Non profit outcomes

What Is The Level of Your Nonprofit Board’s Behavioral Quotient (BQ)

What Is The Level of Your Nonprofit Board’s Behavioral Quotient (BQ)?

By: Eugene Fram

Most viewers will have a working knowledge of Intelligence Quotient (IQ), a predictor of academic achievement or Emotional Intelligence (EI), an assessment of a person’s social skills and intelligence.

I would like to suggest that nonprofit boards, as a team, assess their behavioral intelligence (BQ). BQ involves the acknowledgment that how leaders behave will directly impact the success of the organizations they lead. Following are some critical BQ questions for the board team.* Answering all these questions openly will enable a board to develop its own BQ. (more…)

Too Little Board Deference to CEOs – Typical of Nonprofits?

Too Little Board Deference to CEOs – Typical of Nonprofits?

By: Eugene Fram

“Most nonprofit staff leaders still struggle to have a bona fide seat at the board table as a respected peer,” says Brian Foss, nonprofit consultant. He hypothesizes that this lack of respect is not so apparent on for-profit boards. “I rarely see nonprofit CEOs receiving the same deference. …they would enjoy in the for-profit setting.” Foss also notes that the situation has not changed appreciably during the 25 years in which he has served as a consultant.*

Attitudes in a working relationship such as Board/CEO are often deeply ingrained in board culture. Yet I am convinced that with the right oversight and approach they can be improved. Developing a new and mutually respectful management atmosphere will in time yield superior outcomes for the organization. Here are some basic thoughts for both boards and CEOs that I hope will upgrade the quality of the partnership. (more…)

J.C. Penney Board Flap: A Lesson for Nonprofits!

J.C. Penney Board Flap: A Lesson for Nonprofits!

By: Eugene Fram

The Penney board wanted to fire one its leading directors. The Wall Street Journal reported that the board “… accused him of breaching his board room duties by disclosing confidential information about the CEO search and financial condition.” The director, William Ackman, initially refused to resign. It was only after days of tense negotiations and details hammered out by lawyers that a resignation agreement was forged, finally ending the flap. *

What Nonprofit Boards Should Learn.

• It is difficult, if not impossible, to dismiss an elected director even if he or she commits an egregious act similar that executed by Ackerman. Some nonprofits believe if a director violates the attendance regulation cited in many bylaws or other bylaw regulations, the board majority can unilaterally dismiss a director. Before taking such a step, the board should review the action with its legal counsel, since state laws vary greatly.

• In the Ackman case, the Penney board, with its huge legal power, could only wait until his elected term was over before refusing to reelect him. Such an occurrence in the nonprofit environment would significantly impact the organization’s reputation. Penney’s stock dropped 3.7% when the resignation was announced. While the nonprofit’s reputation can’t be measured in such a quantitative manner, it needs to plan to take protective PR actions should it find itself in such a difficult position, such as the Penney case. (more…)

Are Powerful CEOs Right for Nonprofit Organizations? Updated & Reissued

Are Powerful CEOs Right for Nonprofit Organizations?

By: Eugene Fram

David Larcker and Brian Tanya, Stanford University Professors, have come to the following conclusions about CEO power and raise some pertinent questions about the role of the board, based on research mainly centered on for-profit organizations.*

The research literature clearly shows that having a powerful CEO creates the potential for him or her to abuse this position to extract personal benefits or engage in excessive risky activities. At the same time, the research also shows that (CE0) power is often critical to the successful completion of tasks and the achievement of corporate objectives (and nonprofit missions). To this end, powerful CEOs can ultimately be a success or a failure. Are shareholders (stakeholders of nonprofits) better or worse off with a powerful CEO?

While it is the role of the board of directors to oversee management, at some point the board must empower management to make decisions. Where should it “draw the line” between giving its CEO discretion and providing appropriate oversight? How much power is too much power?

My Response Related to Nonprofit Organizations:** (more…)

Focusing the Nonprofit Board on Strategy – Same for For-Profit & Nonprofits? Updated & Reissued

Focusing the Nonprofit Board on Strategy – Same for For-Profit & Nonprofits? Updated & Reissued

By: Eugene Fram

Writing in the third quarter, 2012, of Board Member.com, Peter Dailey begins with the following conclusions about for-profit company’s strategic process (es):

As directors become increasing involved in their company’s strategic process, it’s evident that some fail to have the competencies to meaningfully contribute. Some deficiencies may result in only benevolent dabbling. … But at the extreme, deficiencies can result in destructive deliberative processes and the adoption of faulty strategic decisions. Often these scenarios operate with the context of by well meaning directors – not within hostile environments. * Skill matrices related to specific director experiences are needed. But they fall short in addressing how a director might behave.

For example, I once observed two influential directors establish complex “management by objective” programs for which the staff was forced to focus on process minutiae rather than program outcomes and impacts. The organization suffered. Large company executives can be a problem source when they force extensive discussions on minor operational items. These are items that they would never allow on their own board agendas. Why this happens is a decades old mystery for those of us who have observed it (more…)

Where Nonprofit Boards May Fall Short

Where Nonprofit Boards May Fall Short

By: Eugene Fram

Boards of Directors, like people, have areas of strengths and weaknesses. Gretchen Morgenson, in her article in the New York Times discusses the weak categories of performance in the boards of public companies. * How do nonprofit boards score in these three major categories?

1. Risk Management – I think that most persons associated with nonprofit boards will agree that nonprofit boards are risk adverse. The rationale is that their budgets are derived from public or donated dollars. However, do boards occasionally seek grants that can enable them to ask outside sources (individuals or foundations) to assist with these more risky projects? For example, I recently encountered a nonprofit that has an internally developed product that could have some modest profitable commercial value. It will require a small financial investment that might be derived from an individual or foundation, and a volunteer to champion the product marketing. In my opinion, nonprofit boards need to seek these types of ventures in the current tight budget environment

Few nonprofit boards have ad hoc or standing risk committees or even employ occasional risk management advisers. Each board should have a good understanding of the risks that it faces. Then where appropriate, purchase insurance to reduce the risk liabilities.

2. CEO Succession Planning – FPs are not noted for CEO succession planning, as noted by JC Penney’s lack of planning when the board had to terminate its former president, Ron Johnson. Similarly, NFP boards are not noted for prowess in this arena. For example, a Google search of “CEO Succession Planning for Nonprofits” did not yield a single reference.

The Morgenson article cited above reports, “Hiring an outside C.E.O. costs between three and five times the amount it does to promote an existing manager…” For nonprofit organizations under budget stress, this fact can be a positive or negative factor in hiring. Positively it can force some organizations to consider all strong internal candidates. Negatively, it may allow the additional costs of engaging an outside candidate to overshadow the review of candidates. Consequently the organization may engage an internal person with less management potential.

Also, within six months of hiring a new CEO a nonprofit should have a succession plan in place in the event that the CEO is temporarily incapacitated.

3. Pay for Short-Term Performance? Many NFPs review executive compensation annually. But the impact of NFP programs and efforts may not be known for longer periods of time. Would it be desirable to structure some CEOs a deferred compensation plan dependent on measuring long-term impact? Would such a change provide more executive motivation in a nonprofit setting? Measuring qualitative impacts also are important, but require using imperfect metrics (http://bit.ly/OvF4ri) over time to obtain a robust picture. Change is difficult for nonprofits. But in the 21st century, some tangible experimentation should take place to consider these options.

Do you also agree the NFPs, like FPs, also fall short in these three major areas? Brief comments on field experiences appreciated.

* Gretchen Morgenson (2013), “ Directors Disappoint by What They Don’t Do,” The New York Times, May 11th.

11 Ways to a Stronger Nonprofit Board

11 Ways to a Stronger Nonprofit Board

By Eugene Fram

There’s lots of advice out there on how to build a strong and smoothly functioning nonprofit Board of Directors. Dr. Richard LeBlanc, York University law professor, had public companies in mind when he recently published 40 proposals to improve board governance. Many of his suggestions I find extremely relevant to NFP boards and their longstanding challenges. Here are some of my adaptations of his proposals. (more…)

Fundraising Foundations: Important Nonprofit Tools for the 21st Century?

Fundraising Foundations: Important Nonprofit Tools for the 21st Century?

By: Eugene Fram

Nonprofits for decades have established – or want to establish their own own fundraising foundations. However many have backed away from them because of the complexity involved, the potential loss of control and the feeling they have a proactive board fundraising committee. In terms of board fundraising effectiveness, a 2012 BoardSource study shows that only 24% of CEO respondents gave their boards and “A” or “B” grade for fundraising, the lowest evaluation among ten board responsibilities listed by the study. * (more…)

Target More Specific Skills in Nonprofit Board Recruitment Plans

Target More Specific Skills in Nonprofit Board Recruitment Plans

By: Eugene Fram

When the nominating committee sits down each year to fill vacant or termed-out board slots, their challenge is to identify the “right” directors for the organization. Typically, the group will work with a grid to define the types of skills they deem valuable to the board composition. While this kind of generic search (e.g. marketing, financial, human resource,) is adequate in many cases, the committee would do well to narrow the probe with an approach more focused on a candidate’s specific experience and skills. (more…)

Absenteeism at Nonprofit Board Meetings On the Rise? Technology Can Help!

Absenteeism at Nonprofit Board Meetings On the Rise? Technology Can Help

By: Eugene Fram

Dear Fellow Board Members: as you know, we have had to cancel recent board meetings due to a lack of quorum. It is imperative that we take certain annual administrative actions that require a duly called meeting and quorum of our board. To date we have been unable to do so due to our lack of attendance….

Twenty-four directors recently received this note from the organization’s volunteer president at the end of June. His sense of frustration was obvious. Lack of a quorum had precluded action on a number of important issues. And although no meetings are scheduled during the summer months, the president felt impelled to call one to take care of unresolved business.

From my experiences with a variety of nonprofits, this single case is indicative of continuing problems. What are the expectations of board attendance at these meetings? And why should it matter when directors have poor attendance records? Finally, what can be done to get a majority of the directors to the boardroom for what is usually no more than nine two-hour sessions a year? How can technology best assist? (more…)