Stakeholder Relations

Nonprofit Boardroom Elephants and the ‘Nice Guy’ Syndrome: A Complex Problem

 

Nonprofit Boardroom Elephants and the ‘Nice Guy’ Syndrome: A Complex Problem

By: Eugene Fram            Free Digital Photo

Revised viewer favorite post

A friend serving on a nonprofit board reported plans to resign from the board shortly. His complaints centered on the board’s unwillingness to take critical actions necessary to help the organization grow.

In specific, the board failed to take any action to remove a board member who wasn’t attending meetings, but he refused to resign. His term had another year to go, and the board had a bylaws obligation to summarily remove him from the board. However, a majority of directors decided such action would hurt the director’s feelings. They were unwittingly accepting the “nice-guy” approach in place of taking professional action.

In another instance the board refused to sue a local contractor who did not perform as agreed. The “elephant” was that the board didn’t think that legally challenging a local person was appropriate, an issue raised by an influential director. However, nobody informed the group that in being “nice guys,” they could become legally liable, if somebody became injured as a result of the inferior work and their inaction.

Over the years, I have observed many boards with elephants around that have caused significant problems to a nonprofit organization. Some include:

• Selecting a board chair on the basis of personal appearance and personality instead of managerial and organizational competence. Be certain to vet the experience and potential of board candidates carefully. Beside working background (accounting, marketing, human resources, etc.), seek harder to define characteristics such as leadership, critical thinking ability, and position flexibility.

• Failure to delegate sufficient managerial responsibility to the CEO because the board has enjoyed micromanagement activities for decades. To make a change, make certain new board members recognize the problem, and they eventually are willing to take action to alleviate the problem. Example: One board refused to share its latest strategic plan with it newly appointed ED.

• Engaging a weak local CEO because the board wanted to avoid moving expenses. Be certain that local candidates are vetted as carefully as others and that costs of relocation are not the prime reason for their selection.

• Be certain that the board is not “rubber-stamping” proposals of a strong board member or CEO. Where major failures occur, be certain that the board or outside counsel determines the causes by conducting a postmortem analysis.

* Retaining an ED who is only focusing on the status quo and “minding the store.” The internal accounting systems, human resources and results are all more than adequate. But they are far below what can be done for clients if current and/or potential resources were creatively employed.

* A substantial portion of the board is not reasonably familiar with fund accounting or able to recognize financial “red flags.” Example: One CFO kept delaying the submission of an accounting accounts aging report for over a year. He was carrying as substantial number of noncollectable accounts as an asset. It required the nonprofit to hire high-priced forensic accountants to straighten out the mess. The CEO & CFO were fired, but the board that was also to be blamed for being “nice guys,” and it remained in place. If the organization has gone bankrupt, I would guess that the secretary-of-state would have summarily removed part or all of the board, a reputation loss for all. The board has an obligation to assure stakeholders that the CFO’s knowledge is up to date and to make certain the CEO takes action on obvious “red flags”.

* Inadequate vetting processes that take less board members’ time, especially in relation to family and friends of current board members. Example: Accepting a single reference check, such as comments from the candidate’s spouse. This actually happened, and the nominations committee made light of the action.

What can be done about the elephant in the boardroom?

Unfortunately, there is no silver bullet to use, no pun intended! These types of circumstances seem to be in the DNA of volunteers who traditionally avoid any form of conflict, which will impinge upon their personal time or cause conflict with other board members. A cultural change is required to recruit board members who understand their responsibilities, or are willing to learn about them on the job. I have seen a wide variety of directors such, as ministers and social workers, successfully meet the challenges related to this type of the board learning. Most importantly, never underestimate the power of culture when major changes are being considered. As Peter Drucker noted, “Culture can eat strategy for breakfast.”

In the meantime, don’t be afraid to ask naive question which forces all to question assumptions, as in Why are we really taking this action? Have we really thought it through and considered other possibilities? http://bit.ly/1eNKgtw

Board  members need to have passion for the organization’s mission. However, they also need to have the prudence to help the nonprofit board perform with professionalism.

How Is Your Nonprofit Board Adjusting To “The Great Resignation”?

How Is Your Nonprofit Board Adjusting To “The Great Resignation”?

By: Eugene Fram                Free Digital Image

An article in The New York Times (12/23/2021) reports, In Louisville Ky, nonprofit groups are losing social workers to better-paying jobs at Walmart and McDonalds.  *  With 34.5 million American job resignations reported by, August 31, 2021, it’s reasonable to estimate that by the end of 2021 about 46 million Americans will have left their current jobs during the past year. This is about 25% of the American work force. ** The movement has been named “The Great Resignation.”      

Reasons for change range widely.  Beyond salary, some families may have found living on one salary acceptable, others may have moved to rural areas for quieter living, still others may have used a lay-off bonus to have time to get away from an authoritarian boss. ***          

It appears this robust employment turnover will continue. As a result, nonprofit boards, within their overviewing responsibilities, must focus on recruiting and retaining organization talent, like few nonprofit boards have done in the past. (more…)

The Nonprofit Board’s New Role In An Age of Exponential Change

The Nonprofit Board’s New Role In An Age of Exponential Change

By Eugene Fram                 Free Digital Image

Most nonprofit boards are being faced with huge pressures—reduced financial support, challenges in integrating new technologies, recovering from Covid impacts and difficulties in hiring qualified personnel who will consider “nonprofit” wages. To survive long term, board members need to be alert to potential opportunities. These may be far from the comfort zones of current board members, CEOs and staff.

(more…)

Raising The Bar For Nonprofit Involvement

 

Raising The Bar For Nonprofit Involvement

By Eugene Fram                            Free Digital Image

It’s no secret that some nonprofit board members cruise through their term of board service with minimal involvement. McKinsey Company, a well-known consulting firm, has suggested five steps that can be used to counteract this passivity in for-profit boards. * With a few tweaks, McKinsey suggestions (in bold) are relevant to the nonprofit board environment where director engagement is often a challenge.

(more…)

Once Again: How to Keep Nonprofit Board Members Informed.

Once Again: How to Keep Nonprofit Board Members Informed.

By: Eugene Fram.            Free Digital Image

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 board members informed of significant developments. Still, there’s no need to clutter regular board meetings by reporting endless details about operations.

(more…)

Nonprofit Board Members—Are They Aware of Their Independent Director Duties?

Nonprofit Board Members—Are They Aware of Their Independent Director Duties?

By Eugene Fram     Free Digital Image

The vast majority of nonprofit board members serve as independent directors. They are not members of management, have other occupations as their major focus, but have some significant responsibilities to a community, profession, government or professional/trade association. Mary Jo White, Former Chair, U.S. Securities & Exchange Commission, outlined the responsibilities of fund board members who also are independent directors to overview the investment dollars made by 53 million U.S. households. Many of her comments easily apply to nonprofit board members and their responsibilities as Independent directors. Note: The italicized materials following are White’s direct quotations. *

(more…)

How Can A Chief Operating Officer (COO) Advance Your Nonprofit Organization?

How Can A Chief Operating Officer (COO) Advance Your Nonprofit Organization?

By: Eugene Fram                Free Digital Image

In my decades of involvement with nonprofit boards, I have encountered several instances in which the CEO has failed to engage the services of a COO–when this addition to the staff was clearly needed. In each case and for whatever reasons, this reluctance to act left the nonprofit organizationally starved.

This means that the CEO continues to handle responsibilities that should have been delegated, some of which a predecessor may had assumed during the start-up stage. I once observed a nonprofit CEO with an annual $30 million budget personally organize and implement the annual board retreat, including physically rearranging tables/materials and cleaning the room after the retreat! When top leadership is deflected in situations at this level, client services and the general health of the organization is likely being negatively impacted.

(more…)

Nonprofit Boards Should Consider the Implications of Artificial Intelligence (AI)

Nonprofit Boards Should Consider the Implications of Artificial Intelligence (AI)

BY: Eugene Fram           Free Digital Image

AI is rapidly being implemented in many environments, some with aggressive intensity. Walmart, for example, will be replacing 7,000 jobs with artificial intelligence powered technology. Foxconn will be replacing 60,000 factory jobs with machines. * While this is a minuscule portion of Walmart’s total employment, it presents a new reality—machines create fascinating outputs that require less energy to produce and do so at lower costs. They are capable of making decisions, regardless of skill level. *

What Nonprofit Skill Levels Might be At Risk

(more…)

Board Member Networking Pays Off for Nonprofits

Board Member Networking Pays Off for Nonprofits

By Eugene Fram    Free Digital Image

Over decades of nonprofit board membership and consulting, I have rarely observed volunteer board members effectively networking with their peers to develop best board practices. Also rarely do I see them accompany management to regional or national conferences related to the nonprofit’s mission. These types of exposures are necessary to have groups of board members capable of making generative suggestions.

For directors who are willing and able to network, I suggest the following: *

(more…)

Want Better Nonprofit Board Cultures? Look for Four Board Behaviors

 

By Eugene Fram                Free Digital Image

Board cultures can be difficult to modify or change in for-profit and nonprofits. A recent McKinsey study demonstrated the strength of the board culture in three different levels of board operations—ineffective, complacent and striving. * Differentiated achievement seems to be largely dependent on four behaviors. (See bold type.) Centered on my experiences, they can be applied to nonprofit boards. At the least, the behaviors can motivate considerations for board modifications. (more…)