Nonprofit Risk and Crisis Management: Challenges for the 21st Century

Nonprofit Risk and Crisis Management: Challenges for the 21st Century

The nonprofit leadership literature recommends that every nonprofit organization have a comprehensive crisis management plan, but it has little focus on risk. Perhaps nonprofit boards are too risk averse and are really unable to maximize their resources to assist clients? Is it that nonprofit boards see little personal gains from taking reasonable risks fearing potential reputation and financial losses? I reviewed over 300 nonprofit articles related to nonprofit crises and related risks; only a handful centered on how a nonprofit board can respond to handling risk and crises in a strategic manner. A great deal seemed to depend on the position of organization of the nonprofit board and its culture, provided in these principles: (more…)

The Dangers of Board Micromanagement

The Dangers of Board Micromanagement

By: Eugene Fram

Accepted View of Micromanagement: “…Directors spend more time with the details of the operations instead of planning its short-term and long-term growth strategies. …
(http://linkd.in/1q84pMm)

The Need for a Micromanaging Board
Board micromanagement is an appropriate approach when either a nonprofit or for-profit is in a start-up stage. Financial and human resources are modest, and the directors often assume some responsibilities normally executed by compensated staff. The chief executive often has managerial responsibilities as well as a list of low-level operational duties. (more…)

A PS to Harvard Business Review Blog Post: Boards Can Be Terrible at Their Most Important Job: http://bit.ly/1B3N6Rj

A PS to Harvard Business Review Blog Post:
Boards Can Be Terrible at Their Most Important Job: http://bit.ly/1B3N6Rj

By: Eugene Fram

“A recent Bridgespan Group survey of nonprofit CEOs found that nearly half (46%) got little or no on-boarding help from their boards.”

To help the board with the on-boarding process, a customized format can also be utilized. The board then tailors a program that helps the new executive to develop a solid base in the organization and to understand its unique climate and culture. Properly structured, this orientation takes about a year to complete. The board’s time commitment decreases over the course of the year. Major responsibly for the program should rest with the board chair, but it should also involve one or more senior board members.
Every custom designed orientation program should include nine steps, either in sequence, or concurrently.

1. Developing immediate and long-term goals
2. Reviewing fiscal and personnel resources
3. Examining current policies and procedures
4. Developing staff relationships
5. Fostering board relationships
6. Cultivating community or industry relationships
7. Understanding the customers, clientele, membership and stakeholders.
8. Discussing the new executive’s career expectations
9. Establishing a succession plan should the executive be temporarily incapacitated

Steps one and two are often readily accomplished. The following steps need more detailed explanations because boards do not commonly initiate them.

• Examining Current Policies & Procedures: This is a routine but necessary task. The top administrative staff should be responsible for the new CEO’s orientation on operating policies and procedures, and the CEO will also develop a fuller understanding of such policies and procedures as he/s makes daily operating decisions. However, when it comes to understanding how the board goes about setting policies, the CEO needs a formal “tutorial” orientation from the board chair. The CEO and the board chair should establish a work plan to determine if all board policies are concise, understandable and operationally complete. Depending upon the quality of prior work, this task can be simple or require extensive revisions and additions.
• Developing Staff Relationships: In any organization, top management changes cause staff insecurity and unrest. Old comfortable patterns will be broken. Resistance to change will likely occur. Board members must provide strong support for changes that are needed. Board members should have representation at all business meetings and at other functions where the board traditionally has been expected to participate.
• Fostering Board Relationships: Any astute new CEO will want to get to know his/h board well, and board members should expect a strong leader to assertively develop these interpersonal relationships. One suggestion is for the new CEO to meet individually with board members at their place of employment or another convenient location.
• Cultivating Community or Industry Associations: The board chair needs to assume leadership in helping the new CEO to develop contacts and relationships with community leaders, industry leaders and/or other stakeholders, such as key vendors. The board chair and CEO need to jointly develop a “game plan” to achieve the objectives involved.
• Understanding The Customers, Clientele, Membership and Stakeholders: Through informal meetings, presentations or reviews of pertinent issues, the board should strive to give the new CEO an understanding of how the products or services offered are perceived by various stakeholder groups. The CEO needs to try to verify the information with visits with stakeholders. If a significant gap(s) is noted, the CEO has an obligation to review it with the board to determine if the strategic plan in place is sound or needs modification.
• Discussing The New CEO’s Career Expectations: As part of the hiring process, the board should have an understanding of that individual’s career expectations and aspirations to be certain that these are compatible with the position being offered. The board and the new CEO must agree on a plan for his/h career development and growth, and the board should specify what it is willing to do to help the CEO with the plan.
• Succession Planning: Two plans are needed. One — to cover a situation where the CEO is incapacitated for a period — should be organized quickly. The other, long-term succession planning, a more difficult discussion, needs to take place every few years for the CEO and his/h direct reports.

Numerous benefits accrue to having a board-directed orientation program for a new CEO. The most important is the smooth transition that the program promotes. As a result of these efforts, power, authority, leadership and accountability are clearly understood and accepted by both the board and its new CEO. Misunderstandings and conflicts can be avoided.

Source: Eugene H. Fram & Robert F. Pearse (1992), “The High-Performance Nonprofit,” Milwaukee, Wisc. Families International, Inc.

Can A Nonprofit Find Strategic Ways To Grow in Difficult Times?

Can A Nonprofit Find Strategic Ways To Grow in Difficult Times?

By: Eugene Fram

Nonprofits have always had to struggle to meet their client needs, even when economic conditions and social turmoil were much less constraining than today. How can mid-level nonprofits uncover growth opportunities in the present environment? (more…)

Better Board Governance. Is it the same for both business & nonprofit organizations?

Better Board Governance. Is it the same for both business & nonprofit organizations?

Both BoardSource in 2012 and the Charted Global Management Accountant (CGMA) in 2012 have issued reports on improving board governance. The former group focuses on nonprofit boards and the latter focuses on business boards globally.* Both the nonprofit and business organization reports listed the following prime areas for board improvement or focus:The CGMA report called for improved strategy development & risk analysis; better boardroom behaviors; better relationships between board & management. The BoardSource report asked for improved focus on strategy, with much less emphasis on operations; more board commitment, engagement, & attendance; better self-assessment, recruitment & development. (more…)

What Can A Nonprofit Chair Do To Fix A Dysfunctional Board?

What Can A Nonprofit Chair Do To Fix A Dysfunctional Board?

By: Eugene Fram

There are times when the governing body of any organization may appear to be “broken.” The directors, whether for profit or nonprofit, may be polarized—progress is stunted – apathy and confusion replace purpose and efficiency.
A listing of ways to resuscitate dysfunctional business firms http://bit.ly/1w4Tutv prompted me to expand on actions for nonprofits in similar condition. When a nonprofit is in trouble, any chair, who is aware of his/ her leadership responsibilities, should aspire to be the “fixer “of the fractured board. But there is just so much he/s can do. Some failures have deep endemic roots such as outdated structure, personality conflicts etc. The following actions are within the chair’s capability, and they can be useful in repairing board disruption. (more…)

What Key Elements Make A Nonprofit Board Great?

What Key Elements Make A Nonprofit Board Great?

By: Eugene Fram

According to an old Chinese proverb—the wise man learns from his own experience—the wiser man learns from the experience of others. A group of 300 for-profit directors recently took the time to answer questions posed by the RHR International and NYSE Governance Services. Their opinions were subsequently compiled and published in a major study “about the crucial elements in making and maintaining a strong board.” (http://bit.ly/1qTjPXI) Following are my best estimations on how these findings can apply to nonprofit boards.

Quality of boardroom dialog and debate:
Achieving this objective in the nonprofit environment can be a challenge. First, even on boards that meet monthly or quarterly for a couple of hours, directors often don’t have enough interactive time to get to know each other. Second, nonprofit board conflict is usually avoided because it can easily lead to interpersonal problems. Consequently, the board chair and CEO need to develop a board culture that allows for vigorous dissent as a positive process. One board chair I encountered faced with this challenge set a goal of trying to imitate more “conflicts” in board discussions. According to the above study, “The way board members operate together, not who they are, is what differentiates a great board from an average one….”

Ability to ask the tough questions of management:
As volunteers, nonprofit directors often find they must make decisions about issues that are far afield from their career interests, hobbies or their family interests. To effectively relate to management and staff, directors need to take time to better understand the environment in which the nonprofit operates. However, even without this background, it is possible to raise many fair and rigorous questions, such as the level of due diligence behind a recommendation or the impact of the proposal on coming budgets. A director should be duty-bound to ask these types of questions, even at the risk of embarrassing management and developing board conflict. In addition boards need to provide “constructive feedback to (individual) board members on the quality of their contributions.” …

Diversity of thought and experience:
While nonprofit boards select board members on the basis of their experiences, such as marketing, accounting or human relations and demographic divisions, little focus is placed on seeking to develop an inclusive board, with representation from all major stakeholder groups. (Example: Every board should have some people who have strategic perspectives.) Seeking these traits can only be done by reputation, not by career backgrounds. Developing such a board, within the confines of maximum board membership, is necessary to achieve diversity of thought. It also will require creative recruiting and ongoing director “maintenance” by the board chair and CEO to be certain that all directors are engaged in meaningful projects.

Summary
Nonprofit boards need to be evaluated on the way they work together with open dialog, debate and, at times, vigorous dissent. In my opinion, too many directors, because they do not have a financial investment in the nonprofit, vote to go along and/or to avoid conflict. Rarely do nonprofit directors vote “no” to record a different perspective on a proposal. Rigorous, but fair, questioning of management must be the norm. The need for nonprofit board diversity has been well documented for decades. A new view is evolving calling for nonprofits to develop inclusive boards. Some boards have moved in this direction, where legal by state law, to have the CEO as an ex-officious member or voting member of the board to represent staff stakeholders.

When extended to nonprofit board practices the RHR-NYSE study results provide some interesting bases for evaluating how nonprofit boards operate.

How Prepared Are Directors for the Challenges of the Nonprofit Culture?

How Prepared Are Directors for the Challenges of the Nonprofit Culture?

By: Eugene Fram

Given that the typical tenure of a new board member is six years. And assuming that a new director’s intention is to make his/her unique contribution to the organization’s progress before he rotates off the board and is supplanted by another “new” director. With these factors in mind, I estimate that many volunteers enter the boardroom with little understanding of nonprofit culture. Even those who have served previously on business boards may initially spend valuable time in accommodating to the nuances of nonprofit practices and priorities before being poised to make contributions to the “greater good” that nonprofit create. Following are some areas that are endemic to nonprofits: (more…)

Stay on That Nonprofit Board!

Stay on That Nonprofit Board!

By: Eugene Fram

Gene Takagi, noted San Francisco attorney, who specializes in nonprofit organizations recently published an article listing 12 reasons for resigning from a nonprofit board. It is worth reading. (http://bit.ly1r2M5Hi)

BUT

Nonprofit directors often become impatient with the slow pace of progress toward positive change. Here are some actions that may change the situation, improve service to clients and prepare the organization for any long-term mission disruptions. (more…)

Should Mature Nonprofits Allow Board Micromanagement?

Should Mature Nonprofits Allow Board Micromanagement?

By: Eugene Fram

Accepted View of Micromanagement: “…Directors spend more time with the details of the operations instead of planning its short-term and long-term growth strategies. …
(http://linkd.in/1q84pMm)

The Need for a Micromanaging Board
Board micromanagement is an appropriate approach when a nonprofit is in a start-up stage. Financial and human resources are modest, and the volunteer directors must assume some responsibilities normally executed by compensated staff. The chief executive often has managerial responsibilities as well as a list of clients to service. It is not unusual to promote a person who is only familiar with direct service to become the first chief executive of the organization. In turn , this neophyte manager has to depend on board members for managerial counsel and direction. A culture of board dependency is created out of necessity. (more…)