Nonprofit board stucture

Does A New Nonprofit Board Director Really Understand Your Organization?

Does A New Nonprofit Board Director Really Understand Your Organization?

By: Eugene Fram

The careful nurturing of a board member, whether for-profit or nonprofit, is critical. The pay-off of a robust orientation process is an informed and fully participating board director. The following are very similar occurrences in both for-profit and nonprofit boards:

The CEO of a transportation firm agrees to become a board director of a firm developing computer programs. He has risen through the transportation ranks with a financial background, but he knows little about the dynamics of the computer industry.*

A finance professor is asked to serve on the board of a nonprofit school serving handicapped children. She has no children of her own and has never had any contact with handicapped children, social workers or teachers serving handicapped children.

In these similar cases, the new director needs to become reasonably conversant with a new industry or a new human service field in order to be able to better apply policy development skills, strategic planning skills and to allow generative thinking.

On nonprofit boards, the problem is exacerbated when the new director often is asked to immediately join a specific board committee without being able to understand the board perspectives and the organization’s mission vision and values. Following are ways in which the nonprofit board can resolve this problem:

• Don’t appoint the new board member to committee until she has completed a board orientation program including a review of board procedures, attending several board meetings, has had visits with the staff, as they normally operate, and becomes alert to the major trends in the field. This ideally should take about six months assuming the director is employed full-time elsewhere.
• During this time, the chief executive and board president should be available to the new director as frequently as she wants in order to respond to questions.
• Hopefully, the chief executive would informally meet the new director (and each established director) quarterly to review current issues and opportunities. ** In addition, to the information presented at the board meetings, this will provide a better perspective of the board’s mission, vision and values.
• Ideally, the board volunteer should attend one staff meeting and one outside professional meeting to acquire a feeling for the topics reviewed at these gatherings and the field terminology.

If most of these actions can be accomplished within a six-month period, major blind spots are removed, and the new board member can then join a standing board committee. Now, reasonably understanding the organization and her own participation on the board, she has a background to make a substantial contribution for years to come.

• *Robert Frisch, Managing Partner of The Strategic Offsites Group, presented this type of example as a common one for business boards. SVNACD Meeting January 17th, 2013, Rock Center for Corporate Governance, Stanford University.
• ** For more details, see my book and blog site:
Blog: http://bit.ly/yfRZpz

Book: http://amzn.to/eu7nQl

Enhance New Directors’ On-boarding Orientations: Give Copies of Reader Friendly “Policy Vs. Paper Clips” (2011)

Enhance New Nonprofit Directors’ On-boarding Orientations: Give Copies of Reader Friendly “Policy Vs. Paper Clips” (2011)

By it at a Discount Price

Nonprofit Organization Mergers: What to Do.

Nonprofit Organization Mergers: What to Do.

By Eugene Fram

A Fast Company article by Alice Korngold about nonprofit mergers lists seven steps for a successful nonprofit merger. * Korngold used these steps to describe nonprofit merger activity with which she had been involved.

In October 1998, Family Service America (FSA) merged with the National Associations of Homes and Services to Children (NAHSC) to form the Alliance for Children & Families. I chaired the FSA investigating committee in the merger process and later served as co-chair of the Alliance board during a two-year transition period. This article adds another experience example to the model described by Alice Korngold. (more…)

What To Do About Weak Nonprofit Board Practices – Reissued based on viewer interrest.

What To Do About Weak Nonprofit Board Practices

By Eugene Fram

Peter Rinn, Breakthrough Solutions Group, recently 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. (more…)

Critiquing My Blog: “All Nonprofit’s are a Business – Need to be Run Like a Business”

Critiquing My Blog: “All Nonprofit’s are a Business – Need to be Run Like a Business”

By: Eugene Fram

I encountered a torrent of comments from consultants, chief executives and staffers replying to the blog listed above. Following are some abstracts of support and questioning I received:

One could say this is true, if we know what is truth, but one should avoid ALL. … We are called to be faithful, not to be successful. Why do we… avoid all ethical questions? … Granted, one should hope to wind up with excess revenues at year-end but to affirm who you suggest doesn’t appear to be worked through.” Philip S. Wood, CPA.

Sorry I disagree. Many/most nonprofits are aimed at creating social good. To be run like a business means risk – (taking) decisions for the short/near term, based on financial tradeoffs. While I agree nonprofits benefit from excellent leadership, discipline, solid strategy and financial planning, they should be run as nonprofits. Linda Williams

If businesses exist to create and retain customers, then nonprofits exist to create and retain members. I think this could be a good learning for many of the nonprofits I have (encountered). This is terrific, but they cannot do this without capital. The more those inside the nonprofit are motivated by their own sprite of “contribution to the world,” the more they could undermine their ultimate survival. (Companies that focus) inside-out rather than outside in will run into trouble.
Elliott Schreiber

I work for an organization … that (has a) mind-set to a for-profit business, … keeping in mind our core values, mission and vision. …

• A research department … regularly checks to make our programs are successful. We follow clients for two years after receiving services.
• Though measuring programs, … our donors have confidence is what we do and we have expanded contacts in the community.
• Our strategy department ensures that expansion will not drain resources from other areas.
• Our direct service employees are results oriented and goal focused.
• Also we take our employees very seriously. We would hate to expand, hire people or have our staff relocate and then havet o close up shop one year later.
• We are more mission focused – we are fiscally solvent, jobs are not in danger and have the numbers to prove that what we do works. Catherine Hayley

My Reactions

Philip: You hit the nail on the head with you comments about “ALL.” I concede the adjective was not well placed. However, some businesses also have a mission or creed to generate social good, like Ben & Jerry’s Ice Cream. However, if you examine the product that emanates from the firm, one can easily view it as creating obesity. Businesses and nonprofits must be judged on their missions and how they execute them.
I would take Ben & Jerry’s over a commercial call center that says its mission is to help charities, but then takes, as fees, 75% of the money donated. Or it might be a nonprofit that gives excess benefits to its management. (The IRS now has become a watchdog over these giveaways.)

Linda: Some businesses also have a double bottom line. For example utility companies have to please their stakeholders and meet utility commission regulations. Unfortunately, the term “being run like a nonprofit has become a negative term and only a high senior nonprofit mangers, who execute the functions you listed at a effective and efficient levels, will contribute to improving the situation.

Elliott: In my opinion you are correct. Nonprofit strategic plans should always have a section showing the estimated economic impact of what is projected. For an example, according to Cynthia Montgomery, a Harvard business professor, a nonprofit hospital whose mission is to “save lives” will not succeed long term if it does not “save lives efficiently and effectively.”

Catherine: I just want to join the chorus of people who commented how fortunate you are to work with an organization with a structure that makes such impacts.
It really shows that many nonprofits need to move towards a business model.

As one other respondent stated, nonprofits in the 21st century need to be “SMART i.e., Sympathetic, Malleable, Active, Realistic and Timely.

Designating a ‘Lead Director’ Can Help Nonprofit Boards Improve Their Operations

For several years, I have suggested that some NFP boards experiment with the addition of a Lead Director to their rosters, just as for-profit boards successfully have since 2002.  This blog is divided into two sections.  First is an abstract of an article published I published on  the topic in the Chronicle of Philanthropy (June 2, 2011, p.34). This will help the viewer understand how I am adapting a business board process to a nonprofit board   Following that is a field critique of my proposal provided by Mark Soundie.   Mark is uniquely qualified to comment. He provides counsel to boards for the following types of nonprofits:  social housing providers, voluntary & social enterprise organizations from all sectors and all sizes & types of charities,  His essay below  provides an excellent summary of the pros and cons. Also, I have noted from a current study that about 37% of a small subgroup of 420 nonprofit directors responding to an NACD study have designated directors on their nonprofit boards. In addition, 88% of the group concluded that their lead directors enhanced board effectiveness.* These nascent results are encouraging news. Finally, a link follows to a comprehensive article on lead directors that appeared in April, 2012 in The International Journal of Not-For-Profit Law, Vol.14, Numbers 1-2.pages 52-57.
Lead director article: bit.ly/15s4eVv

At this point, April 2013, there has been little field interest in my proposal.  If some NFP boards are interested in conducting a trial or experiment with the idea, I would be  delighted to be in contact. Please send me an e-mail at frameugene@gmail.com . 

ABSTRACT

Few nonprofit boards do a great job of overseeing their organizations. Both nonprofit board members and CEO’s share that concern: Asked to rank their performance with academic-style grades by the nonprofit group BoardSource, chief executives gave their boards a C+, while board members gave themselves a B. <!–more–>

The use of such directors became popular as a way to deal with the public concern about the business world that prompted passage of the Sarbanes-­Oxley law in 2002. That legislation spurred the New York Stock Exchange to enshrine the idea of lead directors as a way to show that a company was well governed.

Given how time consuming it is to serve as a nonprofit board chair, especially of a complicated organization like a university or hospital, it seems logical to empower another volunteer to formally fulfill some of the responsibilities expected of a board chair.

A lead director can assist the chair in the day-to-day needs of leading a board (while not micromanaging) and to assist in rehabilitating a dysfunctional board. This is especially important when the chair has little management or board experience. (Example: a concert pianist chairs a social-services board.)

At first glance, adding a lead director to the structure of a nonprofit board seems like formalizing a position in a way that could impede the relationship among the chair, the CEO, and other board members.

The lead director should be viewed as just the opposite, as the business world has demonstrated.  H/she can help the CEO work more effectively and efficiently with board committees, especially in driving the work of the strategic-planning groups.

What’s more, the lead director can be an additional consultant or mentor to the CEO, especially when the board chair is unavailable. Because the lead director would help the board run better, this move could also do much to build morale at nonprofit groups.

CRITIQUE FROM MARK SOUNDIE

I think this is a great concept and the introduction of a Lead Director into most non-profits could make a huge difference.

These are my thoughts;

The role of Lead Director as outlined is a real departure from the established governance model that NFP organizations have worked to since their inception. The successful implementation of this new model would be a real challenge to many organizations that may see this as a criticism of their performance.

This is a multi-skilled and multifaceted position that most would find daunting (more than most are prepared to do). To support prospective Lead Directors there would have to be a specific and quite intense training programme (although I hate to use qualifications in respect of board members in the NFP sector this role could call for this level of commitment and validation). I believe that the title (Lead Director) is unhelpful in the NFP arena due to the connotation that a board member has a higher role than others and is a possible barrier to organizations looking at this model. I will continue to use the title in my response, but strongly recommend a change of title (still with director in it).

The relationship with the Chair and other board members needs a Lead Director to have great people skills, otherwise there is a danger of a “Big Brother” feeling developing. There also needs to be clear lines of demarcation between this role and that of others such as Company Secretary. I feel that as each of the identified roles in your article are developed for the NFP sector; they are built into a framework document for Lead Directors that contains a set of guidance documents, good practice examples and reference points. I see a real need for flexibility of approach within a strong framework as an essential factor in the successful delivery of Lead Directors.

To ensure continuity of role and delivery a Lead Director may have to be appointed in the same way that a Company Secretary can be and not subject to Board rotation/renewal in the same way as other board members. The role would then have to be written into the rules/constitution of the organization

To ensure quality and standards for Lead Directors an assessment criteria would have to be developed (probably internal and external validation).  Some sort of organisation/resource for Lead Directors would be needed to provide information, advice, training and networking opportunities. [Note: For-profit boards in the U.S. have a group of lead directors, from Fortune 500 companies, which meet several times a year.  Their suggestions are published in [Lead Director Network–Tapestry-Network — See Google]

There is a challenge in trying to sell this to a sector that does not have a great deal of confidence in its boards. The NFP sector sometimes need a proven model before they will adopt new thinking, this could be delivered through a pilot programme either delivered through academic means or by attracting funding or private sector support, this would probably take three years to design, implement, trial and evaluate. If the value of having a Lead Director can be established and then championed by those in the pilot, the sector is far more likely to adopt this.

Unfortunately some CEO’s are happy to have a weak board that does not challenge them too much, and this role could be perceived as a real threat by them (resistance from organisations in most need)

It is a shame that non-profits have not as yet seen the benefit of this but as with all new ideas a level of marketing/promotion is needed before people begin to see the possible advantages.

Mark Soundie, Governance Matters UK & Independent Community, Housing & Tenant Advisor

* NACD Nonprofit Governance Survey, 2012 – 2013, pp.10-11

Who is Primarily Accountable for Long Term Planning – Board or CEO?

Who is Primarily Accountable for Long Term Planning – Board or CEO?

By: Eugene Fram

THE QUESTION

 Can you further clarify whom you see as accountable for making what decisions in relation to the various aspects of corporate strategy creation and execution? If the board approves the CEO’s decisions do they not become board decisions? Where is the scope for the CEO to be accountable for making his or her own decisions?

MY ANSWER
“(My model)… promotes accountability. It requires the board and the CEO to work together to paint the big picture for the organization. It then holds the CEO accountable for implementing that vision. The (board’s) planning and resource committee (also) plays a major part in painting this picture by helping the organization and the CEO to look ahead to look to the future.” <!–more–>

Now for some details also found in “Policy vs. Paper Clips. *  (http://amzn.to/eu7nQl)

The CEO is asked, in addition to heading operations, to be looking ahead in the organization’s mission focused field. This is very important where the board is largely an eclectic group of volunteers. The CEO should be thinking about these issues 24/7 and bringing what S/he considers the important ones to the board’s planning and resource committee, from which the board has a process for selecting those that have potential for further study by a board-staff ad hoc committee or task force. Where the board is composed of field professionals, like the Associated Press, the CEO still has an obligation to be on the frontiers of field changes and opportunities, obviously very important to the AP.

* Board members from all backgrounds have an obligation to bring GENERATIVE, out-of-the-box, thinking to the board. Where this often falls short with nonprofit boards is that many attempt to acculturate directors to the culture of the organization, instead of being open to the person’s expertise and culture. For example, if a director has expertise in financial planning, nonprofits often will ask the director to be involved with immediate accounting issues, instead of expanding the organization’s financial outlook.

Many of these field insights are covered in my blog site, now numbering a selection of over 100 current blogs. http://bit.ly/yfRZpz

See previous blog:  Differences: Nonprofit Board Board Policy/Strategy Development vs. Management Operations

*PS: Recent Comment on the Model

Our Board applied the principles in Policy Vs. Paper Clips after the first edition came out many years ago. We were fortunate to have the author himself consult with us. I can unequivocally state that the Corporate model spelled out in this book works and is responsible for the incredible growth and success my not for profit has experienced over the last 15 years. More importantly the Board members love it because they are engaged at a strategic level that allows them to use their brains and contribute in a meaningful way. Every not for profit CEO and Board member should read this book regardless of size or scope of the organization. Its how Boards need to work in the 21st century.

Difference: Nonprofit Board Policy/Strategy Development vs. Managing Operations

Difference: Nonprofit Board Policy/Strategy Development vs. Managing Operations

By: Eugene Fram

Following is how I view the difference between the nonprofit board functions versus operations management functions. Based upon my governance model (see bottom of page), all of the responsibilities listed below are board functions. <!–more–>

A. DIRECTS MANAGEMENT
1. Establishes, in partnership with management, long-term organizational objectives
2. Sets overall policies affecting strategies designed to achieve objectives.
3. Employs the CEO.

B. JUDGES MANAGEMENT ACTIONS
1. Evaluates short-term and long-term management performance.
2. Determines whether policies/strategies are being carried out and goals achieved.

C. APPROVES MANAGEMENT ACTIONS
1. Critically reviews, approves, or disapproves proposals in policy areas (for example, major capital needs or expenditures and major contacts)
2. Provides formal recognition and acceptance of executive decisions when related to operational concerns.

D. ADVISES MANAGEMENT
1.Acts in an advisory consultative capacity, when sought by management.

E. RECEIVES INFORMATION FROM MANAGEMENT
1. Regularly receives reports on the organization (e.g., performance, program development, external factors, other challenges or concerns).

F. ACTS AS A PUBLIC AND COMMUNITY RELATIONS RESOURCE FOR MANAGEMENT.
1. Keeps the organization attuned to the external environment in which it operates.

G. FUNDRAISING PARTNERSHIP BETWEEN BOARD & CEO

1. CEO & staff act as “scouts” for fundraising opportunities.  Board members act as the “cavalry” to team with management,  to make generative proposals, to make formal proposals and to make needed interpersonal contacts.

For more detail on how this fits into my policy/strategy model, see: “Policy vs. Paper Clips,” Third Edition, (2011). Available on

Amazon.com: http://amzn.to/eu7nQl

My blog site: http://bit.ly/yfRZpz

A Traditional Nonprofit Board vs. A Nonprofit Policy Focused Board: The Difference is Operational

A Traditional Nonprofit Board vs. A Nonprofit Policy Focused Board: The Difference is Operational

By Eugene Fram

Scenario: The nonprofit agency, ABC, has been criticized for not having enough minority staff members. Because ABC, a large well-known organization, primarily serves urban residents in a major U.S. city, board members are concerned about the criticism. (more…)

A 21st Century Nonprofit Reality – The Chief Executive Needs to be a President/CEO

A 21st Century Nonprofit Reality – The Chief Executive Needs to be a President/CEO

By: Eugene Fram

Many of my viewers* know that I strongly favor nonprofit boards, which develop a budget level of more than $1 million (US) and employ about 10 full and part time people, should designate their chief executive as the President/CEO. A volunteer director then becomes the board chair. Below, in italics, is a response I received to my viewpoint listed on the Board Source blog site:

Interesting points. However, where I come from, executive director is the recognized title for the heads of non-profits, with the possible exception of multimillion-dollar agencies. Everyone understands it. Even when the ED is recognized (in bylaws and/or policies) as the CEO of the agency, they still tend to use the ED title, The CEO title smacks of the for profit sector, which may be off-putting to the social service sector, perhaps a tinge of “playing out of your league.” President is definitely from the for profit sector, and could be confusing from the perspective that some boards still refer to their chairs as “presidents. (more…)