nonprofit board culture

Can Nonprofit Boards Afford To Underinvest In Management Leadership Development?

Can Nonprofit Boards Afford To Underinvest In Management Leadership Development?

By: Eugene Fram:

McKinsey & Company has just issued the results of a substantial study: To better understand the state of (nonprofit) leadership in the US social sector… The findings suggest that chronic underinvestment in (management) leadership development…(may risk) the sector’s capabilities to fulfill emerging missions effectively and to adapt to fast-changing demands.
(http://www.mckinsey.com/insights/social_sector/what_social_sector_leaders_need_to_succeed) (more…)

Can A Nonprofit Find Strategic Ways To Grow in Difficult Times?

Can A Nonprofit Find Strategic Ways To Grow in Difficult Times?

By: Eugene Fram

Nonprofits have always had to struggle to meet their client needs, even when economic conditions and social turmoil were much less constraining than today. How can mid-level nonprofits uncover growth opportunities in the present environment? (more…)

What To Do About Weak Nonprofit Board Practices

What To Do About Weak Nonprofit Board Practices

By Eugene Fram

Peter Rinn, Breakthrough Solutions Group, published a list of weak nonprofit board practice. * Following are some of the items listed and my estimation of what can be done about them, based on my experiences as a nonprofit board director, board chair and consultant.

• Dumbing down board recruitment – trumpeting the benefits and not stressing the responsibilities of board membership.
Board position offers frequently may be accepted without the candidate doing sufficient due diligence. At the least, the candidate should have a personal meeting with the executive director and board chair. Issues that need to be clarified are meeting schedules, “give/get” policies and time expectations.
In addition, the candidate, if seriously interested, should ask for copies of the board meeting minutes for one year, the latest financials, and the latest IRS form 990.

• Overlooking the continued absence of board members at board meetings, strategic and planning meetings.
Many bylaws have provisions dropping board members who do not meet meeting attendance criteria established by the bylaws. However, such actions are difficult to execute because of the interpersonal conflicts that can arise. For example, one organization with which I am familiar had a director who did not attend any meetings, but did make a financial contribution to the organization. When his resignation was requested, he refused. Not wanting to create conflict, the board simply kept him on the board roster until his term expired and then sent him a note acknowledging the end of his term.

• Taking a board action without conducting enough due diligence to determine whether the transaction is in the nonprofit’s best interest.
Although each board member should sign conflict of interest statement each year, my impression is that this is rarely done. Some conflicts of interest can develop that are to the benefit of the organization and these should be acknowledged openly and listed on the IRS Form 990. On the financial side, board members should understand the potential personal liabilities that might be accrued as a result of violation of the Federal Intermediate Sanctions Act (IRS Section 4958) and other statues. For example, under IRS 4958, a board member can have his or her personal taxes increased if involved in giving an excess benefit, such as selling property to the wife of a board member for less than the market rate.

• Allowing board members to be re-elected to the board, despite bylaw term limitations.
This often occurs when the board has given little thought to a succession plan, and the only person who seems qualified is currently in place. It also happens when the board has significant problems and nobody on the board wants to take the time to hold a time consuming position. Some boards make a bylaw exception by allowing a board chair, if scheduled for rotation, an extra year or two to be chairperson.

• Allowing board members to ignore their financial obligations to the nonprofit.
To assess board interest in a nonprofit, foundations and other funders like to know every board member makes a financial contribution within their means or participates in the organization’s “give/get” program. This topic should be discussed at the outset of recruitment so it can be full understood by all directors.

• Over selling the protection of D&O insurance and laws limiting the liability of directors.
The importance of a nonprofit having a D&O policy, even a small one, can’t be over stated. I recently encountered a nonprofit that had operated for seventeen years without a D&O policy, although its annual budget was $500,000, and it was responsible for real estate valued at $24 million. Each director should be knowledgeable about the potential personal liabilities involved with such a board position.

• Allowing ignorance and poor practices to continue because it keeps leadership in control.
Changing leadership and practice is difficult for both for-profit and nonprofit organizations. However, in the nonprofit environment it is more difficult because poor leadership and practices can continue for long time period, as long as current revenues meet expenditures. But the nonprofit can be headed for problems without a business plan covering three or more years. In some situations, this state of affairs continues because the board has low expectations of management and staff.

There is much that nonprofit boards can do about weak practices,

* Source: http://www.nextlevelnonprofits.com/board-governance

Once Again! Are Three Standing Nonprofit Board Committees Enough?

Once Again! Are Three Standing Nonprofit Board Committees Enough?

By: Eugene Fram

Nonprofit boards are often known for the proliferation of board standing committees. Current thinking is to reduce the number substantially. Following is one model, with only three standing committees which has been used by thousands of nonprofit organizations for over 20 years. Ad hoc committees or task forces, are used when needed for investigation of policy decisions and major strategic issues such as changes in pension plans.

  1. Executive Committee – It consists of the CEO, corporate officers and an at-large member elected by the board. The committee acts for the board between meetings, subject to later board ratification; sets the meeting agendas, reviews reports for board discussion; and appoints all standing committees and ad hoc committees.

    2. (more…)

Is Your Nonprofit Board Ready to Recruit a Transformational Leader?

Is Your Nonprofit Board Ready to Recruit a Transformational Leader?

By Eugene Fram

A CEO friend recently shared her organization’s remarkable success story. She had been a first time CEO for about 10 years when a new director was elected to her board. This one individual, whom she described as a strategically focused transformational director because of his board influence, helped position the organization to expand services and become nationally recognized. (more…)

Do Today’s Business Leaders Make Effective Nonprofit Directors? Revised & Updated

Do Today’s Business Leaders Make Effective Nonprofit Directors? Revised & Updated

By: Eugene H. Fram

The names of the new board nominees have been announced. They include several outstanding recruits from the business community. Will these new formidable directors perform well in the nonprofit environment? William G. Bowen, a veteran director in both the for-profit and nonprofit environments, raised the following questions about such beginnings in a 1994 article:* Is it true that well-regarded representatives of the business world are often surprisingly ineffective as members of nonprofit boards? Do they seem to have checked their analytical skills and their “toughness” at the door? If this is true in some considerable number of cases, what is the explanation? (more…)

What Nonprofit Boards Are Not Doing – But Should! Revised & Updated

What Nonprofit Boards Are Not Doing – But Should! Revised & Updated

By Eugene Fram

A recent New York Times article* last May reported that public company directors are coming under scrutiny this proxy season based on what they are not doing. Based on my experiences with dozens of nonprofit organizations, the litany of complaints cited in the Times article, can easily apply to nonprofits, whether they are professional organizations, trade associations, educational institutions or charitable organizations. (more…)

Nonprofit CEOs Need To Be Peers NOT Powerhouses – Interface More Frequently with Individual Board Members

Simply having board meeting contact with directors isn’t sufficient for a 21st century nonprofit CEO. Following are three professional approaches the CEO can take for developing better communications with board members. This especially applies to those, who think as I do that the board should view the CEO as a mission focused peer, not an aspiring powerhouse.

http://www.huffingtonpost.com/eugene-fram/nonprofit-ceos-need-to-be_b_5060285.html

What’s in a Name? Benefits of the president/CEO title — Revised & Updated

What’s in a Name? Benefits of the president/CEO title Is it time to change your organizational title?

By Eugene Fram

Over the last 100 years, senior managers of nonprofits typically have held the title of “executive director.” During the past 30 years, many nonprofits have changed the title to “president/CEO,” following a common business practice. Many more nonprofits need to consider the same change to obtain some subtle but useful organizational benefits.

A wide range of nonprofits use the executive director title: churches, human service agencies, trade associations, and medical facilities. An executive director can be organizations; hospitals became regional healthcare systems;the only manager in a church with an annual budget of $200,000, or be the head of a medical facility with a $10 million annual budget and 200 employees. These significant differences in responsibility levels can:

•demean the contributions of many executive directors in the eyes of some important audiences
•minimize people’s perceptions of the organizations’ contributions.

The Executive Director in Nonprofit Organizations

According to Wikipedia, nonprofit senior managers are called executive directors instead of chief executive officers “to avoid the business connotation which the latter name evokes.” It also distinguishes them from “members of the (volunteer) board of directors and from non-executive directors, who are not actively involved in running the corporation.” (Non-executive directors are volunteers who mentor or advise an operating division within the nonprofit, such as the development office.)

Using the title of executive director made sense during the early part of the 20th century when nonprofit organizations were modest ones with a handful of employees, and volunteers regularly filled managerial or service roles. As late as the 1960s, one occasionally witnessed volunteer board members having internal operational roles.Those who advocate the continued us of the executive director title argue that the title’s use is empirical evidence of the board’s involvement in the organization’s activities. However, the negative side of the argument is that continued use of the title leads to board micromanagement of operations, which stunts organizational growth.

Nonprofit organizations became larger and more complex in the latter part of the 20th century. Local professional societies became regional organizations; hospitals became regional healthcare systems; and so on. The proportion of volunteers involved in management operations and staff work declined. Consequently the trend to use the president/CEO title became more appealing to focus operational responsibility on management and staff. If properly structured, the title requires the chair and CEO to develop a more trusting professional relationship that assures stakeholders of higher levels of performance. Organization results become focused on outcomes, not process.

The president/CEO in Nonprofit Organizations

In the latter part of the 20th century, businesses began to add CEO to the title of either their president position or board chair position.* The objective was to clearly designate which of the two had final operational authority, except for those actions reserved by the firm’s bylaws for the board (usually acquisitions, pension plans, and long-term contracts). In the business environment, as contrasted to the nonprofit environment, both the chair and the president can be corporation employees.

In the 1980s, nonprofit organizations began to mirror business organizations managerially. Many developed marketing departments and installed complex information technology. A few hired experienced business executives to head their organizations. The older philosophy of “avoiding the businesses connotation” was quickly eroded. When hiring new senior managers, nonprofit boards offered titles of president/CEO and made bylaw provisions for others in the senior management teams to become vice presidents.**

Some president/CEOs even became voting members of their boards, if permitted by their state laws. It wasn’t unusual for some incumbent executive directors to seek the new title if it was politically expedient. However, many conservative boards still look upon the change as a managerial power grab, which has slowed the change process.
Three decades have passed since early adopters made the first changes. Yet thousands of complex nonprofits are still headed by managers holding the executive director title, although they may have substantial, complex operational duties.

Changing the title of the chief staff officer to president/CEO can positively influence three things:

1. PERCEPTIONS OF THE ORGANIZATION

There’s little public understanding of the robust responsibilities of executive directors. Most people holding the title can relate stories of having to describe their jobs to those unfamiliar with nonprofits. But most people recognize that the president/CEO is the head of the organization with authority to lead its employees and to direct operations.

The senior manager from time to time may have opportunities to be interviewed by the media. This can be a critical responsibility when a rapid response to a crisis is needed or an unusual public relations opportunity arises. The president/CEO title enables the senior manager to move quickly and authoritatively; there is no ambiguity related to the leader’s authority.

How leaders and organizations are perceived by stakeholders are realities with which leaders must deal, whether or not the perceptions are accurate. Providing the chief staff officer with the president/ CEO title can help develop more desirable internal and external perceptions of an organization’s strength and the responsibilities of the person leading it.

2. ORGANIZATIONAL CULTURE

When organizations change the title, they often do so in connection with developing a structure that brings more formality and managerial professionalism to the culture. In the past, years of volunteer involvement in operations often developed a more family culture, which is a positive force when the nonprofit is in its early stages. But it’s hard to maintain a family environment as the number of employees grows. A new formality, brought about with the senior manager’s title change, along with a group of former managers now titled vice presidents, may be seen by older members of the staff as making the operation “uncaring” towards staff and clients.

As time progresses, with the president/CEO being the communications nexus between the board and staff, there will be less personal contact between the two groups. This requires the CEO to be concerned that a mistrusting atmosphere may develop. Under the CEO’s guidance, contact between board and staff can take place on ad hoc committees, on strategic planning projects, at various board orientations, and at organization celebrations. In these ways, the board can seek the participation and advice of all staff in establishing the major programs involved with missions, visions, and values.

The change in top titles and the greater formality it can bring may raise some trust issues with older staff. Management needs to convey a message to the staff that the change is a result of the board placing more trust for operations in the hands of management and staff.

3. FINANCIAL GROWTH

Some nonprofits take the position that fund development is the board’s responsibility, since board members have the broadest range of community and other outside contacts. With a president/CEO in the top management position, fund development becomes the joint responsibility of the president/CEO, the development person — if one is employed — and board members capable of fundraising. The new title gives the senior manager the immediate recognition necessary to credibly approach donors and, with the consent of the board, to make commitments on the organization’s behalf.

To involve the board more directly, the president/CEO can work collaboratively with board members to develop contacts opened by the board. (As one nonprofit executive person explained the situation, “Top people readily communicate with persons in similar positions.”) In seeking support funds, the new title can open doors and communications that might not be available to one holding an executive director title (which conveys such an unspecified range of responsibility). It might even raise an unarticulated question in the minds of some donors as to why the person hasn’t been given the title of president/CEO.

Which title Will Work Best for you?

Compared to the duties of a president/CEO, the duties of an executive director range much more widely on a management activity scale. Some executive directors are simply clericals while others are sophisticated senior executives. Any organization that ignores this fact can leave a psychological gap in public perceptions relating to the group’s strategic posture and the senior manager as a substantial leader. Where warranted by higher responsibility levels, changing a senior manager’s title to president/CEO can help present a better public posture for the senior executive and a better strategic posture for an organization.

Eugene Fram, Ed.D. (frameugene@gmail.com, blog site: http:// bit.ly/yfRZpz), is professor emeritus at the Saunders College of Business, Rochester Institute of Technology. In 2008, Fram was awarded the university’s Presidential Medallion for Outstanding Service. In 2012, a former student gifted Rochester Institute of Technology $3 million to establish the Eugene H. Fram Chair in Applied Critical Thinking. Fram’s book Policy vs. Paper Clips (available in new edition at http://amzn.to/eu7nQl) has been used by thousands of nonprofits to model their board structures.

*In the nonprofit corporation, the board chair is usually an unpaid volunteer who also might hold the CEO title, indicating that person has final operational authority. A volunteer holding the CEO title may be subject to more personal liability than other board members.

**This also assumes that those directly reporting to the president/CEO are concurrently given vice president titles.

Reprinted from the 2014 January/February/March issue of Nonprofit World Volume 32, number 1

Does the Nonprofit CEO Need to Go??

Recognizing and acknowledging that the current CEO is no longer helpful to the nonprofit organization is never easy to come by. Beyond malfeasance and under-performance, obvious reasons for initiating such a discussion, there are often other indicators: his/her modest leadership skills, ineffective discussions between the CEO and the board chair, criticism from external stakeholders, overemphasis on tactics unbalanced by a focus on strategies, etc. Volunteer directors are loathe to be confrontational when a CEO has been marginally satisfactory for a number of years, preferring to avoid the “drama” that inevitably accompanies the “changing of the guard.” Yet this type of change can’t be accomplished in a clear and pristine manner.

http://www.huffingtonpost.com/eugene-fram/does-the-nonprofit-ceo-ne_b_5019360.html