Can A Nonprofit Organization Have An Operational President/CEO & An Executive Director?
By: Eugene H. Fram. Free Digital Image
Yes, if the organization has the following structure:
Board With A Volunteer Chairperson Full-time President/CEO With Full Authority for Operations Executive Director for Division A Executive Director for Division B
However this structure can be confusing to persons in the nonprofit arena. The executive director should have final authority for all operational matters related to the organization, except those designated for the board in the bylaws. For example, pensions plan changes.
The big question is who carries the CEO title. Some nonprofits, in their early stages, have a volunteer, part-time, President/CEO and an operational Executive Director. This signifies the volunteer, representing the will of the board, can have final authority in implementing board operational policies/strategies. This is not a good structure because the CEO title might lead to the volunteer having liabilities that other board members don’t have.
A Special Relationship: Nurturing the CEO-Board Chair Bond
By Eugene Fram Free Digital Photo
Viewer Favorite – Updated & Revised
Here are tips to assure the best possible partnership between the board chair and CEO.
Keeping boards focused on strategic issues is a major challenge for nonprofit leaders. This leadership crisis is intensified by the fact that board chairs tend to have short terms (according to BoardSource, 83% stay in office only one or two years). Thus, nonprofit CEOs and board chairs need to bond quickly. For the good of the organization, they must come together swiftly and create a partnership that works. Here are golden rules for the CEO and board chair to follow:
1. Be sure the CEO and board chair share strategic issues with each other—negative as well as positive ones. A failure by either the chair or CEO to share information, such as a potential cash flow issue, can be disastrous for the nonprofit.
2. It’s critical for the CEO to conduct orientation sessions with a new chair, explaining the challenges facing the nonprofit, and reviewing the fundamentals of the mission. The CEO can help the chair keep the board focused on strategic issues, whether they’re programmatic or financial. With many nonprofits electing a new president each year, the CEO needs to prioritize these tasks.
3. Make sure staff know who has the final say. Some employees mistakenly view the board chair as the ultimate authority, even when the organizational table lists the CEO as holding that position. As a result, they may try an end run around the CEO, asking the board to overturn the CEO’s decision about salaries, promotions, or programs, for example. Both the CEO and board chair must emphasize the fact that the CEO is the final authority. If they make this message clear enough, they can probably keep staff from attempting any end runs. If an end run still occurs, the board chair must refer the issue to the CEO for resolution, except if the CEO is being charged with malfeasance.
4. The CEO should arrange for individual board members to meet with management staff on occasion so that the board can gather information about how the organization is operated and obtain an understanding of the promotional abilities of managers. The Sarbanes-Oxley act (a federal statute relating to public corporation boards) recommends this process for for-profit boards, and it’s also a good one for nonprofit board members.
5. Give staff members opportunities to participate in strategic planning and to support board committees. The board chair and CEO should work together to arrange such board-staff interactions, including joint celebrations of organizational success.
6. The CEO and board chair need to agree on the use of ad hoc board committees or task forces and their relationship to standing committees. For example, should the HR/personnel committee be a standing one or only an ad hoc one to address major personnel policies? In the 21st century, a board should only have maximum of five standing committees, many can only have three. If task forces are used to provide provide options for occasional policy issues, for example pension plan changes, there may be little need for a standing board HR/personnel committee.
7. The board chair and CEO should be the active leaders in fundraising efforts, with the CEO as administrative leader. The board chair and other board members must provide the CEO entrée to funding sources. They often need to accompany the CEO on fundraising visits. The CEO should keep the board chair informed of all entrepreneurial development activities being explored.
8. The board has only one major employment decision to make – to recruit and hire the CEO. It’s usually a long and exhausting process. But once it’s completed, the employment of all other staff personnel is the responsibility of the CEO and the CEO’s management team. For senior positions, most CEOs ask their chairs and/or other board members to meet with candidates, but the ultimate responsibility remains with the CEO. The board also has a responsibility to overview staffing to make certain that adequate bench-strength in in place for succession placements, at the CEO and the senior management
9. When hiring a CEO, or soon after employment, the board chair and CEO must face a stark reality—the need for emergency leadership should the CEO become temporarily incapacitated. These plans can either be established informally by the chair-CEO partnership or more formally via board resolution. The following are possible interim CEOs: a senior manager in the organization, a semi-retired experienced CEO living near headquarters, a consultant living in a neighboring city. CEO succession planning is an important issue for the partnership should the CEO decides to leave or retire.
10. The CEO can be helpful to the board chair in recruiting new board members by suggesting possible volunteer candidates or other contacts who have demonstrated an interest in the organization’s mission, vision, and values. Board candidates will want to meet with the CEO as part of the interview process. As a result, the two partners must agree on how to present the organization to board candidates.
11. The chair and CEO need to lead in establishing meeting agendas. The two partners must work together to assure there’s sufficient meeting time to discuss and resolve strategic issue While many nonprofits call their top executive the “executive director,” the term CEO or president/CEO is a more leader-focused.
12. For the current environment, board members should be ready and willing to be ready to involved in a heightened level of board activity. If not, the board chair and board member should determine what constraints the member needs to be in place for his/h activity.
Are Nonprofit Boards Capable of Evaluating Themselves?
By: Eugene Fram Free Digital Image
A study of business boards by Stanford University yielded the following results:
Only one-third (36%) of board members surveyed believe their company does a very good job of accurately assessing the performance of individual directors.
Almost half (46%) believe their boards tolerate dissent.
Nearly three quarters of directors (74%) agree that board directors allow personal or past experiences to dominate their perspective.
And, perhaps most significant, the typical director believes that at least one fellow director should be removed from the board because the individual is not effective. *
Given that many of these business boards have the financial power to employ legal counsel or consultants to conduct a rigorous impartial evaluation, what can a nonprofit board, with limited financial resources, do to make sure that the board and its members are being fairly evaluated to drive change?
Once Again! The Possibility Of Fraud – A Nonprofit Board Alert
By: Eugene Fram Free Digital Image
“According to a Washington Post analysis of the filings from 2008-2012 … of more than 1,000 nonprofit organizations, … there was a ‘significant diversion’ of nonprofit assets, disclosing losses attributed to theft, investment frauds, embezzlement and other unauthorized uses of funds.” The top 20 organizations in the Post’s analysis had a combined potential total loss of more than a half-billion dollars. *
One estimate, by Harvard University’s Houser Center for Nonprofit Organizations, suggests that fraud losses among U.S. nonprofits are approximately $40 billion a year. **
Vigilant nonprofit boards might prevent many of these losses. Here’s how:
How Does Cultural Intelligence (CQ)* Impact A Nonprofit Board?
By: Eugene Fram Free Digital Photo
There are many ways to assess the balance of capabilities on a nonprofit board. EDs and board chairs are generally familiar with the implications of terms like IQ (cognitive ability) and EQ (emotional intelligence). New research has added a third characteristic— cultural intelligence or CQ. Obviously, CQ comes into focus when boards are dealing with global or international issues. But its usefulness is still germane to community-based and/or domestically focused professional/trade associations. Making a change in board strategy is at best a challenging process. But when that plan collides with cultural differences, board culture will trump change. To paraphrase Peter Drucker’s pronouncement—“Culture Eats Strategy for Lunch.” Following are a few of the many types of nonprofit CQ divisions that I have observed:
Baby Boomers vs. Millennials: Up to this point in their history, NFP boards have tended to be organizationally conservative, but this may be changing rapidly. One of the most prominent developments is the influence of the millennials, those born rough between 1980 and the turn of the new century. The new cohorts tend to have cultural values that are quite different from those of their parent or grandparents.Millennial work patterns, for example, are more informal, often spanning long hours and ignoring 9 to 5 routines. All of this can create a cultural gap between themselves and their boomer board colleagues and between baby boom management and millennial staffs. As they move into senior management positions,will they collide with those who have adhered to traditional conservative nonprofit cultures? Currently their social values align with those of many human service nonprofits. But in the future, will cultural values they encounter frustrate them to the point of turning their energies toward other career opportunities? One current report concludes, “Despite what you may have heard, millennials aren’t lazy. In fact they’re downright work-obsessed–and it’s making life worse for everybody.”
Entrepreneurs vs. Public Service Backgrounds: Persons with public service backgrounds tend to move slowly in bringing about change. For example, the challenge of developing consensus among city council members can be daunting. In contrast, an entrepreneur must be able to pivot his/h organization quickly from plan A to plan B. Consequently, “processing” takes precedence over “pivoting” when an NFP organizational change is proposed. These two board types brings different tempos to board discussions. If the gap is left unresolved, the entrepreneur may leave and a valuable voice is lost. Unfortunately, in my experience, I have met too many entrepreneurs who simply refuse to accept nonprofit board positions because of this discrepancy.
Management Backgrounds vs. Independent Contributors: Persons with management background are directors who have had leadership responsibilities with small or large groups of subordinates. Independent contributors are those who basically work alone or may only have responsibilities for just a few subordinates—e.g., attorneys, professors, planners or physicians. Board members in the latter group can assume they have management knowledge superior to the executive director’s or other senior personnel. Often their insights are outside a manager’s experience “space.” This creates a cultural gap that can be harmful to nonprofit’s operations. Example: A medical association board refused to set performance standards. for its executive director and staff. One staff member commented, “Board members don’t want to build trust and establish mutually accepted goals, these guys just want to give orders.” The cultural gap was substantial because management and staff did not know the standards and behaviors by which they will be judged annually. Another staff colleague angrily commented, “I’m not going to allow a twenty-something medical intern order me what to do!”
How to bridge the gap
Board chairs and EDs should develop a realistic inventory of the types of CQs on their board to be certain that one style is does not dominate.
With the continual turnover of board membership and with annually changing board chairs, the ED needs to assume long-term responsibility for the inventory.
It probably is not possible to develop a perfect balance of cultural norms. As a result, the chair and ED must make sure that those who have “minority CQs,” such as the entrepreneur described above, feel that their participation is meaningful and appreciated.
Never underestimate the impact of culture and its various CQ components. The dominant legacy, especially with successful nonprofits, must be widely accepted. But it also should be reviewed occasionally to make certain that the board is not simply accepting it at face value. The Impacts must be robust performance for all clients, along with innovative and operational effectiveness. Assessing board member’s CQ categories can be a challenge for many chairs and EDs. These categories often do not fit into discrete groupings like age and educational levels. But practice with them over time should be helpful. They allow chairs and EDs to better retain those productive outliers whose CQs may not fit the traditional legacy culture.
Solarwinds and Target and others may seem far afield from the concerns of nonprofit directors, except for the giants in the area, like AARP. However, think about this hypothetical scenario.
A group of high school students hacked into the computer system of a local nonprofit offering mental health services and gain access to records of clients, perhaps even placing some of the records of other teenagers on the internet. Considering the recent introductions of new AI tools, the power of immature teenagers and adults to initiate Cyber Security (CS) problems seems unlimited.
What due care obligations did the board need to forestall the above situation? A move to recruit directors with special expertise in information technology or cyber security would be nonproductive. A nonprofit director has broader responsibilities such as the overview of management, approval of budgets, fostering management and staff growth etc. Similarly, when social media became a prominent issue a few years ago, boards debated the advisability of seeking directors with that specific kind of background. Today, a consultant with management is likely to provide guidance to directors on these issues.
After listening to a group of cyber security experts discuss for-profit challenges in this area, I have the following suggestions on how nonprofit boards might respond to similar types of challenges.
1. Carefully “wall off” all confidential information – Have management be certain that private information such as health records, are encrypted and separated from operating data that may be considered public in a nonprofit environment. 2. Review D&O and other liability policies – Determine whether or not the D&O policy protects directors and managers from CS intrusions. (It likely does not, but I understand that some carriers may offer some protection along with smaller policies.) It is clear that most general liability policies do not protect the organization against CS. 3. Board Encouragement – Devote some meeting time, perhaps 10 minutes, to a discussion of the CS topics so that management and staff are aware of the board’s concerns on the subject and will take action when necessary. Appropriate due care actions like frequent password changes should become routine. Some checklists are available online, suggesting questions directors might pose to raise awareness on the topic and avoid potential CS breaches. 4. Can third party payer help? – Many nonprofits deal with third party payers with sophisticated CS systems and may offer the nonprofit some advice or assistance. 5. Education and training of employers – Many CS crimes have been successful because employees have violated or forget to effectively protect their working accounts and information. Proper education and training can help reduce these types of lapses. 6. Finance & Audit Committees – Recent data indicate that only 20% of nonprofits have a CS vulnerability assessment in place and only about the same proportion have a plan in place should a CS breach take place . * Due care responsibilities seem to be missing among a large portion of nonprofits.
If a nonprofit, like the one described, is attacked, not only will records be compromised, but also the reputation of the agency will be destroyed, probably along with the nonprofit organization itself. SolarWinds and Target may be able to survive such an attack, but the typical nonprofit may not.
Clearly the purpose of a nonprofit board is to serve the constituency that establishes it—be it community, industry, governmental unit and the like. That said, the “how” to best deliver that service is often not so clear. An executive committee, for example, can overstep its authority by assuming powers beyond its scope of responsibility. I encountered this in one executive committee when the group developed a strategic plan in an interim period where there was no permanent ED. The board then refused to share it with the incoming executive. In another instance, an executive committee took it upon itself to appoint members of the audit committee—including outsiders who were unknown to the majority on the board.
The fuzziness of boundaries and lack of defined authority call for an active nonprofit system of checks and balances. For a variety of reasons this is difficult for nonprofits to achieve:
A typical nonprofit board member is often recruited from a pool of friends, relatives and colleagues, and will serve, on a median average, for four to six years. This makes it difficult to achieve rigorous debate at meetings (why risk conflicts with board colleagues?). Directors also are not as eager to thoughtfully plan for change beyond the limits of their terms. Besides discussing day-to-day issues, the board needs to make sure that immediate gains do not hamper long-term sustainability.
The culture of micromanagement is frequently a remnant from the early startup years when board members may have performed operational duties. In some boards it becomes embedded in the culture and continues to pervade the governmental environment, allowing the board and executive committee to involve themselves in areas that should be delegated to management.
The executive team is a broad partnership of peers –board members, those appointed to the executive committee and the CEO. The executive committee is legally responsible to act for the board between meetings–the board must ratify its decisions. But unchecked, the executive committee can assume dictatorial powers whose conclusions must be rubber-stamped by the board.
Mitigating Oversight Barriers: There is often little individual board members can do to change the course when the DNA has become embedded in the organization. The tradition of micromanagement, for example, is hard to reverse, especially when the culture is continually supported by a succession of like-minded board chairs and CEOs. No single board member can move these barriers given the brevity of the board terms. But there are a few initiatives that three or four directors, working in tandem, can take to move the organization into a high-performance category.
Meetings: At the top of every meeting agenda there needs to be listed at least one policy or strategy topic. When the board discussion begins to wander, the chair should remind the group that they are encroaching on an area that is management’s responsibility. One board I observed wasted an hour’s time because the chair had failed to intercept the conversation in this manner. Another board agreed to change its timing of a major development event, then spent valuable meeting time suggesting formats for the new event—clearly a management responsibility to develop.
“New Age” Board Members: While millennial directors may be causing consternation in some legacy-bound nonprofit and business organizations, certain changes in nonprofits are noteworthy. Those board members in the 43- and- under age bracket need some targeted nurturing. I encountered a new young person who energized the board with her eagerness to try to innovative development approaches. She was subsequently appointed to the executive committee, deepening her view of the organization and primed her for board chair leadership.
Board members who understand the robust responsibilities of a 21st century board need to accept responsibilities for mentoring these new age board people, despite their addictions to electronic devices.
Experienced Board Members: Board members who have served on other high-performance boards have the advantage of being familiar with modern governance processes and are comfortable in supporting change. They are needed to help boards, executive committees and CEOs to move beyond the comfortable bounds of the past. They will be difficult to recruit, but they are required ingredients for successful boards.
NEW Projects: Boards and the CEO must be bold and try new approaches to meet client needs. For example instead of going through a complete planning process for a new program the board must ask management to complete a series of small experiments to test the program. When a series of results are positive, the nonprofit can work on a plan to implement the program.
Conclusion: Individual board members working alone will probably become frustrated in trying to contend with the three overview barriers discussed. But working with three or four colleagues, over time, on a tandem basis, they can make inroads on the barriers. Meetings can become more focused on policies/strategies, new age board members can become more quickly productive, experienced board members can become role models and new programs and other projects can be more quickly imitated via the use of small scale experiments.
From my observations and those of my colleagues, virtual meetings are more efficient for reporting operational items like compliance updates. But they lack the robust human social interactions provided by face-to-face meetings.
Some nonprofits will continue to increase the proportion of virtual meetings post-covid, both groups, those using it now and those using it post-covid, may now be looking to reduce the human deficit incurred.
Here are some suggestions:
More But Shorter Meetings: Instead of monthly board meetings, schedule meetings every two months.. With the social intensity in the environment, some boards are being required to meet more frequently. In advance of the meetings, ask the CEO to send a list of announcement types items, hopefully limited to one page. (Have it understood that the one page may not meet the requirements of her/h high school English teacher!)
Onboarding New Board Members: A friend joined a nonprofit. As a result of all virtual board and committee meetings she feels adrift of human connection. She might even not recognize some of her new colleagues if she passed them on the street. This problem can be alleviated to some extent by arranging for the new member to have brief individual virtual meetings with other board members and senior managers. It’s a hopefully a quick fix to a problem.
Strategic Planning. It was evident in the pre-corvid period that strategic planning needs to have a longer focus than the traditional three to five-year plan in order to achieve organizational sustainability. There are enough evidences of post-covid changes to continue strategic planning with small committees. This involves more frequent, but shorter, virtual meetings for the planning committee and updates to the board.
Building Trust: Having trust among board colleagues is critical to having a fully functioning board. Talking directly to them, listening carefully and even watching body language or face colorings. Some people, for example, when agitated develop a flushed face. None of this appears when meetings are virtual! There are several actions Board Chairs and/or CEOs can take to help members to be better acquainted, hoping to lead to trusting relationships.
· Good & Welfare Periods: At the beginning or end of the virtual meeting ask members to share personal or professional events—promotions, marriages, children or grandchildren, etc.
· Outside Presentation: At a virtual meeting, arrange for a local or national authority to briefly talk about a mission related topic
· Invite the board members’/managements’ spouses or significant others to also be involved.
· Other Interests: Invite board members/management persons to discuss unusual skills they have or other groups to which they belong that promotes the public interest.
· Board Education: Where possible continue board education via a virtual approach. If staff persons participate, be certain presentations are rehearsed and that time restrictions are carefully followed.
Focusing on any of these four areas in a time-compressed nonprofit environment can be difficult. In my opinion, nonprofit boards should review them to determine if they can help alleviate the obvious deficits inherent with virtual meetings.
Lifestyle & Behavioral Information – Some New Ways To Seek High Performance Nonprofit Board Members?
By: Eugene Fram Free Digital Image
Over several years, I have conducted nonprofit board recruitment projects. Two boards with which I worked had rather similar challenges. • They had concerns recruiting sufficient numbers of board members to fill their needs. • Current board members, largely composed of younger people, in the 30-40-age range, had significant problems balancing work and family obligations and attending board and committee meetings. • Attendance was sporadic. Although the boards were small, board members really did not know each other, and, in another situation, a board member sent a work subordinate to attend board meetings. A well-regarded board member never attended meetings and only occasionally met with the ED to offer advice. In both instances EDs and board chairs had significant power. One of the EDs complained she was doing the work of operating the organization and operating the board, and this may lead to too much potential personal liability. • Although these organizations, with budgets in the $8-$10 million range were operating successfully, the EDs involved realized that they were in line for long-term problems if board recruiting didn’t change.
What to Do • Consider establishing two boards, a board for governance and a consulting board. For the governance board, make certain the typical directors in the 30-40 year age range have a good understanding of their work-family obligation to be able to devote time for the organization. • For the consulting board, ask volunteers to work on projects that have a defined time limit. They will not be asked to be involved in more than one or two projects per year, an ideal inducement for millennials who are used to short bursts of activities. It may be necessary to recruit several persons with the same skills to provide coverage for several projects. • Keep communications flowing to the consulting board like one would to the governing board. Have social and educational events that allow the groups to meet informally. If the organization has a volunteer manage the consulting board, this person should be charged to keep the communications flowing. Members of the consulting board will only have occasional contact with the organization. • Overlay the traditional nonprofit skills grid with several time dimensions to recruit: 1. Recently retired people, both those traditionally retired and those who retried early, who may have time to be candidates for both the governing and consulting boards. 2. Seek individual contributors who may have more control of their time, such as medical doctors, lawyers, professors and small business owners. 3. Seek successful entrepreneurs who can schedule their own time, can resonate with the organization’s mission, vision and values and who want to give back to the community. • Beyond the time requirement, seek persons with experience on for-profit or nonprofit boards so they can share their board knowledge and become models for those having their first board experience. Their questions and behaviors can teach as much or more than formal seminars.
Summary The traditional nonprofit board skills grid can still be helpful in the 21st century. However it needs to incorporated lifestyle and behavioral information for each board candidate. These are important candidate attributes that must be thoroughly vetted.
Nonprofit Boardroom Elephants and the ‘Nice Guy’ Syndrome: A Complex 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 board members decided such action would hurt the board member’s feelings. They were unwittingly accepting the “nice-guy” approach in place of taking professional action. (more…)
Nonprofit Management 