nonprofit boards

Does the Nonprofit CEO Need to Go?

Does the Nonprofit CEO Need to Go?

By: Eugene Fram

Viewer Favorite– Revised & Updated

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. (more…)

Addendum to my third post on Millennials and Money – July 12, 2015

See National Public Broadcasting. Nightly Business News–Episodes 34136-37-38 July 13-14-15

Linked to Atlantic Article.

Falling in Love With the Mission & Other Sage Advice for a First Time Nonprofit Director

Falling in Love With the Mission & Other Sage Advice for a First Time Nonprofit Director

By: Eugene Fram

Sam Smith recently entered early retirement and wants to become a director on the board of a nonprofit organization. His motive is to give back to the community where he has prospered. As a first time board member, he can look to some advice from pros in the area, from a recently published article by Stanford’s Center Social Innovation (CSI).

Following are my reactions to some of the article’s suggestions, hopefully adding important field information. The comments are based on having served on 12 nonprofit boards over several decades and my experiences as a consultant to at least a dozen additional nonprofit boards.

Fall in Love Wisely
This is good advice. It follows the nonprofit dictum that each director needs to be dedicated to the organization’s mission. In practice, however, some flexibility is required:
• the availability of choices at the time the search for the position takes place
• the board ‘s current composition – example, no board needs six attorneys
• the time and frequency of meetings
• requirements of “get or give” etc.
• the compatibility of he new director with the current CEO — a fast driving director may not be compatible with an ED, doing a status quo job but lacking in entrepreneurial instincts.

In my opinion, good nonprofit directors may only need to have a modicum of mission dedication, as long as long as he/s can be assured the organization is having positive impacts. For example, a director has joined a board for networking contacts does an outstanding fundraising job. Choosing a nonprofit board is akin to finding a spouse. Everybody looks for the perfect spouse, but in the meantime people get married!

Pick Your Preferred Developmental Stage
Like commercial organizations, the CSI article points out nonprofits range though three stages – early stage, growth stage and scaling stage. The early stage can be most frustrating for those who have worked in commercial organizations. Board members often are called upon to doing everything, from securing the facility at night to assuming operations responsibility. Management relies on the board for both direction and operational decisions.

More staff support for the board becomes available in the growth stage. Board oversight committees are organized to reflect operational aspects bush as — building, personnel, budget, program, etc. These can work well until they become redundant, as staff assumes more responsibility. Board meetings can become longer and filled with reports. Board turnover may increase rapidly. Unfortunately, during the growth stage a nonprofit culture can keep this system in place long after it is productive. When this occurs, the board needs to move to a corporate position.

Under a corporate position the board focuses on over-viewing management impacts, strategic planning and policy development. Tactical operational decisions become the responsibility of management and, hopefully, micromanagement is completely abandoned.

The CSI article calls for a third scaling stage: “Organizations that understand the difference between scaling solutions versus scaling the organization engage in collective impact strategies that require developing a strong network. The board relies on connections across sectors and disciplines.” Here the board, hopefully, takes leadership through generative “what if” questions to increase the scale of client-based solutions. Mergers and partnerships can take place that should provide better quality client services.

Design for Harmony & Efficiently

Like a business board, the new first time board member has to know that the nonprofit board only has one employment decision – engaging the chief operating officer. However, any sensitive nonprofit CEO should seek the formal or informal board reactions before changing or engaging the senior management team.

Board Engagement – Every nonprofit CEO and board chair wants their board members fully engaged. But few talk about the need to have them meaningfully engaged. Since nonprofit directors representing communities and foundations over such a wide spectrum of backgrounds, the CEO and Board Chair need to clearly assess what is meaningful to each director. To some being involved with the details of the annual dinner is meaningful. Hopefully to most others, strategic planning and overview management outcomes are paramount.

“Cultivating the right composition? (The answer) lies in in the venerable idea of the ‘the 3 Ws:’ work, wisdom & wealth… . [M]embers (should) bring one or two or even three of these assets to the organization. “

Engineer Financial Health

Like the business situation, what constitutes an organization’s overhead can be a debate among professional accountants. “Baring field variations, 15% of overhead is typical in the nonprofit world and reflects salary levels that are significantly lower than in the for-profits… . “

Most nonprofit directors serve limited terms amounting to anywhere from one to six years, with the vast majority in the four to six year ranges. Sometimes this brief tenure of board members precludes some boards from really focusing on the sustainability issue. While some operating expense, can be drawn from endowment (4-5% in recent years) there must be a prudent reserve to assure long-term increases and improvements in client services.

Fundraising should be a joint responsibility between the CEO and board members who are comfortable with the process. At the very least, each board member should feel responsible to provide leads and introductions to potential funding sources.

Do Nonprofit Board and For-Profit Boards Face Similar Major Challenges?

Do Nonprofit Board and For-Profit Boards Face Similar Major Challenges?

By: Eugene Fram

The answer is Yes! Although the nonprofit’s objective is to develop maximum impact for its mission, while the business organization wants to maximize shareholder returns, a listing of current major challenges by Deloitte Touche Tomatsu indicates the two types of boards face similar challenges*

1. Overseeing enterprise risk management
Many nonprofits facing reductions in financial support must make heartbreaking choices between focusing on financially viable programs and dropping needed programs. Fraud is a continuing concern for nonprofit directors, both from a reputational standpoint and potential personal liabilities. Developing new competitive services and products continues to be a top priority for business concerns.

2. Focusing on executive compensation programs and related regulations
Regulators and media outlets are focusing on outsized salaries for some top managers in both nonprofit and for-profit organizations, especially where nonprofit and commercial organizations are in the same field, e.g., health care. Increased governance attention to the expanded IRS form 990 and to the Intermediate Sanctions Act, covering granting illegal excess benefits, are challenges for nonprofit boards. I have noted that many volunteer directors and nonprofit executives are unaware of the latter piece of legislation.

3. Ensuring corporate strategy will achieve long-term value creation
Numerous nonprofit and for-profit reports indicate both type of boards need to focus more on strategic planning. Both types of boards are wrestling with the problems of making investment decisions about emerging technologies.

4. Addressing heightened levels of shareholder (stakeholder) activism
Nonprofit stakeholders, such as foundations, are expecting grantees to show impact results for their financial grants. Both types of boards are expected to respond to environmental and business sustainability concerns, whether they be forest conservation or child obesity.

Conclusion: A board is a board is a board … The Major Challenges Are The Same!!
* Deloitte Touche, Tomatsu (2014) “Selected Challenges for Boards of Directors in the Current Environment”

Is Your Nonprofit Forward Focused or A Prisoner of the Past?

Governance arguably suffers most … when boards spend too much time looking in the rear view mirror and not enough scanning the road ahead. *
It has been my experience that nonprofits rarely address the possibilities and perils of “…the road ahead.” …. Here are some “prompts” that might guide nonprofit board members and CEOs as they attempt to provide leadership in this important but often neglected area:

Is Your Nonprofit Strategically Deprived? Updated & Revised

Is Your Nonprofit Strategically Deprived? Updated & Revised

By: Eugene Fram

A vital concern to the future of any nonprofit organization is frequently neglected. Responsibility for the lack of strategic planning must reside with the chief executive, board members and the tactical challenges that inevitably flow to the board.

Before a nonprofit board can begin successful strategic planning, it must: (more…)

Target More Specific Skills in Nonprofit Board Recruitment – Revised & Updated

Target More Specific Skills in Nonprofit Board Recruitment – Revised & Updated

By: Eugene Fram

When the nominating committee sits down each year to fill vacant or termed-out board slots, their challenge is to identify the “right” directors for the organization. Typically, the group will work with a grid to define the types of skills they deem valuable to the board composition. While this kind of generic search (e.g. marketing, financial, human resource,) is adequate in many cases, the committee would do well to narrow the probe with an approach more focused on a candidate’s specific experience and skills. (more…)