The Nonprofit CEO–How Much Board-CEO Trust Is Involved?
By; Eugene Fram Free Digital Image
The title, CEO for the operating head of a nonprofit, clearly signals to the public who has the final authority in all operating matters and can speak for the organization.* .
The CEO designation calls for an unwritten trusting contact with the board based on mutual respect, drawing from the symbolism that he or she is the manager of the operating link between board and staff. It is a partnership culture. However, a solid partnership does not allow the board to vacate its fiduciary and overview obligations. The board has moral and legal obligations to “trust but verify” and to conduct a rigorous annual evaluation of outcomes and impacts CEO has generated for the organization.
While the trust the board has in its chief operating officer can’t be described in exact quantitative terms, viewing it through the lens of a set of CEO and/or Board behaviors can provide an idea that a significant level of trust is involved in the relationship.
Following are some of the behaviors that signify a trusting partnership is in place:
Nonprofits:”What Role Should Board Members Play in Overviewing Management /Staff Talent?”
By: Eugene Fram Free Digital Image
Nonprofit boards rarely develop an in-depth strategy for assessing its organization’s human capital. Some will keep informal tabs on the CEO’s direct reports to prepare for the possibility of his/her sudden departure or is incapacitated. Others –smaller organizations with fewer than 20 employees—need only a basic plan for such an occurrence.
Need for Strategy: In my view, maintaining a viable talent strategy to assess staff and management personnel is a board responsibility, albeit one that is often ignored. The latter stems from the constant turnover of nonprofit members whose median term of service is 4-6 years—hardly a lifetime commitment. Like for-profit board members whose focus is on quarterly earning results, their nonprofit counterparts are likely more interested in resolving current problems than in building sufficient bench strength for the organization’s long-term sustainability.
The Bridgespan Group, supported by The Rockefeller Foundation, completed an exciting research study. The results identified “six elements common to nonprofits with a high capacity to innovate” * Following are some suggestion how to implement these elements.
Developing Meaningful Relationships Within Nonprofit Boards
By: Eugene Fram. Free Digital Image
For several decades, I have suggested that nonprofit Board Chairs and CEOs have a responsibility to be sure that each board member perceives his/h continuing relationship as being meaningful. Following are some organizational guidelines that can assist Board Chairs and CEOs in this effort.*
Developing or hiring strong executive leadership: Obviously when hiring externally it is necessary to engage a person with a managerial background. But many nonprofit CEOs can be appointed after years of being an individual contributor or leading a small department. These experiences condition them to do too much themselves, rather than to assume a strong management posture. This involves focusing more on strategy, on talent development, interacting more with the board/community and creating a long-term vision.
When a CEO Exits (or should)—what are the Board’s Succession Options?
By Eugene Fram Free Digital Image
CEOs of for-profit and nonprofit organizations typically come and go. Those executives that remain in place for an extended period may be highly valued for their demonstrated skills and accomplishments. One CEO I know has reached a 30 year anniversary and is still innovating. Other CEOs, including organization founders, may remain on the job past the point of growth. The nonprofit environment can be a comfortable workplace—a board member I once interviewed remarked that his long-serving CEO had a great “deal.” He meant the nonprofit wasn’t even close to its potential I’ve even encountered CEOs who admit that they can run the organization on automatic, convinced that new challenges will be similar to those of the past.
Questions For Nonprofit Board Meetings—And Why They Are Needed
My greatest strength as a consultant is to be ignorant and ask a few questions. – Peter Drucker
By: Eugene Fram Free Digital Image
Knowing the right questions to ask at a nonprofit board meeting is a critical part of a board member’s responsibility. Following is a list that, as a nonprofit director, I want to keep handy at meetings. * I also will suggest why I think each is important in the nonprofit environment. Compliance and overviewing management alone do not guarantee success.
What is our one sentence strategy?: It needs be short to convey the essence of the impact the organization is creating—a brief abstract of your mission that is easy to understand. Example from my experiences: “We serve the homeless and seniors by helping them to sustain their lives with healthy food, housing and other support services.”
What is our organization’s 10-to-15 year dream?: Not a question frequently asked, but needed to fashion strategies in the intervening period. Traditionally board and management feel that such dreams don’t have practical applications. They do if passed to future generations of boards and managers. To foster continuing discussion, a good idea is to initiate a simple process, which is implemented every few years, to determine whether or not these “dreams” are still relevant and being accepted by board and staff.
What are the non-negotiable core values that dictatehow we behave?: Something that needs to be reviewed annually by a group of more visionary board people and management. In rapidly growing nonprofits these may not have been communicated to new managers and employees
What are the key priorities we need to focus on in the next three to five years?: Needed as a motivation to asses the impact of strategic planning. Too often operational issues instead of strategic items dominate meeting agendas.
What are the key metrics or key performance indicators we will use to measure our progress? Both quantitative (e.g., financial, clients served) and qualitative (e.g., advocacy, community impact) need to be addressed. Qualitative impacts are much move difficult to access, and often they are not developed for the annual review. **
What kind of cash flow do we need to sustain and grow our organization?: A key indicator for both for-profit and nonprofit organizations. The importance of strong cash flow is encompassed in the adage “cash is king.” Having cash puts the nonprofit in a more stable position with better buying power. While the nonprofit can borrow money at times, cash affords the organization greater protection against loan defaults or foreclosures. Cash flow is distinct from cash position. Having cash on hand is critical, but cash flow indicates an ongoing ability to generate and use cash. Nonprofits that include in-kind donations in their revenue streams have an obligation to separate cash vs. in-kind income for financial analysis. and annual reports to stakeholders.
All of these questions need to be reviewed annually, but in my experiences they rarely surface in board discussions.
Can Small Experiments Test Nonprofit Strategic Validity?
By: Eugene Fram Free digital image
When given a series of potential mission changes, modifications or opportunities, most nonprofit boards take the following steps: (1) Discuss alternatives (2) Develop working plans, board/staff presentations and funding proposals (3) All three usually are packaged into a three or five year strategic plan for implementation. Typically the process can take about six months to “get all stakeholders on board.” When something new is suggested, the conservative board and nonprofit management immediately respond, “Great idea, let’s consider it in the new strategic plan.” Results: It can take three to five years to implement the idea, assuming the plan actually gets off the shelf, not an unusual occurrence for nonprofit organizations!
Another alternative being implemented by some nonprofit is to use a rapid experimentation approach called Lean. “First developed for use in the for-profit world,(especially startup ventures) … the method focuses on new ideas for products/services through iterative experiments. Lean practitioners build simple prototypes ‘called minimum viable products/services (MVPs),’ …move quickly to get feedback on these items from constituents/stakeholders.” * As long as they have some positive iterations they continue to full product development.
Example: The small software division of a larger firm suggested a program that it felt certain would have great marketability because of it perceived uniqueness.
As an initial part of a Lean process, the software developers were required to present it personally to a small group of potential customers. As a result of the interviews, both marketing and development executives dropped it.
How Can Nonprofit Boards Utilize Lean Experimentation?
These lean experiments can be conducted at minimum costs and with small samples that initially may not be statistically significant. (For example, in the software case cited above, there were only four customers in the sample, but they were significant ones.)
Not being able to afford the time and money to develop excellent metrics, nonprofit boards, especially in assessing ambiguous and qualitative impacts, need to initially glean what they can from the use of imperfect metrics. (http://bit.ly/OvF4ri). The metrics can be anecdotal, subjective, interpretive or qualitative. For most nonprofits, it is a great leap forward from doing nothing or taking years to implement action. Also losing time invested in offering a client centered opportunity? The most critical requirement is that the directors and management agree that the process is reasonable and that outcomes from each experimental iteration constitute fair and trustworthy information.
A Current Example
There seems to be a growing body of knowledge of how to apply the art of lean in the nonprofit environment. * The use of lean to assess the proper venues to select social media by which to communicate with donors and other stakeholders is an example. All agree that the use of various social media venues is difficult to assess for both for-profits and nonprofits.
Here, as an example, is what might be done to obtain some directions on using social venues to reach millennials. Charitable nonprofits are seeking ways to communicate with this group as potential volunteers and future donors. Instead of a board waiting to take action on a broad social media strategy before taking some action on social media, it might start with some small-scale, low cost experiments. The information it obtains from one or two MPVs would be useful in backing into a comprehensive social media strategy when a new strategic plan is needed. But an early MPV also might provide some information for immediate action.
Summary: Like any management process lean is not a panacea for either the business or nonprofit sectors. It has its advantages and disadvantages and will not replace more rigorous process, when required–longitudinal studies and strategic planning. However, its experimental design feature can help drive the nonprofit decision process to be more effective and efficient. That alone can help to recruit more able directors, who because of time-compressed lifestyles, now are impatient with the traditional pace of nonprofit decision-making.
Nonprofit Board Discourse: a Meeting of the Minds??
By: Eugene Fram Free Digital Image
Several years ago, a nonprofit board member complained to me that there was too little “conflict” at board meetings. Too few hands were raised to challenge or simply question the efficacy of certain important agenda items. Having participated in hundreds of nonprofit meetings, I have observed that this laissez-faire response still typifies a significant number of board member’s attitudes, especially for items that deserve vigorous discussion. Why is that? And why can the term conflict be perceived as an asset to an organization that is determined to move forward?
Below are some answers based on my own experience in the nonprofit environment.
Once Again! Should Nonprofit Chief Executives Should Have Title: President/CEO?
By Eugene Fram Free Digital Image
This post, over several years, has developed a record of continued viewing or comment interest. Rarely a day passes in which the data doesn’t include several views. Perhaps the controversial nature of topic causes the longevity of interest?
When nonprofit organizations reach a budget level of over $1 million and have about 10 full-time staff members it is time to offer the chief operating officer the title of PRESIDENT/CEO. In addition, the title of the senior board volunteer should become CHAIRPERSON OF THE BOARD, and the title of EXECUTIVE DIRECTOR needs to be eliminated. Experience has shown that with a reasonably talented PRESIDENT/CEO at the helm, he/she can provide the following benefits:
Must Nonprofits Develop Employee Benefits That Substitute For Annual Raises?
By: Eugene Fram Free Digital Image
An analysis in the Washington Post reports that a tsunami-style change has been taking place in the manner in which United States employees are being paid—benefits are being offered in place of annual salary increases. (http://wapo.st/1MwoIBZ) Driving the change are the needs of a substantial portion of millennials who appreciate immediate gratifications in terms of bonuses and perks, such as extra time off and tuition reimbursement. Employers like the arrangement because they can immediately reward their best performers without increasing compensation costs. Example: One sales employee spent weeks reviewing dull paperwork, was very diligent in the process and was given three extra days of paid leave. She said, “I think everybody would like to make more, but what I liked about it was the flexibility.”