SuccessionPlanning

Guidelines For Developing Authentic Nonprofit Board Leaders

Guidelines For Developing Authentic Nonprofit Board Leaders

By Eugene Fram               Free Digital Image

The problems of Wells Fargo and Enron  have provided negative examples for future leaders, according to William George, Senior Fellow at the Harvard Business School. As an antidote to these and others serious problems that have plagued business and nonprofits in the last several decades, he cites the movement towards Authentic Leadership. He further lists six guidelines to identify behaviors in such leaders. Following are my views on how his guidelines can be useful to directors and managers in the nonprofit environment. (http://hbswk.hbs.edu/item/authentic-leadership-rediscovered)

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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.

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Nonprofit Boardroom Elephants and the ‘Nice Guy’ Syndrome: An Evergreen Board Problem?

Nonprofit Boardroom Elephants and the ‘Nice Guy’ Syndrome: An Evergreen Board Problem?

By: Eugene Fram    Free Digital Image

At coffee 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 three-year term had another 18 months 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 board member’s feelings. They were unwittingly accepting the “nice-guy” approach in place of taking professional action.

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

 

The Nonprofit President/CEO–How Much Board Trust Is Involved

By: EugeneFram    Free Digital Image

The title, full time president/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.* It is not an ambiguous set of titles. However, the terms “manager” or “executive director” can be quite ambiguous and do not generate the same external understanding or respect. An executive director can be the administrator in a small church or the operational head of a large arts organization. The public and some corporate directors often view managers and executive directors (because of the organizational history of nonprofit) as “hired hands,” not as professionals who, with strategic vision, are able to manage all operational activities.

The  full time president/CEO designation calls for a trusting relationship with the board based on mutual respect, drawing from the symbolism that he or she is the operating link between board and staff. It is a newer type of 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 evaluation of outcomes and impacts of the CEO and organization annually.

Following are some of the behaviors that signify a trusting partnership is in place:

  • The president/CEO:
    • Has authority to initiate short-term loans from a bank for emergency funding. The board has established a limit on the amount to be borrowed.
    • Sees himself/her as an equal partner in fundraising efforts. Knows how to effectively interact with top managers in stakeholder organizations.
    • Is comfortable is interfacing with senior executives of other NFP organizations, especially those to which the organization wishes to emulate.
    • Is confident about his/h management experiences and expertise, understanding that nobody does a job perfectly.         Occasional modest management missteps are viewed by the board in proper perspective.
    • Has good professional relationships with board members.
    • Does not view the job as being in jeopardy.
    • Feels comfortable in disagreeing with board members.
    • Feels comfortable with the processes the board uses to have executive sessions without management present.
    • Feels comfortable with a rigorous examination of CEO performance.
  • Board Members:
    • View CEO as a peer who deserves respect, not seen as a board servant.
    • Do not discuss the CEO’s professional limitations outside of the boardroom.
    • View the CEO as an effective staff leader.
    • Look to the CEO to be have state-of-art knowledge and vision for the areas in which the mission has been defined.
    • Expect the CEO to grow professorially and tries to support that growth within the financial means of the organization.

“In order for a trust-based governance system to work, …(nonprofits) must first develop a culture that discourages self-interest.”** In the nonprofit environment, many work to achieve a mission at the expense of self-interest. Consequently, a “high-trust” culture should be easier to establish at the senior levels. 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.

* Note Well: In many states a volunteers who carry the title of president /CEO can accrue personal liabilities not incumbent on other board members.
** David F. Larcker and Brian Tayan (2013) “Trust: The Unwritten Contract in Corporate Governance,” Stanford Closer Look Series, July 31st.

 

 

     

    How The Nonprofit CEO Can Exit Gracefully

     

    How The Nonprofit CEO Can Exit Gracefully

    By: Eugene Fram         Free Digital Image

    Like many nonprofit CEOs, Tom Smith has held the position for 10 or more years. As he reported, and I agreed with his assessment, the association he heads was doing well. The membership has increased substantially, revenues exceed expenses each year, and through a series of development events, the reserve account now exceeds $5 million. But Tom was not satisfied. He said the job has become “boring.” In his words, it’s like turning on automatic at the beginning of each year—adjusting to a new board chair, developing a budget and being alert for “Black Swan” events that nobody can anticipate.   He quietly said to himself at the beginning of each year, “I wonder what the big problem is going to be this year?”

    Preplanning  

    Tom had a preplan: Several years ago, he had purchased an avocado farm in California, and had a partner-manager operating it successfully. He and his wife planned to move there, once he decided it was time to leave his CEO position.

    Other potential preplanning actions he might have taken:.

    • Quietly investigate the potential to join a nonprofit consulting firm.
    • Assess whether or not he can be successful as a solo consultant.
    • Quietly interact with contacts in nearby education institutions to determine how his experiences and educational credentials might qualify him for teaching or administrative positions.
    • Review grant proposal requests from foundations and governments to assess how his expertise might match those of people needed to manage the grants.   (Be certain none of this type of activity creates a conflict of interest with his current CEO position.)
    • Register with search firm to test his “marketability’ for a more interesting CEO position. (Beware of any firm that requires a fee from you.)

    Be Proactive

    Once preplanning is complete, discuss it carefully with your family, financial advisors and possibly with an attorney if a major relocation is going to be involved. Be sure that they view the change as you do. Make certain they don’t see a missed opportunity within the current position. Also be certain that the time frame is reasonable for the CEO and the organization. It would be a mistake for the CEO to leave when the CFO is planning to retire. Traditionally, a one to three year period is needed from first discussion to the time the CEO departs.

    Inform the Board

    This should be accomplished in several steps. First quietly inform the board chair. Then at intervals alert other members of the board, the management team and staff.   The CEO msy have been around for a long time and has an obligation to prepare the organization for a major change. I recently watched a nonprofit executive group “tread water,” for 18 months from the rumors of the CEO’s departure through the selection of the new CEO and his arrival at the office.   To develop a graceful exit, the incumbent needs to be aware of the situation and help provide s smooth transition.

    Leaving With Dignity 

    Leave as scheduled. Any delay will extend the uncertainty that surrounds the transition.   As noted above, nonprofit organizations have their own ways of remaining static during these transition periods.   Your CEO nonprofit successor deserves better strong support.

    How Often Do Nonprofit Board Members Need to Question Strategic Norms?

    How Often Do Nonprofit Board Members Need to Question Strategic Norms?

    By Eugene Fram                Free Digital Image

    A new nonprofit director has a lot to learn. Considering that his/h term of service will be relatively short (typically four to six years), he/s must quickly learn the “ropes” to participate in a meaningful way. In this process, colleagues and leadership will acquaint him/h with prevailing board systems and culture—often ignoring the depth of expertise she/h can employ. Example: An expert in financial strategies may be asked to assist the CFO with accounting details, far below the person’s skill level. Oftentimes the new board member also is greeted with a mantra that says, “We’ve always done it this way.” As the director moves in his path from novice to retiree, during a short tenure, there is little opportunity to suggest innovations that differ from the accepted fundamentals and to successfully advocate for change.

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    A Nonprofit Paradox: Weak Leadership Pool, Positive Organizational Outcomes?

    A Nonprofit Paradox: Weak Leadership Pool, Positive Organizational Outcomes?

    By:  Eugene Fram                   Free Digital Image

    It happens: one or both of the two nonprofit engines—governance and/or management — sputters out, yet the organization continues to meet its goals and deliver adequate service to its constituents. Some examples: a child placement agency manages to maintain the quality of its oversight while struggling to deal with an admittedly inept board and CEO. Another example: An ineffective volunteer board at a youth center, meeting quarterly for a couple of hours, allows the CEO to really manage the board and to motivate the staff. The CEO realized she and the agency were in dangerous positions without an innovative board providing standard oversight, although client services were positive.

    A staff, dedicated to its own professionalism, can on occasion compensate for a lackluster board and/or senior management team by continuing to provide reasonable value to the nonprofit’s clients. Another example involved the ED, simultaneously a deputy sheriff, and his law enforcement colleagues taking payments to refer wayward youths to ED’s shelter. However, the staff continued to provide valuable services. In the end it’s about leadership and the ability to step up to the plate when dysfunction occurs. In the last case, the staff acted in a professional manner, although the management was entirely corrupt and the board evidently inept.

    Klaus Schwab, founder of the World Economic Forum, has some innovative thoughts on that subject. He identifies four key characteristics he believes are critical to strong innovative organizational leaders. * I have listed them below, and the ways I think his ideas can be applied to nonprofit governance. (more…)

    Errors That Can Cloud Nonprofit Board’s Decision Making–Tread With Care

     

    Errors That 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 approved the acquisition without sufficient review.  When the acquisition was consummated, the founding CEO of the subsidiary refused to take directions from the CEO of the nonprofit. In addition, the normal financial settlement of the project requires that a portion of the price be withheld, in escrow, pending adequate performance.  In this instance, the nonprofit paid cash for the acquisition.  Based on  a lack of performance, the operation was finally closed with a substantial loss.

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    Establishing Effective Nonprofit Board Committees–What to Do

    Establishing Effective Nonprofit Board Committees–What to Do

    By: Eugene Fram          Free Digital Image

    Based on my board and consulting experiences, following are ways that effective nonprofit boards have established  board committees.

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    Nonprofit Boards and the Oversight Gap in Internal Leadership Development 

    Nonprofit Board and the Oversight Gap in Internal Leadership Development 

    By: Eugene Fram                    Free Digital; Image

    Although the nonprofit CEO is charged with nurturing the development of his/h staff, the board is responsible for over-viewing the process. Research evidence shows both board and management may be neglecting their duties in regard to this responsibility. Only (20% to 30%) of nonprofit CEO positions are filled internally, a rate that can be about half the rate of for-profit organizations–(about 30% to 50%.) The same research shows that, “Hiring the more (internal personnel) can improve performance at the two-year mark by 30%.”  * These figures are averages and can vary widely based on organizational practices and industry standards. (more…)