Nonprofit CEO-Board Relationships

Dysfunctional Levels in Nonprofit Boards & Organizations.

Dysfunctional Levels in Nonprofit Boards & Organizations.

By: Eugene Fram

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. (more…)

Nonprofit Risk and Crisis Management: Challenges for the 21st Century

Nonprofit Risk and Crisis Management: Challenges for the 21st Century

The nonprofit leadership literature recommends that every nonprofit organization have a comprehensive crisis management plan, but it has little focus on risk. Perhaps nonprofit boards are too risk averse and are really unable to maximize their resources to assist clients? Is it that nonprofit boards see little personal gains from taking reasonable risks fearing potential reputation and financial losses? I reviewed over 300 nonprofit articles related to nonprofit crises and related risks; only a handful centered on how a nonprofit board can respond to handling risk and crises in a strategic manner. A great deal seemed to depend on the position of organization of the nonprofit board and its culture, provided in these principles: (more…)

Can A Nonprofit Find Strategic Ways To Grow in Difficult Times?

Can A Nonprofit Find Strategic Ways To Grow in Difficult Times?

By: Eugene Fram

Nonprofits have always had to struggle to meet their client needs, even when economic conditions and social turmoil were much less constraining than today. How can mid-level nonprofits uncover growth opportunities in the present environment? (more…)

What Key Elements Make A Nonprofit Board Great?

What Key Elements Make A Nonprofit Board Great?

By: Eugene Fram

According to an old Chinese proverb—the wise man learns from his own experience—the wiser man learns from the experience of others. A group of 300 for-profit directors recently took the time to answer questions posed by the RHR International and NYSE Governance Services. Their opinions were subsequently compiled and published in a major study “about the crucial elements in making and maintaining a strong board.” (http://bit.ly/1qTjPXI) Following are my best estimations on how these findings can apply to nonprofit boards.

Quality of boardroom dialog and debate:
Achieving this objective in the nonprofit environment can be a challenge. First, even on boards that meet monthly or quarterly for a couple of hours, directors often don’t have enough interactive time to get to know each other. Second, nonprofit board conflict is usually avoided because it can easily lead to interpersonal problems. Consequently, the board chair and CEO need to develop a board culture that allows for vigorous dissent as a positive process. One board chair I encountered faced with this challenge set a goal of trying to imitate more “conflicts” in board discussions. According to the above study, “The way board members operate together, not who they are, is what differentiates a great board from an average one….”

Ability to ask the tough questions of management:
As volunteers, nonprofit directors often find they must make decisions about issues that are far afield from their career interests, hobbies or their family interests. To effectively relate to management and staff, directors need to take time to better understand the environment in which the nonprofit operates. However, even without this background, it is possible to raise many fair and rigorous questions, such as the level of due diligence behind a recommendation or the impact of the proposal on coming budgets. A director should be duty-bound to ask these types of questions, even at the risk of embarrassing management and developing board conflict. In addition boards need to provide “constructive feedback to (individual) board members on the quality of their contributions.” …

Diversity of thought and experience:
While nonprofit boards select board members on the basis of their experiences, such as marketing, accounting or human relations and demographic divisions, little focus is placed on seeking to develop an inclusive board, with representation from all major stakeholder groups. (Example: Every board should have some people who have strategic perspectives.) Seeking these traits can only be done by reputation, not by career backgrounds. Developing such a board, within the confines of maximum board membership, is necessary to achieve diversity of thought. It also will require creative recruiting and ongoing director “maintenance” by the board chair and CEO to be certain that all directors are engaged in meaningful projects.

Summary
Nonprofit boards need to be evaluated on the way they work together with open dialog, debate and, at times, vigorous dissent. In my opinion, too many directors, because they do not have a financial investment in the nonprofit, vote to go along and/or to avoid conflict. Rarely do nonprofit directors vote “no” to record a different perspective on a proposal. Rigorous, but fair, questioning of management must be the norm. The need for nonprofit board diversity has been well documented for decades. A new view is evolving calling for nonprofits to develop inclusive boards. Some boards have moved in this direction, where legal by state law, to have the CEO as an ex-officious member or voting member of the board to represent staff stakeholders.

When extended to nonprofit board practices the RHR-NYSE study results provide some interesting bases for evaluating how nonprofit boards operate.

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…)

Once Again! Are Three Standing Nonprofit Board Committees Enough?

Once Again! Are Three Standing Nonprofit Board Committees Enough?

By: Eugene Fram

Nonprofit boards are often known for the proliferation of board standing committees. Current thinking is to reduce the number substantially. Following is one model, with only three standing committees which has been used by thousands of nonprofit organizations for over 20 years. Ad hoc committees or task forces, are used when needed for investigation of policy decisions and major strategic issues such as changes in pension plans.

  1. Executive Committee – It consists of the CEO, corporate officers and an at-large member elected by the board. The committee acts for the board between meetings, subject to later board ratification; sets the meeting agendas, reviews reports for board discussion; and appoints all standing committees and ad hoc committees.

    2. (more…)