non-profit management

Big Data Are Great—But Imperfect Metrics Work for Nonprofit Boards!

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

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

 

 

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?

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?

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?

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

    A Policy/Strategy Focused Board

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.

    Exceptions & Permutations Of The Three-Standing Committee Approach

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.

** https://goo.gl/QEL8x3

***https://captrust.com/resources/institutional-consulting/can-good-governance-impact-fundraising/?_cldee=amV2ZXJseUBhcmNoLW5vLm9yZw%3d%3d&recipientid=contact-c0457afcd4c7e7118121e0071b66bfc1-5f502a8e3c37456ba7ab756c6169888f&esid=0e7de7bc-0d2b-e911-a962-000d3a4e75ec

Can Nonprofit Boards Suffer From Agenda Deficits?

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?

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?

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…)

How Can Nonprofits Accommodate To External Influences? Some Field Observations

How Can Nonprofits Accommodate To External Influences? Some Field Observations

By: Eugene H. Fram

Ruth McCambridge, editor of Nonprofit Quarterly, points out “Our organizational management, (board) styles and structures are affected by the four external influences.” See bolded items below. (http://bit.ly/1HSwrZY) Following are some specific field observations I have encountered that, over several decades, support her model relating to external influences.

The fields in which we work: McCambridge points out that arts organizations have dual have leadership models—artistic and business. However, unless specified which has final authority, the system can lead to continual conflict between the two; the artistic leader wanting the most authentic productions and the business leader concerned with budget realities. The final authority is often determined by which leader has the CEO title.

Human services boards and staffs often operate at a much higher emotional level than other types of nonprofits. Examples: Some of these board members consider themselves “families,” frequently fail to make the hard choices when board members are ineffective directors. Even the least productive board chair is venerated. Staff members similarly can be emotionally bonded, failing to realistically acknowledge the strengths and weaknesses of others.

On the other hand, board members of trade or professional associations often look to the staff as “servants” who should closely follow board directions. Example: One association CEO I encountered creativity developed a million dollar reserve for the group. Yet he was only allowed to spend up to $5K of a multimillion-dollar budget without formal board approval.

The regulatory environment in which we function: It can be argued that nonprofit organizations are much more regulated than their for-profit counterparts. In addition to traditional state and Federal corporation laws, all nonprofits must abide by the Federal Intermediate Sanctions Act that prohibits them from providing excess benefits to anybody in a position to influence actions—internally a management or staff person and externally a vendor, donor or volunteer, etc. Charitable and public benefit nonprofits must annually file an IRS Form 990 that has, in addition to financial data, 38 questions related to corporate governance. Health care nonprofits face a multitude of regulations related to staff certification and relationships with patients. Example: A psychiatrist employed by a counseling agency resigned and took patient records with him. The employing organization had to sue for return of the records because agency, not the psychiatrist, was responsible for confidentiality.

Our communities’ spoken belief systems: Having worked with nonprofits on both US coasts, I have generally observed that CEOs on the east coast are given much more managerial latitude once a nonprofit start-up moves beyond its early stages. Example: I have consulted with two west coast nonprofits both well beyond the startup stage—one with a budget of $6 million and he other with a budget of $10 million. A community model that required significant number of board interventions covered both. If they were on the east coast, both would likely have had CEOs with the title “President /CEO” with much more operating flexibility than the CEOs I observed on the west coast.

Our communities’ cultural norms and dynamics: Peter Drucker, the noted management expert, is said to have remarked, “Culture eats strategy for breakfast every morning.” He meant that strategy needs to be in line with culture to succeed. Nonprofit boards frequently align with this comments. Example: If a nonprofit board is a conservative one and content with a “mind the store CEO culture,” one or two board members can’t do much to drive change, until the CEO retires or leaves.

Suggestion for action

With the assistance of an independent moderator, many boards could benefit from an in-depth discussion of these four issues every couple of years. It may open discussion on some internal issues that need corrective action.