Trustees

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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Can Small Experiments Test Nonprofit Strategic Validity?

Can Small Experiments Test Nonprofit Strategic Validity?

By: Eugene Fram        Free digital image

When given a series of potential mission changes, modifications or opportunities, most nonprofit boards take the following steps: (1) Discuss alternatives (2) Develop working plans, board/staff presentations and funding proposals (3) All three usually are packaged into a three or five year strategic plan for implementation. Typically the process can take about six months to “get all stakeholders on board.” When something new is suggested, the conservative board and nonprofit management immediately respond, “Great idea, let’s consider it in the new strategic plan.” Results: It can take three to five years to implement the idea, assuming the plan actually gets off the shelf, not an unusual occurrence for nonprofit organizations!


Another alternative being implemented by some nonprofit is to use a rapid experimentation approach called Lean. “First developed for use in the for-profit world, … the method focuses on new ideas for products through iterative experiments. Lean practitioners build simple prototypes ‘called minimum viable products (MVPs),’ …move quickly to get feedback on these items from constituents/stakeholders.” * As long as they have some positive iterations they continue to full product development.

Example: The software division of a large firm suggested a program that it felt certain would have great marketability because of it perceived uniqueness. The software developers were required to present it personally to a small group of potential customers. As a result of the interviews, both marketing and development executives dropped it.

How Can Nonprofit Boards Utilize Lean Experimentation?

These lean experiments can be conducted at minimum costs and with small samples that initially may not be statistically significant. (For example, in the software case cited above, there were only four customers in the sample, but they generated significant sales.)

Not being able to afford the time and money to develop excellent metrics, nonprofit boards, especially in assessing ambiguous and qualitative impacts, need to initially glean what they can from the use of imperfect metrics. (http://bit.ly/OvF4ri). The metrics can be anecdotal, subjective, interpretive or qualitative. For most nonprofits, it is a great leap forward from doing nothing or taking years to implement action. Also it offers an opportunity for client centered investigations.  The most critical requirement is that the directors and management agree that the process is reasonable and that outcomes from each experimental iteration constitute fair and trustworthy information.

A Current Example

There seems to be a growing body of knowledge of how to apply the art of lean in the nonprofit environment. * The use of lean to assess the proper venues to select social media by which to communicate with donors and other stakeholders is an example. All agree that the use of various social media venues is difficult to assess for both for-profits and nonprofits.

Here, as an example, is what might be done to obtain some directions on using social venues to reach millennials. Charitable nonprofits are seeking ways to communicate with this group as potential volunteers and future donors. Instead of a board waiting to take action on a broad social media strategy before taking some action on social media, it might start with some small-scale, low cost experiments. The information it obtains from one or two MPVs would be useful in backing into a comprehensive social media strategy when a new strategic plan is needed. But an early MPV also might also provide some information for immediate action.

Summary: Like any management process lean is not a panacea for either the business or nonprofit sectors. It has its advantages and disadvantages and will not replace more rigorous process, when required–longitudinal studies and strategic planning. However, its experimental design feature can help drive the nonprofit decision process to be more effective and efficient. That alone can help to recruit more able directors, who because of time-compressed lifestyles, now are impatient with the traditional pace of nonprofit decision-making.

* For a robust report of the use of lean in the nonprofit sector see: Peter Murray & Steve Ma (2015) “The Promise of Lean Experimentation,” Stanford Social Innovation Review, summer, 14pp. (http://ssir.org/articles/entry/the_promise_of_lean_experimentation)

 

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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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. (more…)

Board Members:  Are Your Managers & Staffs Effectively Engaging Business Donors?

Board Members:  Are Your Managers & Staffs Effectively Engaging Business Donors?

By: Eugene Fram          Free Digital Image

Fund development should be a partnership between board members and CEOs/Development Officers, if the latter is available. However, I have noted that board members don’t take sufficient responsibility to make certain that CEOs and Development directors are well prepared when they approach potential business donors. This, in my view, is the first step in building a relationship fundraising approach. Many involved with NFP fundraising or management have spent their entire careers in the nonprofit environment, resulting in a gap in communicating with those in the business environment.*  Some may even privately believe that those in business contribute less significantly to society.  While little can be done about the latter, here is what I think can be done to fill or reduce the unfortunate gap in cultures often found between for-profits and nonprofits, especially when it relates to fund development.

Homework: Development officers, executive directors and others meeting potential business donor have an obligation to know a great deal about the potential donor’s firm. The worst opening for those seeking a business donation or grant is, “Tell me about what XXX produces.” It appears the solicitor has no interest in the environment in which the firm operates. In the Internet age, there is no excuse for such lapses. A Google or LinkedIn search is also critical in preparing to understand each of the persons who might be involved in initial contacts.

With this information, a conversation can be appropriately opened with “How’s business been recently?” It can be followed by a discussion of the donor’s industry trends and challenges, establishing a level of comfort for the donor.

What can your nonprofit do for the donor? Sophisticated development officers have ways of asking this important question. Some examples: (1) In the case of a university, this may range from suggesting capable entry-level employees for the firm to answering personal questions such as guidance on seek a relative’s admission to a selective university. (2) In the case of a nonprofit whose mission to assist qualified persons to find locate new employment, its work can be related to the firm when the firm has significant layoffs.

A Business Posture: A development officer or executive director needs to convey they have grounding in the business world and its basics, especially to be able to quickly show that their nonprofit is well managed. A recent study of Silicon Valley donors and nonprofit leaders cited a  empathy gap between the two.  Generally speaking, nonprofit leaders and new philanthropists don’t move in the same social circles. For the latter, community is increasingly defined not by physical place but by socioeconomic class: a particular psychographic and a set of shared experiences that only wealth can buy.*

The objective is to develop a continuing conversation with the donor related to his/h business interests and outlook. This offers a connection to show that the nonprofit fulfills a human service, professional or social need. These may include:

  • Explaining the scope of the “executive director” title directly or indirectly if the operating CEO does have the well-known title “president/CEO.” The ED title puzzles many in the business environment, since the top operational person in a business firm most often is the “president/CEO.” ** 
  • Showing the nonprofit has a viable mission that is being carefully shepherded and the organization doesn’t engage in mission creep. 
  • Clarifying that an achievable business plan is available.
  • Having a well managed internal structure that can achieve impacts for clients. (Like the results of the Zuckerberg gift to Newark schools, many business people are aware that process goals can be achieved without having client impacts.)

Unfortunately nonprofit organizations can have a reputation among members of the business community as being less effective and efficient than for-profit ones. These people may not have encountered many local nonprofit leaders, as I have, with significant management savvy. Consequently, nonprofit representatives first  need to be sure they begin their relationships with donors by showing interest in their business, industry, or firm. This then offers the opportunity to demonstrate that the nonprofit’s mission is managerially strong and looks to impacts, not processes, as measures of success.

*https://www.linkedin.com/pulse/key-trends-silicon-valley-philanthropy-tatiana-fedorova/

**https://non-profit-management-dr-fram.com/2010/05/31/non-profit-governance-executive-title-ceo-versus-executive-director/

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

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

By: Eugene Fram                Free Digital Image

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?  A small group of  CEOs may 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, when allowed by state laws, voting members of their boards!)

There are many precedents for a nonprofit CEO to become a peer board member, some without voting rights, some with full voting rights. One nonprofit group is university presidents, where shared governance with faculty bodies can be the norm. For example, when General Eisenhower became president of Columbia University, he referred to the faculty in an initial presentation as “Columbia employees.” Later a senior faculty member informed him “With all due respect, the faculty is the university.”

Another nonprofit group is hospitals where the CEO may also be or has been the chief medical officer. The level of medical expertise needed to lead requires that a peer relationship be developed. Also if the hospital CEO is a management person, he and the chief medical officer must have a peer relationship, which extends to the board.

Hallmarks of a Peer Relationship
• The CEO values the board trust assigned him/her, and carefully guards against the board receiving surprise announcements.
• The board avoids any attempts to micromanage, a natural tendency for many nonprofit boards.
• When a board member works on a specific operating project, it is clearly understood that he/s is accountable to the CEO for results.
• The CEO has board authority to borrow money for short term emergency needs.
• The CEO understands need for executive sessions without his/her presence.
• The CEO understands the need for a robust assessment processes to allow the board to meet its overview duties.
• Both board and CEO are alert to potential conflicts of interest which may occurs.
• Both value civil discussion when disagreements occur.
• The board realizes that nobody does his/her job perfectly, and  does not strongly react to occasional CEO modest misjudgments.

Summary
Elevating a nonprofit CEO to a status of board peer does not automatically make the CEO a powerhouse. The board legally can terminate the CEO at will. However, in my opinion, having the CEO as a board member can generate  following benefits.

The peer relationship help will:

• Help the organization to build a desirable public brand, since the related responsibility is more broadly understood when compared to the ED title.
• Allow a capable person, with daily experience, to interface with the media.
• Define a role for the CEO to lead in fundraising.
• Allow the organization to hire better qualified personnel.
• Allow the organization to present a strong management environment to funders. After all, top people in organizations readily communicate with people in similar positions.

How Can Nonprofit Boards Overcome the Inertia of Certain Board Members?

 

How Can Nonprofit Boards Overcome the Inertia of Certain Board Members?

BY: Eugene Fram        Free Digital Image

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

The first and third groups (members who want change and process directors) will be very willing to appoint a committee to review the alternatives, but it’s up to the board chair to satisfy process members who create obstacles.

Process members like to sit back and examine issues, often, in my opinion, sincerely feeling that their questions allow them to be on the cusp of showing some insights that others have failed to notice. They always ask, “Have we consulted everybody?” Or say, “Let’s make sure we have considered everything.” Often they are members who call for postponement of the vote, even after a lengthy discussion.

Process members  are well-intentioned, sincere individuals. However, the board has to be careful that these members don’t allow the board to continually examine one angle after another until they lose sight of the board’s main job. They can keep action in limbo indefinitely! It is up to the board chair to makes certain that this does not happen. But board chairs want to develop an inclusive board where all who want to voice their views can be heard.

A certain level of board process is necessary to operate efficiently. But when it gets out of hand, it can have a serious negative effect. Boards often lose some of their best volunteers, who get frustrated and quietly resign. Their usual reason for resigning is “the pressure of job obligations.” To me, that’s a covert message that the board is getting mired in minutiae, usually initiated by process members.

One friend recently from a board, using the “job obligations” excuse. The real reason was that the executive director, a process oriented person, used board-meeting time inappropriately, including asking the full board to review detailed public relations powerpoint presentations.

In another situation, I watched a board make a strategic decision involving the combining of two programs. Even after a thorough discussion of the decision, the board insisted on discussing the tactical decisions needed to implement the change, all of which were the responsibility of management. The board was unable or unwilling to shed an imbedded process culture that the status quo nonprofit had used for over 50 years.

Six Approaches to Innovation for Nonprofit Boards

 

 Six Approaches to Innovation for Nonprofit Boards

By Eugene Fram                     Free Digital Image

The Bridgespan Group, supported by The Rockefeller Foundation, completed an exciting research study. The results identified “six elements common to nonprofits (in bold/italicized) with a high capacity to innovate” * Following are my suggestions on how to implement these elements.

  1.  Catalytic Leadership that empowers staff to solve problems that matter. 
    This involves the board to lead with committed and generative leadership. ** Board members must be ready to ask tough questions. They must require management to respond to the classic question, “Who would miss the nonprofit if it were to disappear?” Board members should be able to suggest new ideas drawn from business and the public sector that can be adapted, assessed and tested by management and staff

  2. A curious culture, where staff looks beyond their day-to day obligation, question assumptions, and constructively challenge each other’s thinking as well as the status quo.
    This, in my view is difficult to achieve, but boards should attempt to take every advantage to develop it. Boards that question the status quo are hard to find in all fields. They should, at the least, involve the staff in strategic planning efforts and pay close attention to its development. Staffs then are in an excellent position to challenge the status quo. One staff person in a human services agency, for example, challenged the status quo by observing the nonprofit did not have a “safety net” mission, but in reality had a “sustainability” mission. The agency was not only helping clients on a day-to-day basis but also was trying to assist them to achieve sustainable lifestyles.
  1. Diverse teams with different backgrounds, experiences, attitudes and capabilities—the feed-stock for growing an organization’s capacity to generate breakthrough ideas.
    As the Bridgespan Group has noted, it is necessary to have board members, “who are diverse across their dimensions: demographics, cognitive and intellectual abilities and styles with professional skills and experiences. In my opinion, nonprofits have been successful in recruiting board members in all of these categories except two—cognitive and intellectual abilities. I have encountered nonprofit boards without a single director with strategic planning or visionary abilities. Board members’ full time occupations often do not require them to have these abilities. As a result, strategic planning was just a SWAT (strengths, weakness and threats) review without any real analytical depth. To rectify the situation, nonprofits need to add these abilities to their recruitment grids. Unfortunately, this makes the recruiting effort more difficult since the abilities don’t appear on many resumes. Candidates must be assessed from an in-depth interview process.
  1. Porous boundaries widen the scope for innovations, by allowing fresh ideas to percolate up from staff at any level—as well as constituents and other outside voices—and seep through silos.
    Because many nonprofits have small travel budgets, they may operate in “bubbles, ” consisting of themselves and similar neighboring organizations. In addition, they can acculturate board members to the “bubble” traditions and environments.   For example, they may ask a new board member, with strong financial abilities to help the CFO with accounting issues, instead of asking her/h to develop a strategic financial plan for the organization. Perhaps as national webinars become more available to nonprofit managements and their staffs, these information flows will help to change the innovation roadblocks. Then they can, “generate new ideas systematically, test ideas using articulated criteria, metrics methodologies and prioritize and scale the highest potential ideas.”
  1. Idea Pathways that provide structure and processes for identifying, testing and transforming promising concepts into needle-moving solutions.
    For example, the process of Lean Management can allow testing of new ideas quickly. Instead of waiting for a new strategic plan to establish a pathway for   something new, a nonprofit can test it with a series of small-scale efforts to determine its viability. The idea can be dropped if positive results are not developed after a couple of tests.   If after successive tests with viable information results, the idea can be moved quickly to an implementation stage when the nonprofit has the necessary resources.

  2. The ready resources—funding, time, training and tools—vital to supporting innovation work.
    To fully take advantage of most of these six innovation guidelines, fundraising is critical. But each board and staff cannot do it alone. It must be a partnership between the board members and the CEO that recognizes fundraising for innovation is a necessary part of the nonprofit’s resourcing efforts.

*https://ssir.org/articles/entry/is_your_nonprofit_built_for_sustained_innovation

**https://www.bcg.com/publications/2022/all-about-generative-leadership-and-its-benefits

Does Your Nonprofit Have A Process For Implementing Strategy?

 

Does Your Nonprofit Have A Process For Implementing Strategy?

By: Eugene Fram           Free Digital Image  

My observation is that intense interest in nonprofit organizational strategy only takes place  very three or five years when the strategic plan needs to be reviewed.  The cause, as I see it, is that substantial numbers of nonprofit board members and senior managers lack substantial strategic  backgrounds and interests to enable them to give the plan implementation attention. Most boards I have encountered are fortunate to have one or two  board members with broad based strategic experiences. With nonprofit board members rotating every four to six years, it’s likely that any board member will only participate in one strategic plan change experience.  Also some nonprofit CEOs and senior managers can be directly appointed from staff positions, lacking knowledge of strategy development.    

Based on a survey of commercial organizations by McKinsey, it appears that these boards and their managements have similar strategic challenges as nonprofits. * 

Following (in bold) are McKinsey’s three suggestions for implementing strategy development and my suggestions for adapting them to nonprofit organizations (more…)