consensus among city council members can be daunting.  In contrast, an entrepreneur must be able to pivot his/h organization quickly from plan A to plan B.  Consequently, “processing” takes precedence over “pivoting” when  an NFP organizational change is proposed. These two board types brings different tempos to board discussions.  If the gap is left unresolved, the entrepreneur may leave and a valuable voice is lost. Unfortunately, in my experience, I have met too many entrepreneurs who simply refuse to accept nonprofit board positions because of this discrepancy.

 Management Backgrounds vs. Independent Contributors: Persons with management background are directors who have had leadership responsibilities with small or large groups of subordinates. Independent contributors are those who basically work alone or may only have responsibilities for just a few subordinates—e.g., attorneys, professors, planners or physicians.  Board members in the latter group can assume they have  management knowledge superior to the executive director’s or other senior personnel. Often their insights are outside a manager’s experience “space.”  This creates a cultural gap that can be harmful to nonprofit’s operations.   Example: A medical association board refused to set performance standards. for its executive director and staff. One staff member commented, “Board members don’t want to build trust and establish mutually accepted goals, these guys just want to give orders.”  The cultural gap was substantial because management and staff did not know the standards and behaviors by which they will be judged annually. Another staff colleague angrily commented, “I’m not going to allow a twenty-something medical intern order me what to do!”

How to bridge the gap

 Board chairs and EDs should develop a realistic inventory of the types of CQs on their board to be certain that one style is does not dominate.

 With the continual turnover of board membership and with annually changing board chairs, the ED needs to assume long-term responsibility for the inventory.

 It probably is not possible to develop a perfect balance of cultural norms.   As a result, the chair and ED must make sure that those who have “minority CQs,” such as the entrepreneur described above, feel that their participation is meaningful and appreciated.

 Never underestimate the impact of culture and its various CQ components.   The dominant legacy, especially with successful nonprofits, must be widely accepted. But it also should be reviewed occasionally to make certain that the board is not simply accepting it at face value. The Impacts must be robust performance for all clients, along with innovative and operational effectiveness. Assessing board member’s CQ categories can be a challenge for many chairs and EDs. These categories often do not fit into discrete groupings like age and educational levels. But practice with them over time should be helpful. They allow chairs and EDs to better retain those productive outliers whose CQs may not fit the traditional legacy culture.

* https://www.indeed.com/career-advice/career-development/cultural-intelligence#:~:text=Cultural%2