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…)
Enlarging the Nonprofit Recruitment Matrix: The art of selecting new board member
By: Eugene Fram Free Digital Image
There’s never enough to say about the selection of nonprofit board members. Following my last post on board behaviors and cultures I ran across a guide fo desirable skills/abilities for “for-profit” directors. From this list, I suggest the following additions to the recruitment matrices of 21st century nonprofit board candidates to improve board productivity. * Those included will have:
• Executive and Non-Executive Experiences: These include planners with broad perspectives needed to have visionary outlooks, a well as persons with unusually strong dedication to the organization’s mission. It may include a senior executive from a business organization and a person who has had extensive client level experience. Examples for an association for the blind could be the human resources VP for a Fortune 500 corporation and/or a visually impaired professor at a local university.
• Industry Experience or Knowledge: An active or retired executive who has or is working in the same or allied field. However, those who can be competitive with the nonprofit for fund development could then present a significant conflict of interest.
• Leadership: Several directors should be selected on the bases of their leadership skills/abilities in business or other nonprofit organizations. Having too many with these qualifications may lead to internal board conflict, especially if they have strong personalities.
• Governance: Every board member should have a detailed understanding of the role of governance, their overview, financial/due diligence responsibilities and the potential personal liabilities if they fail to exercise due care. In practice, nonprofits draw from such a wide range of board backgrounds, one can only expect about one-quarter of most boards to have the requisite knowledge. But there are many nonprofit boards that I have encountered that even lack one person with the optimal board/management governance knowledge. Some become so involved with mission activities that they do what the leadership tells them when governance issues are raised. Example: One nonprofit the author encountered, with responsibilities for millions of dollars of assets, operated for 17 years without D&O insurance coverage because the board leadership considered it too costly.
• Strategic Thinking & Other Desirable Behavioral Competencies: Not every board member can be capable of or interested in strategic thinking. Their job experiences and educations require them to excel in operations, not envisioning the future. Consequently, every board needs several persons who have visionary experiences and high Emotional Quotients (EQs.) Those with high EQs can be good team players because they are able to empathize with the emotion of others in the group. Finding board candidates with these abilities takes detailed interpersonal vetting because they do not appear on a resume.
• Subject Matter Expertise: Nonprofit Boards have had decades of experience in selecting board candidates by professional affiliations like businessperson, marketing expert, accountant, etc.
• Other Factors Relevant to the Particular Nonprofit: Examples: A nonprofit dedicated to improve the lives of children needs to seek a child psychology candidate. One focusing on seniors should seek a geriatric specialist.
A Special Relationship: Nurturing the CEO-Board Chair Bond
By Eugene Fram Free Digital Photo
Viewer Favorite – Updated & Revised
Here are tips 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.
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?
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.
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:
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.
Solarwinds and Target and others may seem far afield from the concerns of nonprofit directors, except for the giants in the area, like AARP. However, think about this hypothetical scenario.
A group of high school students hacked into the computer system of a local nonprofit offering mental health services and gain access to records of clients, perhaps even placing some of the records of other teenagers on the internet. Considering the recent introductions of new AI tools, the power of immature teenagers and adults to initiate Cyber Security (CS) problems seems unlimited.
What due care obligations did the board need to forestall the above situation? A move to recruit directors with special expertise in information technology or cyber security would be nonproductive. A nonprofit director has broader responsibilities such as the overview of management, approval of budgets, fostering management and staff growth etc. Similarly, when social media became a prominent issue a few years ago, boards debated the advisability of seeking directors with that specific kind of background. Today, a consultant with management is likely to provide guidance to directors on these issues.
After listening to a group of cyber security experts discuss for-profit challenges in this area, I have the following suggestions on how nonprofit boards might respond to similar types of challenges.
1. Carefully “wall off” all confidential information – Have management be certain that private information such as health records, are encrypted and separated from operating data that may be considered public in a nonprofit environment. 2. Review D&O and other liability policies – Determine whether or not the D&O policy protects directors and managers from CS intrusions. (It likely does not, but I understand that some carriers may offer some protection along with smaller policies.) It is clear that most general liability policies do not protect the organization against CS. 3. Board Encouragement – Devote some meeting time, perhaps 10 minutes, to a discussion of the CS topics so that management and staff are aware of the board’s concerns on the subject and will take action when necessary. Appropriate due care actions like frequent password changes should become routine. Some checklists are available online, suggesting questions directors might pose to raise awareness on the topic and avoid potential CS breaches. 4. Can third party payer help? – Many nonprofits deal with third party payers with sophisticated CS systems and may offer the nonprofit some advice or assistance. 5. Education and training of employers – Many CS crimes have been successful because employees have violated or forget to effectively protect their working accounts and information. Proper education and training can help reduce these types of lapses. 6. Finance & Audit Committees – Recent data indicate that only 20% of nonprofits have a CS vulnerability assessment in place and only about the same proportion have a plan in place should a CS breach take place . * Due care responsibilities seem to be missing among a large portion of nonprofits.
If a nonprofit, like the one described, is attacked, not only will records be compromised, but also the reputation of the agency will be destroyed, probably along with the nonprofit organization itself. SolarWinds and Target may be able to survive such an attack, but the typical nonprofit may not.
Guidelines For Developing Authentic Nonprofit Board Leaders
By Eugene Fram Free Digital Image
As an antidote to the leadership succession problems that have plagued business and nonprofits in the last several decades, the Authentic Leadership model proposed by William George, Harvard professor, may be of interest. 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)
Authentic leadership is built on your character, not your style: According to George, these leaders must have flexible styles to be able to fill different role at different times—coach, mentor and inspiring others who must work with a minimum of management guidance. Example: He/s has to “stay on message” in any discussions of mission, vision and values. This is especially important when the economic environment is turbulent.
Because nonprofit boards must draw their candidates from a broad base of backgrounds, any board, in my opinion, can only hope to have three or four board members who can be authentic leaders and eventually fill the board chair position. Often professionals, such as physicians, professors and lawyers, as independent contributors, can lack leadership and strategic insights. Consequently, the CEO must contribute these insights when such a knowledge gap exists on the board in relation to strategy. Several nonprofit boards I have recently encountered, mainly composed of mid-level managers and independent professionals have lacked a single board member with any strategic background. Results: The strategic plan consisted of a broad-brush “strengths, weaknesses, opportunities and threats” (SWOT) analysis. Hardly a valuable planning document for the 21st century.
In terms of management selection, boards need to seek those who can make the hard decisions such as CEO termination and/or having to implement a board decision that is vigorously opposed by a small minority. But the leader must still remain an authentic person, even under these difficult circumstances. Example: One CEO I encountered had the amazing ability of being able to fire a subordinate but still maintain good interpersonal relations with the person—an amazing interpersonal managerial talent, indicating an authentic leader.
Authentic leaders are real and genuine. A nonprofit board member can be a distant personality to the management and staff. Only a crisis may determine the level of authenticity of his or her leadership style. But board members in working with management and staff on projects and in social contacts need to show that they are flexible and fair persons in their decision processes. Nonprofits are somewhat different from for-profits because the staff can be only two organizational levels below the board. Consequently staff members monitor board changes closely because they know a new strong personality can impact their futures and working conditions. Example: Two professors persuaded their board colleagues to adopt an overly detailed Management by Objectives program. It stressed the staff to spend a huge amount of time reviewing and assessing objectives, instead of client center work.
One way to view these characteristics is in the evaluation process of the CEO and organization. The process must be unscrupulously rigorous but fair to all concerned. (Example: see http://bit.ly/OvF4ri) Otherwise the management and staff will view the board as a distant body, only dedicated to financial results. Organizational morale will be impacted.
Authentic leaders are constantly growing. In terms of their board membership, they are seeking to learning about the organization’s environment, concerns and opportunities. They are curious people always seeking insights into the personal, professional, cultural and civic worlds in which they live. Harvard’s George defines their behaviors in this way, “ They do not have a rigid view of themselves and their leadership. Becoming authentic is a developmental state that enables leaders to progress through multiple roles, as they learn and grow from their experiences.”
Authentic leaders match their behavior to their context. Often they may have modest Intelligence Levels (IQ) levels but they have very high Emotional Intelligence (EQ), providing them with outstanding people skills. They can quickly recognize interpersonal challenges around them, and they provide moderating solutions. Many are described as not being quick to anger. Most importantly in the nonprofit board situation, they can empathize with board, management and staff problems, even though their full-time occupations are outside the organization’s mission arena.
Authentic leaders are not perfect, nor do they try to be. Nobody does his/h job perfectly, and authentic nonprofit board leaders are quick to accept this reality for themselves and others around them, for example the CEO. They know from experience that leaders can learn from their mistakes and become better leaders.
Summary Authentic leaders are frequently chosen today for the key roles in business and nonprofits, according to William George. In an era when nonprofits are being challenged by budget cuts and a surplus of unfulfilled client needs, it behooves board nominations and CEO search committees to review the above list of behaviors. Those who are fortunate to engage these leaders, in turn, should improve board and staff performance –“A” players hire “A” players.
Are Your Nonprofit’s CEO Succession Plans COVID Updated?
By:Eugene Fram Free Digital Image
“CEO succession planning is one of the most important responsibilities of a (nonprofit) board…” * Yet others and I find it to be a neglected responsibly. In the for-profit arena, a mistake in choosing the wrong CEO can “lead to a loss of $1.7 billion in shareholder value in addition to a loss of organizational confidence and momentum.“ *
Choosing the wrong nonprofit CEO in a situation when I was a board member set in motion a year of staff turmoil, lost growth potentials, decline in the nonprofits reputation and an uncalculated financial loss. After a post-turmoil CEO took the helm, the agency prospered for more than twenty-five years.
Based on a national study of for-profit boards, following are some COVID-19 CEO succession questions that nonprofit board members should consider now. *
Is our emergency successor still right for this environment? Is the internal successor capable of managing under turmoil conditions? If not, a new external person needs to be contacted. Often this turns out to be a consultant in the mission field. It’s important to reevaluate all external options now for the CEO’s ability to manage under unprecedented conditions.
Is our CEO role specification still right? Over several decades, I have encountered a number of what I would call, “mind-the-store” CEOs. These persons have: nice personalities, keep expenses within budgeted incomes, but are not proactive in seeking innovation and change. Unfortunately, these types of CEOs can satisfy their boards for decades under what might have been considered normal circumstances. Because CEOs have a better grasp of current mission-related trends, boards and CEOs should strategically positioned for the Post-COVID 19 period, even while addressing unusual operational challenges.
Do we have the right people in our near-term succession pipeline– are they prepared? The selection of the CEO is the only employment decision that nonprofit boards make. But they are also required to overview the near-term staff succession pipeline for those with very special talents. For many nonprofit boards, this involves an uncomfortable discussion of who might be in line to succeed the CEO or other senior managers should any become temporarily incapacitated.
Is your board ready and able to have these discussions? Under current tenure requirements, the average tenure for nonprofit board members centers around six years—two six-year terms or three two-year terms. As a result of this brief tenure, many board members may feel that simply raising the question of CEO succession suggests a lack of the CEO’s abilities to manage. It also may cause board conflict, if suggested. However, it is simply the members’ due diligence responsibility and, if ignored, can cause strategic problems for the organization.
First Steps: * Review your leadership/experiential criteria. The abilities a nonprofit CEO may need may change substantially. Working with the CEO, nonprofit boards need to take the lead in surfacing these criteria, for example, better understanding of IT requirements.·
Ensure that your emergency (succession) plan is more than just a single name on an envelope. It’s a good idea to have a process ready for an unplanned exit by the CEO. CEO experience criteria should be reviewed in depth every two years to be current.·
Do now what you normally would put off forlater. Start listing the criteria that a CEO will need to operate successfully, emerging from the shock of the pandemic . It will enable the board to consider the changes taking place. Also the CEO can have some guideposts on how his/h abilities need to be enhanced.
Nonprofit Management 