Small experiments

Nonprofit Board Members Can Be Change Agents

 

Nonprofit Board Members Can Be Change Agents

By: Eugene Fram     Free Digital Image

Nonprofit boards should always support policies that will allow the organization to drive innovative actions. Following is a list developed from successful for-profits (in italics) that can be easily adapted to the nonprofit environment. *

Having a Succession Plan: This includes two elements: The first is a plan to avoid disruption in the event that he CEO is temporarily incapacitated. Hopefully it allows designating someone internally who may be capable to take the position. However in many nonprofits, I have encountered, the CEO has not developed this staff talent because of budget limitations. When this occurs, the board should have an experienced consultant in mind to fill the position for an interim period.   In my opinion, it’s not usually desirable to have a board person replace the CEO on an interim basis.   This can tend to blur the line between board and management when the position is permanently filled. The new CEO may hesitate to modify changes instituted by an interim board CEO. (more…)

How Can Nonprofit Boards Overcome the Inertia of Certain Directors?

How Can Nonprofit Boards Overcome the Inertia of Certain Directors?

By: Eugene Fram   Free Digital Image

Making major changes in mission, board structure, management or other significant matters is difficult. The typical nonprofit board will be divided into several groups on the issue: 1) directors who want change, 2) directors opposed to change, some strongly opposed and 3) what I call “process directors,” persons uncomfortable with major decisions who always want more data or information before voting. (more…)

NONPROFITS NEED A BRAND THAT RESONATES!

NONPROFITS NEED A BRAND THAT RESONATES!

By: Eugene Fram       Free Digital Photo

How do people see your organization? Is your nonprofit clearly perceived, and the unique nature of its work, fully understood in the community or industry?

Nonprofit board members occasionally talk about the organizational brand image but rarely take tangible steps to define it. Yet the creation of a strong brand is a major factor in generating public respect, support and significant funding sources. Potential donors need to believe implicitly in the impact of the nonprofit on its clients. They also need to understand the realities implied in the brand image that fail to match the realities of the organization’s operations. For example, some family services agencies (actually multi-human service groups), have long struggled with a brand perception that they offer only family reproduction services.

Following are some guidelines that may help improve a current image or further clarify the mission which fuels the dedicated efforts of boards, staff and volunteers: (more…)

Major Donor Has Remorse — Nonprofit Board/CEO Failed to Meaningfully Engage Him?

Major Donor Has Remorse — Nonprofit Board/CEO Failed to Meaningfully Engage Him?

After the gift is received, announced and celebrated, where does a nonprofit board and its management go from there? And whose job is it to see that the donor remains engaged and involved in the organization? These are questions that I have been thinking about after a friend brought facts of his donor experience to my attention.

A sad donor story begins with this friend who had been a longtime participant on the board of a nonprofit, eventually serving as board chair; he was also a modest contributor to the organization. During his tenure on the board, he developed a close professional relationship with the very innovative chief operating executive. Even after his term of board service had ended, the friendship between the two continued — as did the former director’s modest gifts to the nonprofit. In a decision to more generously support the organization’s innovative mission the now ex-board member made a substantial financial pledge — unrestricted — to be paid over several years. During the second year of the sustainable pledge the CEO left the organization and moved on to another job; the donor, unfortunately, was never contacted by the CEO’s successor. The donor’s calls to request phone appointments were returned weeks later and abruptly terminated. A staff member was delegated to service the donor, and other than letters of thanks for his annual contribution and copies of routine communications, there was no personal contact.

End of story. My friend, a business consultant, was suffering from donor’s remorse, more formally known as cognitive dissonance. He has not remained in touch with the nonprofit and knows little about any innovative activities. No surprise ending here — his strong support is now welcomed at a number of other nonprofits.

Whose job is it anyway??

After a major grant or gift has been received, many nonprofit delegate relations with the donors to the CEO, other senior officers or a development director. But there’s many a slip between cup and lip — and nonprofit boards have to be sure that future funding is not jeopardized. My thought is that a plan of board oversight might be a solution to unusual situations such as the one described above where the necessity of donor meaningful engagement probably slipped through the cracks. Here are my further thoughts on the subject:

• Since it is widely known that “people give to people, not causes,” the board should have policies or guidelines relating to interpersonal contacts with major donors. Who in management and/or board should be responsible for these contacts? How frequently should the contacts take place? And whose problem is it if things go wrong?

• The topic of major givers should be on the board agenda every three or six months at which time the contact person can update the board on the interaction or any problems that might occur.

• If the contact is a board member, he/she must be thoroughly briefed on the mission and management challenges. If it is a development director, he/she must be articulate on every subject relating to the organization.

• The CEO needs to make qualitative assessments of contact progress. When there is a change in executive leadership, the new CEO must immediately be briefed on the interpersonal status of relations with all major donors.

Donor Remorse should be nonexistent in nonprofit organizations — it can affect both current and future funding. In my opinion, the board should take a more active strategic and policy oversight role in this area. I recommend inclusion of the topic on your upcoming agenda.

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. (more…)

Once Again! Nonprofit CEO: Board Peer – Not A Powerhouse

Once Again! Nonprofit CEO: Board Peer – Not A Powerhouse

By: Eugene Fram

Some nonprofit CEOs make a fetish out of describing their boards and/or board chairs as their “bosses.” Others, for example, can see the description, as a parent-child relationship by funders. The parent, the board, may be strong, but can the child, the CEO, implement a grant or donation? Some CEOs openly like to perpetuate this type of relationship because when bad decisions come to roost, they can use the old refrain: the board made me do it.

My preference is that the board-CEO relationship be a partnership among peers focusing on achieving desired outcomes and impacts for the nonprofit. (I, with others, would make and have made CEOs, who deserve the position, voting members of their boards!) (more…)

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) recently 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. (more…)

Nonprofit Board Cultures Need To Be Defined

Nonprofit Board Cultures Need  To Be Defined

By: Eugene Fram     Free Digital Image

Over several decades of contacts with nonprofit boards, I have yet to find one that has spent any time trying to define the organization’s culture that delivers service. Yet every organization has one. It defines what the organization has done well and what needs to be changed. It can grow over years haphazardly or change quickly when new board members are elected or when a new CEO is appointed. Those newly appointed, for better or worse, can change the organization’s mission as well as its culture. Nonprofit staffs that work a few levels below the board and CEO organizationally are especially sensitive to cultural movements emanating from above. They know that a change in culture can affect their work and livelihood.

The reason that nonprofit boards rarely try to define the cultures of their organizations is that it is an amorphous subject. Ask a group of directors to define the culture of their board or the organization and quite different answers will be given. Yet there are commonalities that arise that can form the culture—conservative vs. liberal policies; legacy vs. future focused programs; operations are clearly defined vs. CEO dominance assumes board powers in a de facto manner; etc.  But cultures need to be defined:  Uber failed in the process, while  Microsoft has an ambition to transform Microsoft  from  “a know it all” to a “learn it all culture” *

I recently found a list of 12 attributes of a strong organizational culture. **  Following are six that I suggest that nonprofit boards should consider in assessing their needs of the organizations. My comments provide some practical ways that each can apply to nonprofit boards and organizations. (more…)

Once Again: How to Keep Nonprofit Board Members Informed.

Once Again: How to Keep Nonprofit Board Members Informed.

By: Eugene Fram

With high performing nonprofit organizations, board members will rarely be invited by the CEO to participate in operational decisions. As a result, management will always have more information than board members. Yet the board still needs to know that is happening in operations to be able to perform their overview process.
The name of the game is for the CEO to communicate the important information and to keep directors informed of significant developments. Still, there’s no need to clutter regular board meetings by reporting endless details about operations. (more…)

The Enron Debacle, 17 years Ago—2018 Lessons for Nonprofit Boards?

The Enron Debacle, 17 years Ago—2018 Lessons for Nonprofit Boards?

By: Eugene Fram                Free Digital Image

In 2001 Enron Energy collapsed due to financial manipulations and a moribund board. It was the seventh-largest company in the United States. Andrew Fastow, the former CFO and architect of the manipulations served more than five years in prison for securities fraud. He offered the following comments to business board members that, in my opinion, are currently relevant to nonprofit boards. (http://bit.ly/1JFGQ6T) Quotations from the article are italicized.

• One explanation of his downfall was he didn’t stop to ask whether the decisions he was making were ethical (moral).

Nonprofits directors and managers can find themselves in similar situations. One obvious parallel is when a conflict of interest occurs.  In smaller and medium sized communities, it is wise to seek competitive bids, especially when th purchase may be awarded to a current or former board member or volunteer.

Board members and managers themselves can be at personal financial peril, via the Intermediate Sanctions Act, if they wittingly or unwittingly provide an excess salary benefit to an employee or an excess benefit to a volunteer or donor. Examples: The board allows an above market salary to offer to the CEO. Also the board allows a parcel of property to be sold to a volunteer or donor at below market values.  See: https://www.irs.gov/charities-non-profits/charitable-organizations/intermediate-sanctions

One subtle area of decision-making morality centers on whether a board’s decision is immoral by commission or omission. Examples: In its normal course of client duties, the board allows managers to travel by first class air travel. Obviously, resources that are needed by clients are being wasted and morally indefensible. On the other hand the moral issue can come in to play, if the nonprofit is husbanding resources well beyond what is needed for an emergency reserve. The organization, in a sense, is not being all it can be in terms of client services or in seeking additional resources. Overly conservative financial planning, not unusual in nonprofit environments, can result in this latter subtle omission “moral” dilemma. Overtly, universities with billions of dollars on their balance sheets have been highlighted as having the issue, but I have occasionally noted smaller nonprofits in the same category.

• He (Fastow) said he ultimately rationalized that he was following the rules, even if he was operating in the grey zones (area).

There can be grey zones for nonprofits. Example: IRS rules require that the nonprofit board be involved in the development of the annual Form 990 report. But what does this involvement mean—a brisk overview when the report is finished, a serious discussion of the answers to the 38 questions related to corporate governance, a record in the board minutes covering questions raised and changes suggested, etc.? A nonprofit boards needs to make a determination on which course is appropriate.

Boards implementing government-sponsored contracts can get into grey areas. Example: Some contracts require the nonprofits to follow government guidelines for travel expenses. I wonder how many nonprofit audit committees are aware of their responsibilities to make certain these guidelines are followed?

According to Fastow, a for-profit director can ask the wrong question—“Is this allowed?” A nonprofit director can make the same mistake. Instead, in my opinion, the better question for a nonprofit should be “Will this decision help the organization to prosper long after my director’s term limit?”

As Fastow did, human service boards can invite trouble if they falsely rationalize an action as being taken for client welfare, and then conclude they are following the rules.

• Mr. Fastow said one way to start changing an entrenched culture is to have either a director on the board, or a hired adviser to the board, whose role is to question and challenge decisions.

Nonprofit directors are often recruited from friends, family members and business colleagues, etc. This process creates an entrenched board.

When elected to the board, a process begins to acculturate the new person to the status quo of the board, instead making best use of the person’s talents. Example: An accountant with financial planning experience will be asked to work with the CFO on routine accounting issues, far below her/h professional level. One answer is to accept Fastow’s suggestion and to appoint a modified lead director or adviser to a nonprofit board. (For details: see: http://bit.ly/13Dsd3v)

An old Chinese proverb states, “A wise man learns by his own experiences, the wiser man learns from the experiences of others. Nonprofit can learn a something from Andrew Fastow’s post conviction recollections to hopefully help avoid signifcnat debacles.