Nonprofit board stucture

The Devil’s Advocate on a Nonprofit Board: Asset or Liability?

The Devil’s Advocate on a Nonprofit Board: Asset or Liability?

By: Eugene Fram

An unwritten rule for nonprofit board membership is that it is best to “go along to get along.” But sometimes a nonprofit director’s “no” vote to an action that has had inadequate discussion can allow him/h to avoid tax penalties that have been levied on other board members for lack of due care.

Stanford University research results indicate that groups with a lone minority dissenter outperform other groups where all members agree. In addition, these groups…”are more successful than (groups) in which all members disagree and fall prey to escalated emotional, difficult-to resolve (group) brawls “ * (more…)

Can Nonprofit Boards Learn from the Recent Carnegie Hall Disruption?

Can Nonprofit Boards Learn from the Recent Carnegie Hall Disruption?

By: Eugene Fram

The costly upheaval between Carnegie Hall board and staff appears to be slowly moving toward resolution. * But, for decades, other types of large nonprofit organizations have imperfectly resolved the issues that have arisen at Carnegie Hall without similar spectacles. Examples: university boards know they have to fully rely on faculty to develop up-to-date curricula. Hospital boards know they have to retain skilled physicians or face the potential of due care failure liabilities.

I suggest that nonprofit directors need to consider three actions to help eliminate the type of spectacle recently evidenced by the Carnegie Hall organization. (more…)

Measuring Nonprofits’ Impacts: A Necessary Process for the 21st Century

Measuring Nonprofits’ Impacts: A Necessary Process for the 21st Century

By Eugene Fram

Nonprofit boards and CEOs in the United States are being overwhelmed with requests from foundations and governmental agencies to move from providing outcome data to providing impact data. One nonprofit with which I am well acquainted has been required to reform its IT program to meet the requirements of a local governmental IT program, so that impacts can be assessed. It will be interesting to see how this scenario plays out.

Unfortunately, outcomes and impact are often unrelated, which is why a program that seems to produce better outcomes may create no impact at all. Worse, sometimes they point in opposite directions, as can happen when a program works with harder-to- service populations resulting in seemingly worse conditions, but (has) higher value-added impact. … Rigorous evaluations can measure impact (to a level of statistical accuracy), but they are usually costly (a nonstarter for many nonprofit), difficult and slow. * But how do the medium and small size nonprofits measure actual results in the outside world such as enhanced quality of life, elevated artistic sensitivity and community commitment?

A Compromise Solution:

To close the gap, funders and recipients would need to agree to apply imperfect metrics over time. These are metrics that can be anecdotal, subjective or interpretative. Also they may rely on small samples, uncontrolled situational factors, or they cannot be precisely replicated. ** This would require agreement and trust between funders and recipients as to what level of imprecision can be accepted and perhaps be improved, to assess impacts. It is an experimental approach

How To Get to Impact Assessment:

1. Agree on relevant impacts: Metrics should be used to reflect organizational related impacts, not activities or efforts. Impacts should focus on a desired change in the nonprofit’s universe, rather than a set of process activities.
2. Agree on measurement approaches: These can range from personal interviews to comparisons of local results with national data.
3. Agree on specific indicators: Outside of available data, such as financial results, and membership numbers, nonprofits should designate behavioral impacts for clients should achieve. Do not add other indicators because they are easily developed or “would be interesting to examine.” Keep the focus on the agreed-upon behavioral outcomes.
4. Agree on judgment rules: Board and management need to agree at the outset upon the metric numbers for each specific indicator that contributes to the desired strategic objective. The rules can also specify values that are “too high” as well as “too low.”
5. Compare measurement outcomes with judgment rules to determine organizational impact: Determine how may specific program objectives have reached impact levels to assess whether or not the organization’s strategic impacts have been achieved.

Lean Experimentation

The five-point process described above closely follows the philosophy of lean experimentation, *** now suggested for profit making and nonprofit organizations.

Lean allows nonprofits to use imperfect metrics to obtain impact data from constituents/ stakeholders over time. Under a lean approach, as long as the organizations garners some positive insights after each iteration, it continues to improve the measurement venues and becomes more comfortable with the advantages and limitations of using these metrics.

Organizationally the nonprofit can use this process to drive change over time by better understanding what is behind the imperfect metrics, especially when a small sample can yield substantial insights, and actually improve the use of the metrics.

* http://ssir.org/articles/entry/the_promise_and_peril_of_an_outcomes_mindset
** https://nonprofitquarterly.org/2012/07/24/using-imperfect-metrics-well-tracking-progress-and-driving-change/
*** http://ssir.org/articles/entry/the_promise_of_lean_experimentation

Can Only Three Nonprofit Board Committees Engage Directors Meaningfully?

Can Only Three Nonprofit Board Committees Engage Directors Meaningfully?

By: Eugene Fram

Current research shows that the average nonprofit board has an average of 4.8 committees, down from 6.6 in 1994. * I suggest three standing committees. ** This three-standing committee configuration is flexible. Its strength is that it generates a coordinated robust review of the past board experiences to drive an emphasis on policy development and strategic planning. Organizations know where they have been, are thinking about the future but are not mired in micromanagement

    A Policy/Strategy Focused Board

Planning & Resource Committee: The CEO, working with the committee, is chiefly responsible for developing the nonprofit’s vision, subject to the input of staff plus the input and approval of the board. The group also plays an important role to make it easier to keep strategic planning and evaluation of new projects a prominent part of board agendas. At the same time, it also monitors the activities of all board task forces. These are work-groups of board and staff tasked with investigating policy or strategic issues. There, for example, is no separate personnel committee under this configuration, but if there is a need to revise a retirement plan for the organization, a task force is given the responsibility to review options for board discussion and decision.

Assessment Committee: If there is no finance committee, this group, along with the CEO, establishes organizational and budget goals. The committee subsequently conducts a robust evaluation of the CEO and organizational impacts, using both quantitative and qualitative impact data.

Executive Committee: The committee’s major function, outside of its legal obligations to act for the board between meetings, is to act as a review group for all reports emanating from the two other committees, fostering a high level of director engagement. This, for example, provides progress reviews at the task-force level, at one of the two standing committees and then at the executive committee level. All of this before an item is placed on the board. Most on the board have one or more opportunities to provide their suggestions and concerns. It is an engaging “no surprise” review system.

    Exceptions & Permutations Of The Three-Standing Committee Approach

State Regulations: Some states require separate standing finance and/or audit committees. If not, the assessment committee is responsible for the financial well being of the organization, and several members of the committee may act as an independent audit committee, meeting with the external or internal auditors as needed. Another way to meet state requirements is to have an audit committee composed of independent outside experts plus one or two board members. Former board members often are willing to volunteer, if they are familiar with the organization’s financial reports.

Strategic Planning Objectives: Some nonprofit boards use interim standing committees to reflect major objectives of the strategic plan. If a major building project is needed, a standing committee is formed to overview the project until it is completed. A new ad hoc configuration of four committees is formed.

Governance Considerations: Under the three-committee approach cited above, the executive committee acts as a governance committees and needs to overview governance issues such as board recruiting, board self-evaluations and occasionally establish task forces to review governance issues. “Donors are more likely to reward nonprofits with good board management, according to a 2014 study.[The study found donors took board education, training, and access to historical records into account as part of their considerations.” ***

Cyber security?: There are wide ranging view on whether or not a cyber security standing committee is needed. One side concludes the potential losses are so substantial in the 21st century that it needs substantial board attention. Others conclude that it is a major risk that needs to be monitored in connection with the probabilities of other types of major risks such a flood or fire.

Special Regulations: Some fields, such as healthcare, have special regulations for which a board is ultimately responsible. One approach is having a board committee overview the outcomes involved. But nonprofit boards, with a three-committee format can use task forces which to review compliance with the regulations.

My experience with this board committee configuration has proven it is productive and adaptable to making board structure changes. Prior to board action, the task force members and the two other groups reviewing reports become well versed in the options available. Since the topics reviewed are limited to policy and strategic opportunities/concerns, the board and staff members become meaningfully involved.

* BoardSource (2017), “Leading With Intent: A National Index of Nonprofit Board Practices,” January.

** https://goo.gl/QEL8x3

***https://captrust.com/resources/institutional-consulting/can-good-governance-impact-fundraising/?_cldee=amV2ZXJseUBhcmNoLW5vLm9yZw%3d%3d&recipientid=contact-c0457afcd4c7e7118121e0071b66bfc1-5f502a8e3c37456ba7ab756c6169888f&esid=0e7de7bc-0d2b-e911-a962-000d3a4e75ec

Guidelines To Finding Authentic Nonprofit Leaders

Guidelines To Finding Authentic Nonprofit Leaders

By Eugene Fram

The problems of Enron, Tyco and WorldCom have provided negative examples for future leaders, according to William George, Senior Fellow at the Harvard Business School. As an antidote to these and others serious problems that have plagued business and nonprofits in the last several decades, he cites the movement towards Authentic Leadership. He further lists six guidelines to identify behaviors in such leaders. Following are my views on how his guidelines can be useful to directors and managers in the nonprofit environment. (http://hbswk.hbs.edu/item/authentic-leadership-rediscovered) (more…)

Once Again! Nonprofit CEO: Board Peer – Not A Powerhouse

Once Again! Nonprofit CEO: Board Peer – Not A Powerhouse

By: Eugene Fram

Viewer Favorite: Updated and Revised

Some nonprofit CEOs make a fetish out of describing their boards and/or board chairs as their “bosses.” Others, for example, can see the description, as a parent-child relationship by funders. The parent, the board, may be strong, but can the child, the CEO, implement a grant or donation? Some CEOs openly like to perpetuate this type of relationship because when bad decisions come to roost, they can use the old refrain: the board made me do it.

My preference is that the board-CEO relationship be a partnership among peers focusing on achieving desired outcomes and impacts for the nonprofit. (I, with others, would make and have made CEOs, who deserve the position, voting members of their boards! Some state laws specifically outlaw it.)

There are many precedents for a nonprofit CEO to become a peer board member, some without voting rights, some with full voting rights. One nonprofit group is university presidents, where shared governance with faculty bodies can be the norm. For example, when General Eisenhower became president of Columbia, he referred to the faculty in an initial presentation as “Columbia employees.” Later a senior faculty member informed him “With all due respect, the faculty is the university.”

Another nonprofit group is hospitals where the CEO may also be or has been the chief medical officer. The level of medical expertise needed to lead requires that a peer relationship be developed. Also if the hospital CEO is a management person, he and the chief medical officer must have a peer relationship, which extends to the board.

Hallmarks of a Peer Relationship
• The CEO values the board trust assigned him/her, and carefully guards against the board receiving surprise announcements.
• The board avoids any attempts to micromanage, a natural tendency for many nonprofit boards.
• When a board member works on a specific operating project, it is clearly understood that he is accountable to the CEO for results.
• The CEO has board authority to borrow money for short term emergency needs
• The CEO understands need for executive sessions without his/her presence.
• The CEO understands the need for robust assessment processes to allow the board to meet its overview duties.
• Both board and CEO are alert to potential conflicts of interest which may occurs.
• Both value civil discussion when disagreements occur.
• The board realizes that nobody does his/her job perfectly, and it does not react to occasional CEO modest misjudgments.

Summary
Elevating a nonprofit CEO to a status of board peer does not automatically make the CEO a powerhouse. The board legally can terminate the CEO at will. However, in my opinion, the following benefits can accrue to the organization.

The peer relationship help will:

• Help the organization to build a desirable public brand.
• Allow a capable person to interface with the media.
• Define a role for the CEO to lead in fundraising.
• Allow the organization to hire better qualified personnel.
• Allow the organization to present a strong management environment to funders. After all, top people readily communicate with people in similar positions.

Dysfunctional Levels in Nonprofit Boards & Organizations

Dysfunctional Levels in Nonprofit Boards & Organizations

By: Eugene Fram

Viewer favorite–Updated & Revised

Article and studies from a Google search on “ Dysfunctions in Nonprofit Boards & Organizations,” yields 445,000 items in .32 of a second. These items show dysfunctions on charter school boards, church boards, healthcare boards, trade associations, etc.

Rick Moyers, a well-known nonprofit commentator and nonprofit researcher, concluded:

A decade’s worth of research suggests that board performance is at best uneven and at worst highly dysfunctional. ….. The experiences of serving on a board—unless it is high functioning, superbly led, supported by a skilled staff and working in a true partnership with the executive – is quite the opposite of engaging.

These data and comments can lead one to conclude that all nonprofit boards are dysfunctional. I suggest that nonprofit boards can generate a range of dysfunctional behavioral outcomes, but the staff can muddle through and continue to adequately serve clients. (more…)

People Problems Can Put Nonprofits at Risk

People Problems Can Put Nonprofits at Risk

By: Eugene Fram

Like the Streisand song lyric, nonprofit people who need people must first have the know-how to choose and cultivate those people! If not, the risks to a board can range from modest to substantial. It all begins with making the right choices and vetting board and CEO candidates.   Most nonprofit board members know that they are only required to make one hiring decision—the engagement of the CEO. This is a process that always involves some risk factors. Take the case of the university that has expended substantial amounts to engage a CEO. After a brief “honeymoon period” it was determined that the candidate lacked the requisite background to move the organization forward. His resignation was forthcoming, and with it, a disruption that was costly not only in dollars but in board/faculty morale and public confidence. A nonprofit board is usually confronted with several people risks. Following are some that should be noted by board members. (more…)

Two Nonprofits Merge: Synergy or Collision Course?

Two Nonprofits Merge: Synergy or Collision Course?

By: Eugene Fram

Revised & updated viewer favorite

Having led a merger committee that resulted in a successful merger with another nonprofit, I thought my field observations might be of interest to others contemplating a merger. These comments center on a merger of two equal partners, which plan to form a new organization, not the acquisition of one nonprofit by another. (more…)

Can Nonprofit Boards Suffer From Agenda Deficits?

Can Nonprofit Boards Suffer From Agenda Deficits?

By Eugene Fram

Revised & Updated Viewer Favorite

In a recent study of 772 for-profit and nonprofit directors from around the world, McKinsey & Company found that 25% of the sample assessed their board impact as moderate or low, “… while others reported having a high impact across board functions. “ http://bit.ly/1iFEINR

Following, in italics, are brief abstracts from the study, followed by my analysis of the importance of the information to nonprofit boards. (more…)