Nonprofit board stucture

What Can A Nonprofit Chair Do To Fix A Dysfunctional Board?

What Can A Nonprofit Chair Do To Fix A Dysfunctional Board?

By: Eugene Fram

There are times when the governing body of any organization may appear to be “broken.” The directors, whether for profit or nonprofit, may be polarized—progress is stunted – apathy and confusion replace purpose and efficiency.
A listing of ways to resuscitate dysfunctional business firms http://bit.ly/1w4Tutv prompted me to expand on actions for nonprofits in similar condition. When a nonprofit is in trouble, any chair, who is aware of his/ her leadership responsibilities, should aspire to be the “fixer “of the fractured board. But there is just so much he/s can do. Some failures have deep endemic roots such as outdated structure, personality conflicts etc. The following actions are within the chair’s capability, and they can be useful in repairing board disruption. (more…)

How Prepared Are Directors for the Challenges of the Nonprofit Culture?

How Prepared Are Directors for the Challenges of the Nonprofit Culture?

By: Eugene Fram

Given that the typical tenure of a new board member is six years. And assuming that a new director’s intention is to make his/her unique contribution to the organization’s progress before he rotates off the board and is supplanted by another “new” director. With these factors in mind, I estimate that many volunteers enter the boardroom with little understanding of nonprofit culture. Even those who have served previously on business boards may initially spend valuable time in accommodating to the nuances of nonprofit practices and priorities before being poised to make contributions to the “greater good” that nonprofit create. Following are some areas that are endemic to nonprofits: (more…)

Stay on That Nonprofit Board!

Stay on That Nonprofit Board!

By: Eugene Fram

Gene Takagi, noted San Francisco attorney, who specializes in nonprofit organizations recently published an article listing 12 reasons for resigning from a nonprofit board. It is worth reading. (http://bit.ly1r2M5Hi)

BUT

Nonprofit directors often become impatient with the slow pace of progress toward positive change. Here are some actions that may change the situation, improve service to clients and prepare the organization for any long-term mission disruptions. (more…)

Should Mature Nonprofits Allow Board Micromanagement?

Should Mature Nonprofits Allow Board Micromanagement?

By: Eugene Fram

Accepted View of Micromanagement: “…Directors spend more time with the details of the operations instead of planning its short-term and long-term growth strategies. …
(http://linkd.in/1q84pMm)

The Need for a Micromanaging Board
Board micromanagement is an appropriate approach when a nonprofit is in a start-up stage. Financial and human resources are modest, and the volunteer directors must assume some responsibilities normally executed by compensated staff. The chief executive often has managerial responsibilities as well as a list of clients to service. It is not unusual to promote a person who is only familiar with direct service to become the first chief executive of the organization. In turn , this neophyte manager has to depend on board members for managerial counsel and direction. A culture of board dependency is created out of necessity. (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

How Does a Nonprofit Board Know When a CEO Is “ Just Minding The Store?”

How Does a Nonprofit Board Know When a CEO Is “ Just Minding The Store?”

By: Eugene Fram

David Director (DD) has been the chief executive of a nonprofit for about 15 years. Currently, the organization has a budget of $1.5 million, mainly from governmental contracts and a sprinkling of donations. The nonprofit employs about 20 people full and part-time, and annually serves about 500 people in dire need.

Following is an abstract of the board’s evaluation of DD as the CEO.

• High Job Satisfaction: * DD enjoys his work and his position as a chief executive. Staff turnover is very low, and last year, DD led a board-staff committee to configure the new sign in front of the building. An engaging personality, he is liked by both board and staff. He has good press relationships and frequently uses press releases to call attention to client success stories.

• A Healthy Organization: During DD’s tenure, revenue growth has averaged about 2% annually. Client growth has been in the same proportion. Organizational finances are is good shape with a balanced budget plus a modest yearly surplus. He has a dashboard to monitor finances.

• A Fully Engaged Board: Board members enjoy working on committees such as the new sign campaign (see above), the annual dinner-dance and selecting endowment investments. The audit committee only meets once a year after the completion of the financial audit and its accompanying management letter has been received.

• Positive Community Impact: DD keeps records of clients who exit the programs each year, but has been unable to track their long-term impact on the community.

The big question is whether or not DD is just minding the store? I argue that he is.
This hypothetical organization is typical of the types of nonprofits I have encountered over a long time period. The basic fault is that the board is composed of well meaning people attracted to the mission as well as the personality of the chief executive. As a result, the operations of the organization are kept at a steady state with the active support of the board. Their rationale for this support is the need to focus on the mission. There also might be a mistaken view that the board must protect staff positions.

Some directors come to the conclusion that there is little one can do to drive change, but stay on to enjoy the networking relationships that can develop. Others who join the board resign quickly, citing work pressures. Still others decline board invitations.

A number of other hints are contained in the case:
• Low staff turnover and DD’s interest in the sign committee. The committee can spend hours talking about its color and lettering!
• Revenue and client growth percentages are very low, probably supported by certainty, to date, that government dollars will continue to be available.
• The committees cited don’t contribute much to clients.
* Many directors who don’t have financial responsibilities seem to get some satisfactions out of making decisions about moving endowment assets around. A robust audit committee meets more than once a year.
• There is no strategic planning indicated. Nonprofits, like these, also can confuse a SWAT analysis with a strategic plan. Where financial or behavioral objectives are established, measurement outcome data are not included to more rigorously assess outcomes and impacts.
• DD evidently does have the ability to become an effective development person but prefers to spend his time on smaller operational items, such as the new sign committee.
• DD does not provide any strategic insights or vision on trends in his service field.

Summary
In my opinion, there are thousands of nonprofits like the one described. Making changes in their governance or operations is difficult; culturally changes can only take place after a long tenured CEO leaves. Since they never measure up to what they could be, are those organizations with “store minding” leadership limiting the financial and human (board and management) resources needed to serve more clients in dire need?

*Categories described by Molly Polidoroff, Executive Director, Center for Excellence in Nonprofits, Redwood City, CA.

Can Nonprofits Build on Bill Gates’s Business Insights?

Can Nonprofits Build on Bill Gates’s Business Insights?

By: Eugene Fram

In a recent Wall Street Journal article, Bill Gates shares some of his convictions about what makes or breaks developing businesses. * Based on his vast experience I suggest that many of his insights can serve as models as well as caveats in the nonprofit environment:

• Internal Communications – Both in the corporate and nonprofit world the communications focus is typically on external audiences. The obvious message is the organization’s product or purpose and is targeted to donors, users, clients, media etc. In both business and nonprofit areas, neglecting to clearly and regularly share information internally can lead to significant damage to an organization. While the board may feel it is “staying on message” communication with staff members can easily rupture. Information can become distorted by word of mouth as it travels through the employee “grapevine.” Rumor of possible changes in the nonprofit, as an example, can lead to fear and resistance from staff members and in some cases, loss of top level employees who may seek positions elsewhere

This can be a vexing problem for nonprofit boards since directors are part-time volunteers who only occasionally interact with employees. A comprehensive plan should be in place to demystify the communication, especially in the area of employee engagement. This can be accomplished in a variety of ways. Google, a leader in this area, and others keep their worldwide cache of employees informed about developments by holding regular open video town hall meetings in which employees have an opportunity to pose questions to senior personnel. As the “lifeblood” of the organization, internal communications must be consistently updated and informed.

• Anticipating Disruptions – Many nonprofits are experiencing what is referred to as “disruptions” which, in many cases, can change the direction or scope of operations. Their client bases are declining, foundations and governments are closing traditional sources of funding or technology has become so costly that it is no longer viable to maintain quality services.

The harbingers of disruption are usually apparent well in advance of their impacts. Easter Seals, for example, was founded in 1931 to focus on the elimination of polio. It had adequate lead-time to plan changes after the polio vaccine was introduced in the 1950s. The Board acted on the information to move services to providing help to people with developmental disabilities. The organization still flourishes today.

Nonprofit boards need to be proactive in seeking information that might lead to the consideration of organizational changes in their fields. There are a myriad of examples ranging from universities currently faced with decisions regarding the advent of online learning to mental health counseling agencies that are being impacted by advances in new pharmaceutical treatments.

Unlike business organizations, most nonprofit clients do not have a direct relationship with buyers. In the nonprofit environment the organization that pays for the service (i.e. foundation or donor) is separated from client populations that may be aging, disabled, homeless etc. This leads to a potential planning disconnect, “..between what users or constituents need and want and what the buyers think they ought to have.”**

The CEO of every nonprofit must have 20/20 field insights, effectively scanning his/her professional environment for unexpected opportunities to grow the organization. These so-called disruptions can have a significant impact on the nonprofit’s future.

• Mind the Mission but Don’t Miss the Opportunities: -The nonprofit bible wisely begins and ends with mission, vision and values. These elements are appropriately drilled into the subconscious of every director and board recruit. Rigid adherence to the stated mission can, however, can blind the organization to growth opportunities to serve new and needy populations. While “mission creep” can stretch resources too thinly, a board strategically must always view the big picture and recognize what new and tangential development might mean to the future of the nonprofit.

Gates refers in his article to the folly of Xerox, which, in its R&D division, developed the first computer mouse. Because the firm apparently regarded itself to be in the copier business rather than the information services business, it did nothing with it!

Bill Gates sees that answers to these challenges are addressed by recruiting the “right” people. “For one thing,” he suggests, “there’s an essential human factor in every business endeavor.” He raises three questions: “Which people are you going to back? Do their roles fit their abilities? Do they have both IQ and EQ to succeed?”

Nonprofit response: Amen!

*William Gates, (2014) “Bill Gates’s Favorites Business Book,” The Wall Street Journal, July 11th.
**Ruth McCambridge & Lester Solomon (2003) “In, but not of, the Market: The special Challenge of Nonprofit-ness” Nonprofit Quarterly Newswire, March 21st.

How Seriously Does Your Nonprofit Board Take the Matter of Ethics?

How Seriously Does Your Nonprofit Board Take the Matter of Ethics?

By Eugene Fram

Most board members are aware of their obligation to ensure their nonprofit’s compliance with certain standard regulations e.g. making tax payments, submitting IRS Form 990s and/or avoiding potential fraud. But what I have found missing in the nonprofit environment is a sense of director responsibility to provide for and sustain a viable ethics program. (more…)

What Defines the Culture of Your Nonprofit Board?

What Defines the Culture of Your Nonprofit Board?

By: Eugene Fram

The General Motors debacle is fresh in everyone’s minds. A deficit in the company culture was recognized as being responsible for the disaster that resulted in the deaths of 13 people. (more…)

Can A Nonprofit Organization Have A President/CEO & An Executive Director?

Can A Nonprofit Organization Have A President/CEO & An Executive Director?

By: Eugene H. Fram

Yes, if the organization has the following structure:

Board With A Volunteer Chairperson
President/CEO With Full Authority for Operations
Executive Director for Division A
Executive Director for Division B

However this structure can be confusing to persons in the nonprofit arena. (more…)