Do Business and Nonprofit Boards Have Common MOs?
By: Eugene Fram
My blog posts in the past have frequently suggested that nonprofit boards can successfully adapt common practices used by for-profit boards. Gail McGovern, former senior business executive, now CEO of the American Red Cross posits that both types of boards innately borrow from each other’s operating traditions. * Following are my reactions to the major issues she raises: (more…)
Big Data Are Great—But Imperfect Metrics Work for Nonprofit Boards!
By Eugene Fram
Nonprofit boards need to expand their evaluations of nonprofit managers and their organizations adding more behavioral impacts * to their evaluations.
For example it might be the number of volunteers that have been trained by the organizations. But boards must go to the next level in the 21st century.
In the case of volunteers, they must seek to understand the impacts on those trained. They need, for instance, to understand how well these volunteers are assisting clients and how they are representing the nonprofit to the clients. The training is a process, but their relationships with clients are impacts.
Qualitative data must be developed to the next level, and the average nonprofit CEO will argue that he/she doesn’t have the staff or expertise to develop impact data. Engaging an outside organization to complete a simple project can cost thousands of dollars. (more…)
Nonprofit Boardroom Elephants and the ‘Nice Guy’ Syndrome: A Complex Problem
By: Eugene Fram
An updated and revised viewer favorite post
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 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: (more…)
CEOs Need To Develop Partnering Relationships With Board Members
By Eugene Fram Free Digital Image
When a CEO publicly introduces a board member as “my boss,” (as I have overheard more than once) there is a problem. It’s true that both parties—CEO and board member—have specific roles in the success of a nonprofit organization. But the hierarchy of authority should be deemphasized when it comes to interpersonal connections. The most effective mindset for CEO and directors is to view each other as partners in working to achieve the organization’s mission and their impacts.
The CEO’s efforts to cultivate such relationships are key. The following are some initiatives that he/she can utilize: * (more…)
Do Nonprofit Boards Neglect Oversight of Internal Leadership Development?
By: Eugene Fram
Although the nonprofit CEO is charged with nurturing the development of his/h staff, the board is responsible for over-viewing the process. Research evidence shows both board and management are neglecting their duties in regard to this responsibility. Only 30% of nonprofit CEO positions are filled internally, a rate that is about half the rate of for-profit organizations. * The same research shows that, “Hiring the more (internal personnel) can improve performance at the two-year mark by 30%.” These data are even more troubling when roughly related to those of large corporations that concluded that 40% of those hired from outside the organizations are replaced within 18 months. **
Why Are Nonprofit Boards Not Paying Enough Attention?
• Board Turnover: The most common board structure is two consecutive 3-year terms. Board chairs most commonly serve two consecutive 1-year terms. This in itself can easily create a “short term” board culture. Board members and chairs know they have relatively short tenures and may want to take actions that show more immediate results. Leadership development can be the antithesis of such actions. It takes time and nurturing.
• The Board-CEO Relationship: Nonprofit boards, as conservators of the organizations assets, are often hesitant to remove an incumbent CEO, sometimes, even when the person has been involved with nefarious activities. Consequently, many nonprofit CEOs are what I call “mind-the-store” types. They have small growth percentages each year, have their financial processes in order, but fail to have competent subordinates who are capable of promotion. As a result, those board members who want to establish a culture for leadership growth have to wait for the incumbent CEO to leave or retire. Most board members, as volunteers, fear the interpersonal conflict and added time commitment that follows a board initiated CEO termination. As a result, all plans for change, such as leadership development, can’t thrive without the active support of the CEO.
• The CEO’s Comfort Zone: Few, if any nonprofit CEOs I have encountered take pride in reporting that some of their direct or indirect subordinates have left for substantial success elsewhere. Many currently who have risen in the organization from a line position have had to acquire newer management skills. Consequently, less qualified incumbent CEOs may view more able but less experienced subordinates as a career threat, and they have little interest in promoting leadership development.
Moving Leadership Development Into a Nonprofit Culture
A board member who serves for six years can have some opportunities to introduce leadership development into a nonprofit organization’s culture:
• When Interviewing A CEO Candidate: Ask about leadership development in prior jobs. Ask the candidate about his/h most outstanding direct report and the most problematic one. Look for answers relating to pride in developing subordinates and for engaging able younger managers
throughout the organization. Also ask references about these issues.
• A New Strategic Plan: Have the board agree with the CEO that leadership development is critical at all levels and establish some modest mutual objectives to begin the process of introducing a new strategic plan.
• When The Lack of a Process Affects the Nonprofit’s Impacts: Establish leadership development as a major CEO objective to be accomplished within a reasonable time frame. Seek a new CEO, if the person fails to perform.
Younger people often seek careers in nonprofit organizations because they want to contribute to the lives of others or to the social welfare of the greater community. After some years of direct service experience, some may discover they have leadership potential. Without a leadership development culture, nonprofits will lose these able persons to the for-profit sector, for better financial rewards, or find they will become staff persons who do their job adequately but look other outside activities, like political office, to satisfy their leadership ambitions.
* http://hbr.org/2015/12/nonprofits-cant-keep-ignoring-talent-development
** Ibid.
Board Members: Does Your Nonprofit Know How To Engage Business Donors?
By: Eugene Fram
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. (more…)
Can Only Three Nonprofit Board Committees Engage Directors Meaningfully?
By: Eugene Fram
Current research shows that the average nonprofit board has an average of 4.8 committees, down from 6.6 in 1994. * I suggest three standing committees. ** This three-standing committee configuration is flexible. Its strength is that it generates a coordinated robust review of the past board experiences to drive an emphasis on policy development and strategic planning. Organizations know where they have been, are thinking about the future but are not mired in micromanagement
Planning & Resource Committee: The CEO, working with the committee, is chiefly responsible for developing the nonprofit’s vision, subject to the input of staff plus the input and approval of the board. The group also plays an important role to make it easier to keep strategic planning and evaluation of new projects a prominent part of board agendas. At the same time, it also monitors the activities of all board task forces. These are work-groups of board and staff tasked with investigating policy or strategic issues. There, for example, is no separate personnel committee under this configuration, but if there is a need to revise a retirement plan for the organization, a task force is given the responsibility to review options for board discussion and decision.
Assessment Committee: If there is no finance committee, this group, along with the CEO, establishes organizational and budget goals. The committee subsequently conducts a robust evaluation of the CEO and organizational impacts, using both quantitative and qualitative impact data.
Executive Committee: The committee’s major function, outside of its legal obligations to act for the board between meetings, is to act as a review group for all reports emanating from the two other committees, fostering a high level of director engagement. This, for example, provides progress reviews at the task-force level, at one of the two standing committees and then at the executive committee level. All of this before an item is placed on the board. Most on the board have one or more opportunities to provide their suggestions and concerns. It is an engaging “no surprise” review system.
State Regulations: Some states require separate standing finance and/or audit committees. If not, the assessment committee is responsible for the financial well being of the organization, and several members of the committee may act as an independent audit committee, meeting with the external or internal auditors as needed. Another way to meet state requirements is to have an audit committee composed of independent outside experts plus one or two board members. Former board members often are willing to volunteer, if they are familiar with the organization’s financial reports.
Strategic Planning Objectives: Some nonprofit boards use interim standing committees to reflect major objectives of the strategic plan. If a major building project is needed, a standing committee is formed to overview the project until it is completed. A new ad hoc configuration of four committees is formed.
Governance Considerations: Under the three-committee approach cited above, the executive committee acts as a governance committees and needs to overview governance issues such as board recruiting, board self-evaluations and occasionally establish task forces to review governance issues. “Donors are more likely to reward nonprofits with good board management, according to a 2014 study.[The study found donors took board education, training, and access to historical records into account as part of their considerations.” ***
Cyber security?: There are wide ranging view on whether or not a cyber security standing committee is needed. One side concludes the potential losses are so substantial in the 21st century that it needs substantial board attention. Others conclude that it is a major risk that needs to be monitored in connection with the probabilities of other types of major risks such a flood or fire.
Special Regulations: Some fields, such as healthcare, have special regulations for which a board is ultimately responsible. One approach is having a board committee overview the outcomes involved. But nonprofit boards, with a three-committee format can use task forces which to review compliance with the regulations.
My experience with this board committee configuration has proven it is productive and adaptable to making board structure changes. Prior to board action, the task force members and the two other groups reviewing reports become well versed in the options available. Since the topics reviewed are limited to policy and strategic opportunities/concerns, the board and staff members become meaningfully involved.
* BoardSource (2017), “Leading With Intent: A National Index of Nonprofit Board Practices,” January.
Can Nonprofit Boards Suffer From Agenda Deficits?
By Eugene Fram
Revised & Updated Viewer Favorite
In a recent study of 772 for-profit and nonprofit directors from around the world, McKinsey & Company found that 25% of the sample assessed their board impact as moderate or low, “… while others reported having a high impact across board functions. “ http://bit.ly/1iFEINR
Following, in italics, are brief abstracts from the study, followed by my analysis of the importance of the information to nonprofit boards. (more…)
The Nonprofit President/CEO–How Much Board-CEO Trust Is Involved?
By; Eugene Fram
Viewer Favorite–Revised & Updated
The title, president/CEO for the operating head of a nonprofit, clearly signals to the public who has the final authority in all operating matters and can speak for the organization.* It is not an ambiguous set of titles. However, the terms “manager” or “executive director” can be quite ambiguous and do not generate the same external understanding or respect. An executive director can be the administrator in a small church or the operational head of a large arts organization. The public and some corporate directors often view managers and executive directors (because of the organizational history of nonprofit) as “hired hands,” not as professionals who, with strategic vision, are able to manage all operational activities. (more…)
The Enron Debacle, 14 years Ago—2015 Lessons for Nonprofit Boards?
By: Eugene Fram
In 2001 Enron Energy collapsed due to financial manipulations and a moribund board. It was the seventh-largest company in the United States. Andrew Fastow, the former CFO and architect of the manipulations served more than five years in prison for securities fraud. He recently offered the following comments to business board members that, in my opinion, are currently relevant to nonprofit boards. (http://bit.ly/1JFGQ6T) Quotations from the article are italicized. (more…)
Nonprofit Management 