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…)
Once Again: How to Keep a Nonprofit Board Informed.
By: Eugene Fram
At high-performing nonprofit boards, members of the board will rarely be invited by the CEO to participate in operational decisions. Yet the board still needs to know that is going on in operations.
The name of the game is for the CEO to communicate the important information to board members and to keep them informed of significant developments. Still, there’s no need to clutter regular board meetings by reporting endless details about operations. (more…)
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.
Nonprofit Board Responsibility Social Media – What Needs To Be Done?
By: Eugene Fram
Nonprofit boards, for several years, have been struggling to find proper uses for social media. Many of the decisions on this issue will become strategic board decisions because they will require using alternative promotional strategies, experimental trials and infusion of capital and human resources. The December 8, 2012 issue of the NACD Directorship* cites a Stanford study concludes for-profit boards should develop a better understanding of this new phenomenon. Following are how I think the steps should be applied to smaller and medium sized nonprofit board decisions: (more…)
Nonprofits: To Which Group Do You Belong – The 5% Having Successful Strategies or the 70% Who Do Not?
By: Eugene Fram
According to a recent Deloitte report, two Harvard Professors issued a recent study* that highlighted the above statistics, also showing the remaining 25% having “middling success.”
I recently attended a presentation by Cynthia Montgomery, also a Harvard strategy professor. Following are some major strategy guidelines she presented, with examples mainly relating to the business community, and how I see them applying to nonprofit and trustee boards. (more…)
A Nonprofit Board Has A Problem With A Recently Hired CEO – What To Do?
By: Eugene Fram
With some possible variations, is the following scenario one that is frequently repeated elsewhere?
• The nonprofit board had engaged, Joe, an experienced ED, as President/CEO of human services counseling agency. The prior ED had been in place for 25 years, and was evidently unwilling to move to meet changing client
needs. For example, the agency only offered counseling services five days a week, 9 am to 5pm, with hours extended to 8 pm on Thursday night. There were no client options for emergency calls during nights or during
weekends. (more…)
Nonprofit Innovation: What Can Barbers Teach Nonprofits?
By: Eugene H. Fram
Reading several different blogs comments on nonprofit innovation reminded me of a story I tell my marketing. Here is a brief abstract: When men started to wear their hair longer in the 1980s, two classes oh barbers responded. One class cursed the change, while they became innovative stylists. In the area in which I was living, during the 80s, the number of barbers dropped from 1,000 to 300.
Seth Godin, the famous marketer, thinks that nonprofits have a charter to be innovators. But they aren’t he states in a recent blog. “The thing about most cause/welfare non-profits is that they haven’t figured out how to solve the problem they’re working on (yet). … Too many don’t have a method for getting to the root cause of the problem and creating permanent change.” He than suggests that some nonprofits should, “Go fail. And then fail again. Nonprofit failure is rare, which means that non-profit innovation is too rare as well. Innovators understand that their job is to fail, repeatedly, until they don’t. ”
Comments to a recent BoardSource exchange on innovation had the following reactions:
• Nonprofit founders are focused on specific goals and never go beyond them.
• Decision makers in nonprofits follow the “not invented here” viewpoint and fresh ideas are threatening.
• Many executive directors do not see the “potentially positive role board-level committees (including of non–board members & staff) can play in generating new ides.”
My reaction is that Godin is off base, although I strongly suggest that nonprofits can prosper by adopting the better business practices and vice versa. Few foundations would play “venture capitalist” to nonprofit leaders who have a record of failure. For example, Geoffrey Canada has successfully led the development of the Harlem Children’s Zone. Although the HCZ model is well know, it has yet to be duplicated elsewhere.
The comments from the BoardSource blog have been developed from field experience and remind us that nonprofit innovative leaders are in short supply. The barbers of the 1980s teach us that we must be prepared to innovate when change impacts our field, whether it be style or technological innovation.
But be prepared to think outside of the box. I still go to one barber who cuts my hair, less often, but he still doesn’t work on two heads at a time. Similarly, it is unlikely that marriage counselors will soon be mediating two warring couples at a time, unless some drug company comes up with a pill that enables the counselors to be more innovative.
Nonprofit innovation, as shown by the HCZ project, is very difficult, but it is still very possible in the nonprofit governance arena. For some practical examples, see my blog (http://bit.ly/yfRZpz) & book (http://amzn.to/eu7nQl )
What do others on this exchange see as the state of nonprofit innovation? Is it as dire as indicated by the comments cited above?
Following is part of a blog that I strongly suggest that you, your colleagues and friends associated with nonprofit or trustee organizations read carefully. As you read it, pleas keep the following in mind:
For more insights in how to avoid such situations, review these items on my blog site. Other items also may be of interest http://bit.ly/yfRZpz .
Nonprofit Directors & Trustees: Are You Aware of the IRS 990 Form?
Attn: Crisis Planners – A Leadership Plan For a Nonprofit Organization in Trouble
What To Do About Weak Nonprofit Board Practices
Your Dysfunctional Nonprofit Board – What to Do
Nonprofit Management/Governance – Avoiding Fraud – Internal Controls
For the full blog see: http://www.mercadien.com/index.html
by Sherise D. Ritter, CPA, CGFM, PSA
A recent tax court case held that a volunteer chairman of the Board of Trustees is personally liable for a nonprofit organization’s unpaid payroll taxes. This is a scary development (more…)
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
Sylvia Helper of Launching Lives commented to one of my recent blogs tilted : “What’s in a Name? Benefits of the Nonprofit President/CEO Title”
“While this irritates and offends many nonprofit senior staff, the truth is that ALL nonprofits are actually businesses. And–they need to.be run like a business.”
Sylvia: I strongly agree with your statement. Too many board and staff members in the nonprofit environment ……
Do not realize that a nonprofit can focus even more effectively on “caring” missions, visions and values while operating under a business model.
Mistakenly conclude that using business titles (such as CEO) appears more prestigious than is merited. This mistaken attitude persists in organizations with well over 15 employees and budgets well over $1 million!
Associate business boards with financial disasters such as Enron and Tyco, while failing to perceive the business board model’s benefits, such as having only a few standing board committees.
Fail to appreciate that today’s nonprofit managers must have the tools of professional executives to lead their organizations towards accomplishment.
Choose to continue to implement the 20th century governance practices in which staff members, often without the requisite managerial expertise, are promoted to chief executive positions. A few succeed by growing into the job but most continue on to do little more than “mind the store.” Truly, this can result in a significant waste of board and staff resources.
After many years of participating in nonprofit activities as a volunteer director, consultant and author, I recognized how the adaptation of a business model will positively impact the governance of a nonprofit. This prompted me to write “Policy vs. Paper Clips” which, based on sales of the first two editions, has influenced thousands of nonprofits to convert their governing structure to the model described in the book. The third updated and expanded edition was published in 2011 http://amzn.to/eu7nQl .
My blog site http://bit.ly/yfRZpz now contains over 100 blogs on nonprofit governance.
In summary, many nonprofit boards, managers and staff figuratively stand ten feet tall for what they accomplish. They deserve to have the better aspects of business boards and business venues to do their jobs.
Nonprofit Management 