nonprofit executive director

Can Nonprofit Boards Afford To Underinvest In Management Leadership Development?

Can Nonprofit Boards Afford To Underinvest In Management Leadership Development?

By: Eugene Fram:     Free Digital Image

McKinsey & Company has published a substantial nonprofit study: To better understand the state of (nonprofit) leadership in the US social sector… The findings suggest that chronic underinvestment in (management) leadership development for 337,000 small or midsize nonprofits,..(may risk) the sector’s capabilities to fulfill emerging missions effectively and to adapt to fast-changing demands.

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Nonprofit CEOs and Board Directors: How Expert Is Your CFO?

 

Nonprofit CEOs and Board Directors: How Expert Is Your CFO?

By: Eugene Fram        Free Digital Image

When hiring a chief financial officer (CFO), nonprofit organizations often find themselves with a major challenge, since many financial and accounting functions and compliances are identical with those of for-profit organizations. To compete, the nonprofits may need to offer higher salaries than typical for nonprofit organizations. Some may trim the level of expertise required to fill the position.  They hire a person with a bookkeeping background when the organization needs somebody with financial analysis skills.  This is a dangerous move, especially when the organization is growing. It is difficult to terminate a financial person who is satisfactory for a startup, but isn’t able to navigate the challenges of rapid growth.  Also it is a continuing challenge for the Board and CEO, to make certain that the person in the position now has the requisite skills.  A mistake by a person who is not current with financial changes and compliances can make a major error that will harm the organization’s reputation, leading to a board restructuring and/or firing the CEO.

Both the nonprofit CEO and the board need to assess the CFO’s expertise annually by:

*Asking knowledgeable board members if they are receiving financial data and analysis in a format helpful for decision-making.

*Having an executive session with the external auditors yearly to obtain the firm’s assessment of the expertise of all financial personnel with whom they had have contact.

*Keeping track of reports that are submitted late. Something might be radically wrong. (I know of one case where the Board and CEO were only receiving a subsidiary report intermittently. The problem was the data reported involved old accounts that should have been written off months ago. The organization had to hire forensic accountants to determine what needed to be done to resolve the situation. The board terminated the CFO and then the CEO.)

*Making certain all financial personnel take two weeks vacation each year, so that a substitute needs to handle the duties.

*Having the CEO review the CFO’s expertise annually with knowledgeable board members, external accountants or others.  Acknowledging the growth point when the nonprofit needs a CFO with analytical abilities as opposed to bookkeeping ones.  

*Reviewing the causes for a high turnover rate among financial personnel.

*Providing local financial support for the  CFO and others to stay current with accounting and compliance regulations. 

For a current case of a board that evidently failed to adhere to such guidelines see:

http://www.nonprofitquarterly.org/management/23235-existence-of-a-reserve-fund-in-this-nonprofit-threatens-its-future.html

 

 

 

 

 

 

Is Your Nonprofit’s Strategy Only Stating Ambitions Rather Than Solving Problems?

 

Is Your Nonprofit’s Strategy Only Stating Ambitions Rather Than Solving Problems?

By: Eugene  Fram                Free Digital Image

McKinsey & Company in a recent article interviewing author and academic Richard Remelt discusses this strategy question for business organizations.*  Following is my estimation how the article’s information might be applied to the nuances encountered in nonprofit strategy development. 

Strategy Results

In evaluating strategies, nonprofit boards often only use the easier to measure results, for examples, membership size and financial ratios.

But progress for nonprofits often also must be measured in qualitative formats.  “Not being able to afford the time and money to develop excellent qualitative metrics (e.g., enhanced life quality, community commitment), to glean whatever they can from using imperfect metrics.” **

Richard Remelt suggests there is a big difference between strategies developed for actions versus ambitions.  My experiences with nonprofit strategy development suggest that many nonprofits focus on ambition rather than the problems to be solved by the next three-year plan.  He calls a strategy based on ambition “bad strategy.”   “Bad strategy is almost a literary form that uses PowerPoint slides to say, ‘Here is how we will look as a company in three years.’  That is interesting,  but it’s not a strategy.”

For nonprofits, his analysis also relates to the difference between program outcomes and program impacts. For example, A human services strategy can have good program outcomes but fail to have client impacts because basic causes aren’t/can’t be addressed. 

Board Member Motivation

The median nonprofit board member serves a term ranging from four to six years. In contrast, the average tenure for a public board member is 9.7 years.

Assuming this frequent turnover, the nonprofit director/trustee will only be involved with one strategic planning cycle. Even with a board member highly dedicated to the mission’s objectives, the brief tenure structure can dampen motivations to rigorously participate in strategic planning.  

I have seen this evolve frequently, especially when the board approves the performance of a “mind-the-store executive director,” as opposed to an “entrepreneurial” type.  Operationally, the former executive director can be described as one seeking stability over innovation.  She/h can produce modest income increases with balanced budgets, often supported by substantial legacy financial endowments.

Involving Staff in Strategic Planning and Other Insights 

  • Rumelt suggests limiting the number of persons involved in strategic board planning.  For larger nonprofits, this might only include senior and/or division management.  For smaller and midsized nonprofits, this might involve management and some professional staff. Organizationally, in these nonprofits, the two groups may be only one or two levels apart.
  • Ask simple questions like: “If our organization were to disappear, who would miss us?”  “If we were to establish a new agency, who among the staff, would we take with us?”
  • “Boards may not need strategy committees, but they just need a sense of best practice, just as ..(accountants).. have well-established best practice in accounting:”  I agree that nonprofit boards do not need a standing strategy committee.  The development and maintenance of the strategic plan is the joint responsibility of the CEO and Board Chair. Together they can use a simple maintenance device by relating most 
     problem-solving efforts, generated in nonprofit board meetings to the 
     strategic plan. 

* https://www.mckinsey.com/capabilities/strategy-and-corporate-finance/our-insights/why-bad-strategy-is-a-social-contagion

 

** https://nonprofitquarterly.org/using-imperfect-metrics-well-tracking-progress-and-driving-change/

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

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

By: Eugene Fram              Free Digital Image

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

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

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

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How Nonprofit Boards Can Support Management & Staff and Refrain From Micromanaging!

How Nonprofit Boards Can Support Management & Staff and Refrain From Micromanaging!

By: Eugene Fram                    Free Digital Image

The dilemma is common to nonprofit organizations. As start-ups, everyone aspires to do everything. Passion for the mission and determination to “get it right” imbue board members with the desire to do it all. But once the organization starts to mature, board roles shift to focus more broadly on policy and strategy issues. With the advent of qualified personnel to handle operations, there are many overview activities, sans micromanaging, available to board members. Following are some ways that boards can assist and demonstrate support for operations, CEOs and staffs without interfering.

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The Search For a New Nonprofit CEO Needs To Be Realistic

 

The Search For a New Nonprofit CEO Needs To Be Realistic

By Eugene Fram      Free Digital Image

Boardmember.com in its October 11, 2012 issue carries an op-ed item by Nathan Bennett and Stephen Miles titled, “Is your Board About to Pick the Wrong CEO.” Although targeted to for-profit boards, all of the five items listed in the article can be applied to nonprofit boards. 

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Once Again: How Should Nonprofits Conduct Board Evaluations?

 

Once Again: How Should Nonprofits Conduct Board Evaluations?

By: Eugene Fram    Free Digital Image

 Data from BoardSource show that only about 58% of boards have had “formal, written self-assessment of board performance at some point. Only 40% of all boards have done an assessment in the past two Years,” a recommended practice. With the rapid turnover of directors that nonprofit boards traditionally experience, this seems inexcusable. As a “veteran” nonprofit director, following is what I think can be done to improve the situation.

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Too Much Information Can Cloud Nonprofit Board’s Decision Making–Tread With Care

 

Too Much Information Can Cloud Nonprofit Board’s Decision Making–Tread With Care

By Eugene Fram            Free Digital Image

In this age of information overload, nonprofits need to continually scrutinize the quality and source of the material received in preparation for major decisions. Since board members often come without broad enough experience in the nonprofit’s mission arena, they may not be prepared to properly assess its progress in moving forward–and not equipped to make relevant comparisons with similar nonprofits.  In addition, naive or unscrupulous CEOs and highly influential directors may inundate their boards with information and data as a  distraction tactic to keep them busy in the “weeds,” reviewing what has been presented.  Board members need to avoid donning “rose-colored glasses” when assessing proposals from these sources.

I once encountered a nonprofit whose board was about to acquire a for-profit organization, headed by its founder.  Pushing for the “deal” were the nonprofit’s CEO and an influential board member who were not, it turned out, capable of the due diligence needed for a project of this complexity. But the board accepted their work without question.  When the acquisition was consummated, the founding CEO of the subsidiary refused to take directions from the CEO of the nonprofit. In addition, although the normal financial settlement of the project requires that a portion of the price be withheld pending adequate performance, the nonprofit had paid cash for the acquisition.  Based on  a lack of performance, the operation was finally closed with a substantial loss.

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Nonprofits Can Build a Stronger Brand With Internal Marketing

 

Nonprofits Can Build a Stronger Brand With Internal Marketing

By: Eugene Fram     Free Digital Image

Nonprofit branding is an important topic to nonprofit board members and managers with nonprofits wanting to differentiate their services, images and reputations. Some organizations are spending substantial dollars to assess and build their brands.

Most nonprofits with which I have had contact are not aware whether not all their employees and perhaps some board members are brand loyal to their nonprofit organization. Many independent contributors (accountants, counselors, social workers, trade association executives, etc.), who work for nonprofits, see their loyalties as being related to their professions not their employing organizations.

 I co-authored several articles to explore the issue of employee brand loyalty with commercial firms. * I would like to review some of those finding to show that nonprofit management also constantly needs to assess whether or not employees and board members are receiving positive brand messages related to the organization’s mission, vision and values. This should be the outcome of an internal marketing effort. The impact for internal marketing should be to enlist every employee and board member to become a brand champion for the nonprofit.

Reasons for Rejection

“The results of (our study) indicate the two most prevalent perceptions relating to low employee … behavior were (a) a lack of pride in the product and (B) a sense that the product is unaffordable. “ … This suggests that managers need to determine the level of product pride in mission, vision and values when the term commercial term, “products,” is translated to nonprofits.” They must motivate employees to take pride by celebrating professional awards and reviewing honest client satisfaction data and case studies, especially those that show how the organization has contributed to individuals and society.

In terms of affordability, the internal marketing effort needs to show how clients have benefited long term. This is typical of university internal marketing that focuses on successful graduates who have made societal contributions. This program is especially important where the university is not nationally known but has some special educational benefit to offer.

Quality & Features

“Internal marketing campaigns (often) may rely too much on appeals to employee loyalty or self-interest, thereby missing the opportunity to convert the more skeptical persons on the payroll. …These findings imply that employers need to, where possible,continually educate employees (and board members) on the comparative advantages of their brands involving outcomes of mission, vision and values.” Comparisons of impacts of the local organization with those of others nationally can be helpful. For example, professional organizations often publish data that make interesting comparisons.

Values, Reliability and Prestige.

“One way to deal (with the prestige) issue is to inform employees and board members how the (nonprofit’s) standards compared to the (professional field) standards.” This can be done in two ways. One is to add the annual IRS 990 report to the organization’s website. Another approach is to issue a press release when the organization is re-accredited by an outside organization. At this time, when transparency is becoming increasingly important, management even might want to present a detailed debriefing on important reports to the board and employees as a way to discuss and challenges and strengths.

Changing Perceptions

“Management needs to survey employees and board members to fully understanding their perceptions of the organization’s mission, vision and values. Even having a few misconceptions circulating can be harmful to the brand.” For example one nonprofit recreational facility determined that several members of their board and their families were using a competitor’s facilities. In several instances, there was little they could do about it, but it is important to understand the reason and to try to reduce the negative impact on its brand image. On the other hand, substantial positive changes might occur with the proper internal marketing.

Summary

“One responsibility of management might be to develop venues for employees and (board members) to become more comfortable in communicating their positive attitudes to friends and relatives. There’s also significant potential for brand-loyal employees (and board members) to act as brand champions After all, high enthusiasm within the ranks of employees and directors brings impressive dividends.”

• *Eugene H. Fram & Michael S. McCarthy (2004), “What’s Not to Like? If employees aren’t buying your brand, it important to find why,” Marketing Management, July-August, pp. 36-40.
• *Fram & McCarthy (2003), “From Employee to Brand Champion,” Marketing Management, January-February, pp. 25-29

 

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              Free Digital Image

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.

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