Nonprofit outcomes

How Do Nonprofits Determine CEOs’ Productivity?

 

 

 

How Do Nonprofits Determine CEOs’ Productivity?

By: Eugene Fram           Free Digital Image

Nonprofit organizations can’t have a traditional bottom line profits. If they did, CEO productivity determination could be less complicated. Determining a fair CEO  salary or benefit based on productivity, can be a complex issue for a nonprofit board. Providing too little or too much can be dangerous for the organization and possibly the board members. Although the spadework for salary and benefits need to be done by a small committee, the entire board needs to fully agree on the rationale for the final decision.

Following are some of significant challenges that I have noted nonprofit boards face when determining what is a fair system.

Evaluation Failure: Some CEOs might receive high  salaries because a series of boards have not effectively evaluated her/h performance. It is not unusual to find CEOs who have not been formally and effectively evaluated for years. They are held in position because they are “minding the store,” not being professional managers. It isn a comfortable position for both board and CEO.  As one CEO commented to me, ” I present the board with alternatives, they make the decision that I must implement.”

  Market Forces: Nonprofit organizations are restricted by law from providing their CEOs with excess benefits. (Section 4958 – IRS Code) As a result, the benefits offered the CEO must reflect a market level found in the geographic area and/or the person’s professional qualifications. For example, nonprofit health insurance organizations may have to compensate CEO at levels that are competitive with for-profit organizations. In my opinion, unusual CEO benefits (e.g. luxury cars) that are hard to justify market-wise are invitations for an IRS inquiry

Board Relationships: Obviously having a good, not perfect, interrelationship with the constantly changing board membership is critical to support a reasonable  compensation level. It is especially important in association type nonprofits where the person holding the board chair position changes annually. I recently encountered one board chair who, although being very pleased with the CEO’s performance, expressed a concern that the CEO did not have good communications with board members. The chair welcomed a suggestion that the board might engage a professional coach to help the CEO work on the issue.

Additional Benefits: Although not usual in the for-profit environment, special benefits can be offered the nonprofit CEO, especially if they relate to job performance. These can range from special insurance coverage to extensive travel benefits , educational opportunities. or even housing and entertainment allowances. If involved with fundraising, like a college president, housing and entertainment benefits may be appropriate. In some unusual instances the person’s spouse or significant other may also receive compensation for time spent to benefit the nonprofit.

Nonprofit CEO: It is not unusual for the  nonprofit CEO to undervalue his/h own worth, especially when associated with a human services type of organization. This then keeps a cap on the whole salary scale and can make it difficult to hire capable people. Example: I encountered one CEO with degrees in human services and management areas plus 30 years of excellent experiences. Admired for his performance by peers in a nearby university, he refused to use that leverage to seek equitable compensation.

Personality: Now doubt a positive CEO personality can be an attribute in working with boards and staffs.mAt an extreme, some nonprofit boards continue to support well-liked CEOs, even after they have been found to be involved with fraud. The board then has to be removed by state attorneys’ actions.

Summary:
Nonprofit boards can do a poor job of determining nonprofit CEO salary and benefits because of inherent challenges. Evaluating critical qualitative outcomes and impacts, like improving life quality and successful advocacy, can be daunting. Nonprofit compensation must in line with market levels and professional qualifications, or the board members may acquire an IRS personal liability if they provide excess salaries and benefits!     

The “Compliant” Nonprofit Board—A CEO Takes Charge Like a Founder!

The “Compliant” Nonprofit Board—A CEO Takes Charge Like a Founder!

By Eugene Fram              Free Digital Image

According to BoardSource, “ Founderitis’ and ‘founder’s syndrome’ are terms often used to describe a founder’s resistance to change. When founderitis surfaces, the source of the dilemma often is a founder’s misunderstanding of his or her role in an evolving organization.” * I would like to suggest that a nonprofit CEO also might suffer from the “founderitis illness,” sometimes with the board only being mildly or completely unaware of it. (more…)

Good News for Nonprofit Board Members & CEOs—Examples From The Behvorial Sciences

Good News for Nonprofit Board Members & CEOs—Examples From The Behvorial Sciences

By Eugene Fram             Fee Digital Image

Behavioral economics, finance and marketing apparently are making significant strides in helping nonprofits to understand how to maximize their development efforts. Following are three studies that appear to have significant nonprofit interest.

(http://www.behaviouralinsights.co.uk/bx2015/rounding-up-the-latest-insights-from-behavioural-exchange-2016/(more…)

Is there truth in the statement that ALL nonprofits are actually businesses, and they need to be run like businesses?

Is there truth in the statement that ALL nonprofits are actually businesses, and they need to be run like businesses?

By Eugene Fram                Free Digital Image 

In my opinion, too many board and staff members in the nonprofit environment:

Do not realize that a nonprofit can focus even more effectively on “caring” missions, visions and values while operating under a business model. Many functions of a business and are the same for both types of organizations — financial operations, human resources, marketing, board governance, etc.

(more…)

Eliminating the Nonprofit Board’s Addiction to Micromanaging

Eliminating the Nonprofit Board’s Addiction to Micromanaging

By: Eugene Fram        Free Digital Image

Micromanaging is the DNA of many nonprofit boards. It all starts with the community model culture of start-up periods. Board members have to assume staff roles to drive the nonprofit operations. But it often continues long after an adequate staff is in place. By habit, the board still focuses on operational details—also known as “reviewing the weeds.”   I recently observed a board that was making a policy decision about the change in timing of an annual development event.   Once the decision was made, the directors continued a “weed type” discussion about table locations, invitations and other issues that were in the job of management to implement. The nonprofit is about 50 years old and has a budget of $10 Million with a 100 person staff. (more…)

Measuring Nonprofits’ Impacts: A Necessary Process for the 21st Century

Measuring Nonprofits’ Impacts: A Necessary Process for the 21st Century

By Eugene Fram      Free Digital Image

Nonprofit boards and CEOs in the United States are being overwhelmed with requests from foundations and governmental agencies to move from providing outcome data to providing impact data. One nonprofit with which I am well acquainted has been required to reform its IT program to meet the requirements of a local governmental IT program, so that impacts can be assessed. It will be interesting to see how this scenario plays out.

Unfortunately, outcomes and impact are often unrelated, which is why a program that seems to produce better outcomes may create no impact at all. Worse, sometimes they point in opposite directions, as can happen when a program works with harder-to- service populations resulting in seemingly worse conditions, but (has) higher value-added impact. … Rigorous evaluations can measure impact (to a level of statistical accuracy), but they are usually costly (a nonstarter for many nonprofit), difficult and slow. * But how do the medium and small size nonprofits measure actual results in the outside world such as enhanced quality of life, elevated artistic sensitivity and community commitment? (more…)

The Nonprofit CEO–How Much Board-CEO Trust Is Involved?

 

 

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 behaviors can give an idea of whether it is excellent, good or nonexistent.

Following are some of the behaviors that signify a trusting partnership is in place: (more…)

Once Again! Should a Nonprofit CEO Be a Voting Member of the Board of Directors?   

Once Again! Should a Nonprofit CEO Be a Voting Member of the Board of Directors?

BoardSource, a professional governance organization, reports that this question is one of the most asked. Google reports about eight million citations, in a brief .52 second search, related to the issue or related issues. The question continues to be debated, and the need for comment and opinion seems insatiable.

But here are the issues as I see them:

State Legislation: Most nonprofit charters are issued by states, and it appears that the vast majority of American nonprofits are governed by these regulations. California permits the CEO to be a voting member. Until a recent change, New York did allow the CEO to become a board member. The motivations behind the legislation center on preventing a CEO developing conflicts-of interest, especially as they relate to salary decisions. Also, there is a feeling among some nonprofit directors that the board must be the “boss.” This attitude can even go as far as one nonprofit board member’s comment: “We have a real board, we tell the CEO exactly what to do.”

It appears that the restriction is considered a “best practice.” Some nonprofits move around it by naming the CEO an ex-official member of the board, a member without a vote. However, there is a “better practice,” available where permitted by legislation.

Developing An Even Better Practice in a Nonprofit

Start At The Top: Allow the CEO to hold the title of President/CEO and allow the senior volunteer to become Board Chair. This signals to staff and public that the board has full faith in the CEO as a professional manager. In addition, the change absolves the senior volunteer of potential financial liability, not unlike the volunteer who unwittingly received a $200,000 bill from the IRS because it appeared he had strong control of a bankrupt nonprofit’s finances and operations.

Ask The CEO: Make certain the CEO is willing and able to accept full responsibility for operations. Not all CEOs, designated as Executive Directors, want the increased responsibilities attached to such a title and to become a board member. These managers frequently feel comfortable with having the board micromanage operations and often openly discuss their reservations.

The CEO Becomes A Communications Nexus: Under the CEO’s guidance, board-staff contact takes place on task forces, strategic planning projects, at board orientations and at organization celebrations. It openly discourages the staff making “end runs” to board members, not a small problem in community-focused nonprofits

Brand Image: As a board director, the CEO can be more active in fund development. The board position and the title can easily help the CEO to build the organization’s public brand image through the clear public perceptions of the board’s choice to lead the organization. This provides leverage to make greater use of the board-CEO relationship required to develop funds. It can allow the CEO to be the spokesperson for the organization’s mission and to quickly become the center for public statements when a crisis develops.

Peer Not Powerhouse: Probably descending from early religious nonprofits, its personnel may be seen by part of the public as not being “worldly.” They must be over-viewed by a group of laypersons that encounters the real world daily. The CEO, as a voting member and a board team peer, takes on increasing importance to reducing these attitudes. As long as the CEO works successfully as a peer not a powerhouse, there should be substantial benefits to the organization.

 

 

 

 

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 almost daily by one blog site, ** shows something is wrong.   Following are some inherent problems. (more…)

Big Data Are Great—But Imperfect Metrics Work for Nonprofit Boards!

 

Big Data Are Great—But Imperfect Metrics Work for Nonprofit Boards!

By Eugene Fram

Nonprofit boards need to expand their evaluations of nonprofit managers and their organizations adding more behavioral impacts * to their evaluations.

For example, a nonprofit might count the number of volunteers that have been trained. But boards must go to the next level in the 21st century.
In the case of volunteers, they must seek to understand the impacts on those trained. They need, for instance, to understand how well these volunteers are assisting clients and how they are representing the nonprofit to the clients. The training is a process, but it determines their relationships with clients and yields impact data.

Qualitative data must be developed to the next level, and the average nonprofit CEO will argue that he/she doesn’t have the staff or expertise to develop impact data. Engaging an outside organization to complete a simple project can cost thousands of dollars. (more…)