Nonprofit board communcations

Director Independence: a Nonprofit Board Issue?

Director Independence: a Nonprofit Board Issue?

By: Eugene Fram       Free Digital Photo

In the best of all nonprofit worlds, every director is an independent agent whose ability to make critical decisions on behalf of the organization is regularly uncompromised by outside pressures. This, unfortunately, is not always the case. Based on field observation I have concluded that questionable practices can plague nonprofit boards when social or political pressures are brought to bear on a director. In governance terms nonprofit decision-makers should be “outside directors,” not overtly or covertly susceptible to management or board colleague personal pressures.

Discerning recruitment committees can screen candidates to be certain they are not subject to influences that might impair their judgment as board members. Lack of independence could easily divide and perhaps polarize the board as has happened in our country’s Congress. A candidate who is “sponsored” by a major donor and maintains personal ties with the donor can create a “hornet’s nest” for the recruitment group. There are no easy solutions to these problems. (more…)

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Once Again! Should a Nonprofit CEO Be a Voting Member of the Board of Directors?

Once Again! Should a Nonprofit CEO Be a Voting Member of the Board of Directors?

BoardSource, a professional governance organization, reports that this question is one of the most frequently asked. Google reports eighteen million+ citations related to the issue or related issues. The question continues to be debated, and the need for comment and opinion seems insatiable.

But here are the issues as I see them:

State Legislation: Most nonprofit charters are issued by states, and it appears that the vast majority of American nonprofits are governed by these regulations. California does not permit the CEO to be a voting member. Until a recent change, New York did allow the CEO to become a board member. The motivations behind the legislation center on preventing a CEO developing conflicts-of interest, especially as they relate to salary decisions. Also, there is a feeling among some nonprofit directors that the board must be the “boss.” This attitude can even go as far as one nonprofit board member’s comment: “We have a real board, we tell the CEO exactly what to do.”

It appears that the restriction is considered a “best practice.” Some nonprofits move around it by naming the CEO an ex-official member of the board, a member without a vote. However, there is a “better practice,” available where permitted by legislation.

Developing An Even Better Practice in a Nonprofit

Start At The Top: Allow the CEO to hold the title of President/CEO and allow the senior volunteer to become Board Chair. This signals to staff and public that the board has full faith in the CEO as a professional manager. In addition, the change absolves the senior volunteer of potential financial liability, not unlike the volunteer who unwittingly received a $200,000 bill from the IRS because it appeared he had strong control of a bankrupt nonprofit’s finances and operations.

Ask The CEO: Make certain the CEO is willing and able to accept full responsibility for operations. Not all CEOs, designated as Executive Directors, want the increased responsibilities attached to such a title and to become a board member. These managers frequently feel comfortable with having the board micromanage operations and often openly discuss their reservations.

The CEO Becomes A Communications Nexus: Under the CEO’s guidance, board-staff contact takes place on task forces, strategic planning projects, at board orientations and at organization celebrations. It openly discourages the staff making “end runs” to board members, not a small problem in community-focused nonprofits

Brand Image: As a board director, the CEO can be more active in fund development. The board position and the title can easily help the CEO to build the organization’s public brand image through the clear public perceptions of the board’s choice to lead the organization. This provides leverage to make greater use of the board-CEO relationship required to develop funds. It can allow the CEO to be the spokesperson for the organization’s mission and to quickly become the center for public statements when a crisis develops.

Peer Not Powerhouse: Probably descending from early religious nonprofits, its personnel may be seen by part of the public as not being “worldly.” They must be over-viewed by a group of laypersons that encounters the real world daily. The CEO, as a voting member and a board team peer, takes on increasing importance to reducing these attitudes. As long as the CEO works successfully as a peer not a powerhouse, there should be substantial benefits to the organization.

 

 

 

 

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The Fantasy Nonprofit—Who Works There?

The Fantasy Nonprofit—Who Works There?

By: Eugene Fram                               Free Digital Photo

After three decades of immersion in the nonprofit culture, I occasionally allow myself to imagine what it would be like to start all over again. Assuming I were in the process of founding a new nonprofit I would have the authority to choose my own team! In this hypothetical, I could shape the mode of governance and select the participants I think would interface most effectively!

Here are some of the decisions I might make based on current realities:  (more…)

The Possibility Of Fraud – A Nonprofit Board Alert

The Possibility Of Fraud – A Nonprofit Board Alert

By: Eugene Fram              Free Digital Image

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“According to a Washington Post analysis of the filings from 2008-2012 … of more than 1,000 nonprofit organizations, … there was a ‘significant diversion’ of nonprofit assets, disclosing losses attributed to theft, investment frauds, embezzlement and other unauthorized uses of funds.” The top 20 organizations in the Post’s analysis had a combined potential total loss of more than a half-billion dollars. *

One estimate, by Harvard University’s Houser Center for Nonprofit Organizations, suggests that fraud losses among U.S. nonprofits are approximately $40 billion a year. **

Vigilant nonprofit boards might prevent many of these losses. Here’s how: (more…)

A Nonprofit Paradox: Weak Leadership Pool, Positive Organization Outcomes?

By:  Eugene Fram                   Free Digital Image

It happens: one or both of the two nonprofit engines—governance and/or management — sputters out, yet the organization continues to meet its goals and deliver adequate service to its constituents. Some examples: a child placement agency manages to maintain the quality of its oversight while struggling to deal with an admittedly inept board and CEO. Another example: An ineffective volunteer board at a youth center, meeting quarterly for a couple of hours, allows the CEO to really manage the board and to motivate the staff. The CEO realized he and the agency were in dangerous positions without an innovative board providing standard oversight, although client services were positive.

A staff, dedicated to its own professionalism, can on occasion compensate for a lackluster board and/or senior management team by continuing to provide reasonable value to the nonprofit’s clients. Another example involved the ED, simultaneously a deputy sheriff, and his law enforcement colleagues taking payments to refer wayward youths to ED’s shelter. However, the staff continued to provide valuable services. * In the end it’s about leadership and the ability to step up to the plate when dysfunction occurs. In the last case, the staff acted in a professional manner, although the management was entirely corrupt and the board evidently inept.

Klaus Schwab, founder of the World Economic Forum, has some innovative thoughts on that subject. He identifies four key characteristics he believes are critical to strong innovative organizational leaders. ** I have listed them below, and the ways I think his ideas can be applied to nonprofit governance.

 

1. Systems Thinkers (Brains): Deep knowledge in their area of work. Our current economy and future opportunities will continue to value knowledge, expertise and ideas.

Nonprofit CEOs need not only cutting edge knowledge of their field—they must have a firm grasp of what nonprofit governance implies, particularly the shared leadership style demanded by accrediting agencies. Many CEOs also need to acquire the skills involved to interact well with higher-level executives from business and governmental organizations, in order to partner with them or to take an active role in fundraising.

Nonprofit directors should have a “strategic bent’ to their decision-making and an understanding of the serious downside of micromanagement. Since most directors’ everyday professional lives center on commercial endeavors, or the professions, they must adjust their board mindsets to focus on mission not profit. This is especially pertinent when applied to assessing nonprofit qualitative outcomes, e.g., community impacts. Using imperfect metrics – that are anecdotal, subjective, interpretative — outcomes or impacts can be roughly assessed. Also imperfect metrics can rely on small samples, uncontrolled situational factors and cannot be precisely replicated. Over time they can be highly useful in tracking progress and driving change. (See:http://bit.ly/OvF4ri)

2. Deep Collaborations (Soul): Even when a leader has unwavering commitment to his or her personal values; he or she cannot operate as an island…. Trust among collaborators from a variety of perspectives forms the foundations for deep and ongoing collaboration, which is essential for leading (organizational) change.

Nonprofit directors are part-time volunteers with very little opportunity to have contact with the staff. This lack of interaction can encourage mistrust on both sides. Some informal board/staff social events or board/staff working task forces can go a long way towards promoting a spirit of cooperation.

Although there exists a vast literature on the necessity to build a trusting relationship between volunteer chair and CEO, there is only modest mention of the trust required between nonprofit boards and staff. Many nonprofits are “flat” organizations, meaning there may only be one or two management layers between staff and board. Consequently, this relationship needs to work reasonably well to have operational success; few CEOs or boards can survive a staff “revolt.” Nonprofit CEOs and boards walk a difficult trail in maintaining a deep and trusting collaboration.

3. Empathetic Innovators (Heart): Passion is a key innovator, but to create social (and organizational) change empathy must plan a central role. Innovation must be rooted in deep empathy – a real understanding and sensitivity to the experience of another person –to be most appropriate and effective.

Nominating committees are often seduced by a display of passion for the mission in a board recruit. Passionate directors are driven but not always responsive to other governance interests and perspectives. But candidates who have low or moderate interest can make some surprising contributions because they can take their governance responsibilities seriously or lead in other areas. True board innovation is based on empathy with fellow board members and management. It is also a collegial effort towards fulfilling the mission.

Nonprofit innovators may become frustrated when they want to improve the performance of an established organization and find some of the staff, especially those in management positions, are unable or unwilling to change. In some cases, the answer may be well-planned terminations, showing an appreciation for what the person has contributed or moving the person to an individual contributor position, allowing him or her to be measured for a fulfilling a familiar operating service.

4. World Visionaries (Nerve): Social (and organization) innovators …must be skilled at integrative thinking — the ability to hold two opposing ideas in their minds at once and then reach a synthesis that improves each one. They must…. be comfortable navigating ambiguity and seeing possibilities in the fragmented, complex nature of our social reality as they envision a better future.

The word “nerve” usually conjures up aggression, risk taking or chutzpah! Klaus Schwab brings to it a more nuanced interpretation. My nonprofit “take “on it is a director’s ability to think critically, to weigh the risk of a proposed action with the possible outcome in thoughtful consideration of what is in the best interest of the organization. It is a standard to which nonprofit organizations must aspire if they are to survive and meet the needs of their community and professional clients in the 21st century.

It’s time to banish the old paradox in which productive staffs can compensate for incompetent volunteer boards or managements. Klaus Schwab expands the criteria for leadership in governance. In doing so, he raises the bar for the entire organization.

*For an example see: Ann Eigeman (2013) “Targeted Editorial Stands Out for Separating a Nonprofit’s Poor Management From Its Value,” NPQ Newswire, November 4th.

**Klaus Schwab (2013) “4 Leadership Traits to Drive Social Innovation,” Stanford Business Center for Social Innovation, October 31st.

 

 

 

 

 

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Anticipating Tomorrow’s Nonprofit Crises Today

Anticipating Tomorrow’s Nonprofit Crises Today

By: Eugene Fram

In the decades in which I have been a nonprofit/business board member or consultant, I fortunately have only been in the mire of a crisis situation twice.   In both cases, the board was totally unprepared to take appropriate actions to minimize the turmoil that followed.

Following some guidelines that nonprofit boards can use to plan to respond effectively to crises in the 21st century: * (more…)

Nonprofit Chief Executives Should Have Title: President/CEO, Updated and Expanded

Nonprofit Chief Executives Should Have Title: President/CEO, Updated and Expanded

By Eugene Fram

This post, over several years, has developed a record of continued viewing interest. Rarely a day passes with the post’s count isn’t one to five views. On a recent day  there were 18 views.  Since originally published in 2013 , this post has had a  total of  about 1400 views. The  year-to-date August 2017 total is 508  views and counting, predicting another record year   Perhaps the controversial nature of topic causes the longevity of interest?

When nonprofit organizations reach a budget level of over $1 million and have about 10 staff members it is time to offer the chief operating officer the title of PRESIDENT/CEO. In addition, the title of the senior board volunteer should become CHAIRPERSON OF THE BOARD, and the title of EXECUTIVE DIRECTOR needs to be eliminated. Experience has shown that with a reasonably talented PRESIDENT/CEO at the helm, he/she can provide the following benefits: (more…)