Developing nonpofit management trust

Enlarging the Nonprofit Recruitment Matrix: The art of selecting new board members—Part II

Enlarging the Nonprofit Recruitment Matrix: The art of selecting new board members—Part II

By: Eugene Fram        Free Digital Image

There’s never enough to say about the selection of nonprofit board members. Following my last post on board behaviors and cultures I ran across a guide fo desirable skills/abilities for “for-profit” directors. From this list, I suggest the following additions to the recruitment matrices of 21st century nonprofit board candidates to improve board productivity. * Those included will have:

Executive and Non-Executive Experiences: These include planners with broad perspectives needed to have visionary outlooks, a well as persons with unusually strong dedication to the organization’s mission. It may include a senior executive from a business organization and a person who has had extensive client level experience. Examples for an association for the blind could be the human resources VP for a Fortune 500 corporation and/or a visually impaired professor at a local university.

Industry Experience or Knowledge: An active or retired executive who has or is working in the same or allied field. However, those who can be competitive with the nonprofit for fund development could then present a significant conflict of interest.

Leadership: Several directors should be selected on the bases of their leadership skills/abilities in business or other nonprofit organizations. Having too many with these qualifications may lead to internal board conflict, especially if they have strong personalities.

Governance: Every board member should have a detailed understanding of the role of governance, their overview, financial/due diligence responsibilities and the potential personal liabilities if they fail to exercise due care. In practice, nonprofits draw from such a wide range of board backgrounds, one can only expect about one-quarter of most boards to have the requisite knowledge. But there are many nonprofit boards that I have encountered that even lack one person with the optimal board/management governance knowledge. Some become so involved with mission activities that they do what the leadership tells them when governance issues are raised. Example: One nonprofit the author encountered, with responsibilities for millions of dollars of assets, operated for 17 years without D&O insurance coverage because the board leadership considered it too costly.

Strategic Thinking & Other Desirable Behavioral Competencies: Not every board member can be capable of or interested in strategic thinking. Their job experiences and educations require them to excel in operations, not envisioning the future. Consequently, every board needs several persons who have visionary experiences and high Emotional
Quotients (EQs.) Those with high EQs can be good team players because they are able to empathize with the emotion of others in the group. Finding board candidates with these abilities takes detailed interpersonal vetting because they do not appear on a resume.

Subject Matter Expertise: Nonprofit Boards have had decades of experience in selecting board candidates by professional affiliations like businessperson, marketing expert, accountant, etc.

Other Factors Relevant to the Particular Nonprofit: Examples: A nonprofit dedicated to improve the lives of children needs to seek a child psychology candidate. One focusing on seniors should seek a geriatric specialist.

* http://eganassociates.com.au/disclosing-the-board-skills-matrix/

 

 

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Want Better Nonprofit Board Cultures? Look for Four Board Behaviors–Part I

Want Better Nonprofit Board Cultures? Look for Four Board Behaviors–Part I

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.

There is a culture of trust & respect in the boardroom: Study data showing respondents’ agreement with the statement: 39% of ineffective boards; 66% of complacent boards and 88% of striving boards.
Trust and respect are also critical for nonprofit boards, but they are probably more difficult to achieve for several reasons. First, nonprofits are often seen as lacking efficiently and effectiveness because they operate on smaller budgets and are often housed in marginal physical facilities. In addition, a long-standing nonprofit tradition is for board members to become directly involved with operations. This leads to external perceptions of nonprofits needing managerial support.

Boards will trust management to a higher degree when managers can demonstrate they have the necessary abilities to meet challenges with care and insight.

Finally, nonprofit boards are less homogeneous in terms of director backgrounds since they represent a much broader base of society.

Board & management-team members constructively challenge each other in meetings: Study data showing respondents’ agreement with the statement: 44% of ineffective boards; 53% of complacent boards and 76% of striving boards.
Nonprofit board environments are not well known for being challenging, but the potential really stands out in the for-profit sector—striving boards are about 31points ahead of ineffective ones on this behavior. But with nonprofit directors being comprised of volunteers, this will require a huge cultural shift. “Going along to get along” is a common mantra in the nonprofit sector. Few nonprofit directors, through rigorous discussion, possibly leading to “no” votes, want to be the cause of internal conflict.

The chair runs meetings efficiently and effectively: Study data showing respondents’ agreement with the statement: 37% of ineffective boards; 56% of complacent boards and 69% of striving boards. Among dozens of nonprofit boards with which I have interacted, the chairperson’s views receive a great deal of deference to avoid conflict. But note that there is value in choosing a chair who can lead meetings in an efficient and effective manner—69% of striving directors thought this a factor of success versus only 37% of those on ineffective boards.

Board members seek out relevant information beyond what management provides, to deepen knowledge: Study data showing respondents’ agreement with the statement: 31% of ineffective boards; 59% of complacent boards and 62% of striving boards.
The tenor of the Sarbanes-Oxley Act (2002) called for for-profit directors to seek information beyond that which management provides. Again, note the wide data differences between ineffective and striving. In my experiences with nonprofit boards, the openness of management to having board members interact with staff below the C-Suite levels varies significantly. Some are open to it. Others who fear that such contact will lead to “end-runs”–staff will take grievances directly to board members. Since transparency and openness are board values in the 21st century, every nonprofit should have provisions for directors seek information below the C-Suite level.

* http://www.mckinsey.com/business-functions/strategy-and-corporate-finance/our-insights/toward-a-value-creating-board Note: The study does not list the criteria used to determine the three categories—ineffective, complacent, striving.

 

 

Reversing Traditional Nonprofit Board Barriers

 

Reversing Traditional Nonprofit Board Barriers

By: Eugene Fram          Free Digital Photo

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. 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 are causing consternation in some nonprofit and business organizations, certain changes in nonprofits are noteworthy. Those directors in the 40- and- under age bracket need some targeted nurturing. I encountered a new young person who energized the board with her eagerness to try innovative development approaches. She was subsequently appointed to the executive committee, deepening her view of the organization and priming her for senior 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: Directors that 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.

 

 

Nonprofit Boards’ Relationship with Executive Directors: A Delicate Balance

 

Nonprofit Boards’ Relationship with Executive Directors: A Delicate Balance

By: Eugene Fram 

When an individual with business board experience agrees to serve on a nonprofit board, the result can be culture shock! The new arrival can become impatient with the deliberate crawl of action in the nonprofit sector. Or the fact that he/she has no stake in the organization’s financial outcome can diminish interest and participation. Even more disturbing is the fuzziness of the relationship between board member and Executive Director, a sharp contrast to the corporate director/ CEO interaction. In the nonprofit, the ED can assume a more entrenched position due to cultural and governance protocols.

  • Long before and after the new board member’s four to six year term has expired, it’s likely that the same ED will be in place. Based on national data, a nonprofit executive director’s average tenure is 12 years. In addition, directors’ career interests are likely to be very different from those operating the nonprofit. These two factors invest the ED with “institutional memory.” This requires him/her to structure a field of vision on which directors are often dependent. If the ED lacks foresight, the nonprofit will probably not reach its potential to serve clients during his/her tenure.
  • Board members will have a difficult time modifying a nonprofit’s conservative ambiance. Full support of the ED will be required for change. If a board is unable to modify his/her behavior, a termination action will be needed—this will likely create board conflict.
  • Nonprofit directors are often not eager to replace an ED who “minds the store” but doesn’t move it significantly forward. Without malfeasance or performance issues, many directors are willing to maintain an ED in place whose performance is, at best, undistinguished.

Based on my experiences with 12 nonprofit boards as a board member plus having consulted with dozens more, following are ways I have seen business persons become acculturated to the nonprofit ED’s leadership styles. Instead of resigning, as some do, there remain many who continue to work productively with the ED to enhance the organization. Following are profiles, albeit stereotypical, of undaunted directors with business board experience (and without). (more…)

How A Nonprofit Board Director Can Initiate Positive Change

How A Nonprofit Board Director Can Initiate Positive Change

By: Eugene Fram        Free Digital Image

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A nonprofit board member comes up with an idea that he thinks will do wonders for the organization. He is convinced that establishing a for-profit subsidiary will not only be compatible with the group’s mission but may even bring in new sources of revenue. It’s his ball–now what’s the best route to run with it? All too often in the nonprofit environment, initiating change can be as daunting as trying to get consensus in the US Congress! There are, however, certain interpersonal levers, which, if pushed, can accelerate the process–although one hopes that not all the levers will be needed in any specific situation. (more…)

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

At coffee recently 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 director 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 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 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 directors 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 director 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 directors’ time, especially in relation to family and friends of current directors. 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 directors. A cultural change is required to recruit board members who understand director 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.

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

Directors 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.

A Nonprofit’s Reputation Rests on the Quality of its Directors

A Nonprofit’s Reputation Rests on the Quality of its Directors

By: Eugene Fram         Free Digital Image

Reputations are universally seen as valuable, but reputation risk is poorly understood. As a result, reputations are left unnecessarily at risk.*

Reputation matters in the nonprofit world. Few nonprofit boards exist today that don’t worry about how they are perceived in the communities or associations they serve. And to make sure their images remain pristine, many turn to crisis consultants and other forms of expert assistance. A tarnished reputation can have a huge impact on a vast network of stakeholders as confidence in the organization ebbs and support starts to dwindle. Nonprofit board members must be sensitive to signals of impending reputation risk and immediately roll up their sleeves in an attempt to rebuild confidence.

I was once involved in a board that was bitterly divided over an issue—so much so that the intense conflict in the boardroom became public knowledge. As an anomaly, the staff continued to be productive and the organization maintained its functionality. But the damage had been done. The United Way placed the organization on “probation,” warning that financial support would be reduced unless the board took measures to heal the rift.

Recalling this near-catastrophe, I resonated with a recent post that focused on board composition. (http://bit.ly/1BFQcLh) (more…)