Nonprofit CEO-Board Relationships

Too Little Board Deference to CEOs – Typical of Nonprofits?

Too Little Board Deference to CEOs – Typical of Nonprofits?

By: Eugene Fram

“Most nonprofit staff leaders still struggle to have a bona fide seat at the board table as a respected peer,” says Brian Foss, nonprofit consultant. He hypothesizes that this lack of respect is not so apparent on for-profit boards. “I rarely see nonprofit CEOs receiving the same deference. …they would enjoy in the for-profit setting.” Foss also notes that the situation has not changed appreciably during the 25 years in which he has served as a consultant.*

Attitudes in a working relationship such as Board/CEO are often deeply ingrained in board culture. Yet I am convinced that with the right oversight and approach they can be improved. Developing a new and mutually respectful management atmosphere will in time yield superior outcomes for the organization. Here are some basic thoughts for both boards and CEOs that I hope will upgrade the quality of the partnership. (more…)

Are Powerful CEOs Right for Nonprofit Organizations? Updated & Reissued

Are Powerful CEOs Right for Nonprofit Organizations?

By: Eugene Fram

David Larcker and Brian Tanya, Stanford University Professors, have come to the following conclusions about CEO power and raise some pertinent questions about the role of the board, based on research mainly centered on for-profit organizations.*

The research literature clearly shows that having a powerful CEO creates the potential for him or her to abuse this position to extract personal benefits or engage in excessive risky activities. At the same time, the research also shows that (CE0) power is often critical to the successful completion of tasks and the achievement of corporate objectives (and nonprofit missions). To this end, powerful CEOs can ultimately be a success or a failure. Are shareholders (stakeholders of nonprofits) better or worse off with a powerful CEO?

While it is the role of the board of directors to oversee management, at some point the board must empower management to make decisions. Where should it “draw the line” between giving its CEO discretion and providing appropriate oversight? How much power is too much power?

My Response Related to Nonprofit Organizations:** (more…)

Focusing the Nonprofit Board on Strategy – Same for For-Profit & Nonprofits? Updated & Reissued

Focusing the Nonprofit Board on Strategy – Same for For-Profit & Nonprofits? Updated & Reissued

By: Eugene Fram

Writing in the third quarter, 2012, of Board Member.com, Peter Dailey begins with the following conclusions about for-profit company’s strategic process (es):

As directors become increasing involved in their company’s strategic process, it’s evident that some fail to have the competencies to meaningfully contribute. Some deficiencies may result in only benevolent dabbling. … But at the extreme, deficiencies can result in destructive deliberative processes and the adoption of faulty strategic decisions. Often these scenarios operate with the context of by well meaning directors – not within hostile environments. * Skill matrices related to specific director experiences are needed. But they fall short in addressing how a director might behave.

For example, I once observed two influential directors establish complex “management by objective” programs for which the staff was forced to focus on process minutiae rather than program outcomes and impacts. The organization suffered. Large company executives can be a problem source when they force extensive discussions on minor operational items. These are items that they would never allow on their own board agendas. Why this happens is a decades old mystery for those of us who have observed it (more…)

How Does A Nonprofit CEO Decline Board Advice? Reissued & Updated.

How does a president/CEO turn down advice about operations or internal structure from the board.

With difficulty. It all depends on the type of culture that has been established by the board. (more…)

Where Nonprofit Boards May Fall Short

Where Nonprofit Boards May Fall Short

By: Eugene Fram

Boards of Directors, like people, have areas of strengths and weaknesses. Gretchen Morgenson, in her article in the New York Times discusses the weak categories of performance in the boards of public companies. * How do nonprofit boards score in these three major categories?

1. Risk Management – I think that most persons associated with nonprofit boards will agree that nonprofit boards are risk adverse. The rationale is that their budgets are derived from public or donated dollars. However, do boards occasionally seek grants that can enable them to ask outside sources (individuals or foundations) to assist with these more risky projects? For example, I recently encountered a nonprofit that has an internally developed product that could have some modest profitable commercial value. It will require a small financial investment that might be derived from an individual or foundation, and a volunteer to champion the product marketing. In my opinion, nonprofit boards need to seek these types of ventures in the current tight budget environment

Few nonprofit boards have ad hoc or standing risk committees or even employ occasional risk management advisers. Each board should have a good understanding of the risks that it faces. Then where appropriate, purchase insurance to reduce the risk liabilities.

2. CEO Succession Planning – FPs are not noted for CEO succession planning, as noted by JC Penney’s lack of planning when the board had to terminate its former president, Ron Johnson. Similarly, NFP boards are not noted for prowess in this arena. For example, a Google search of “CEO Succession Planning for Nonprofits” did not yield a single reference.

The Morgenson article cited above reports, “Hiring an outside C.E.O. costs between three and five times the amount it does to promote an existing manager…” For nonprofit organizations under budget stress, this fact can be a positive or negative factor in hiring. Positively it can force some organizations to consider all strong internal candidates. Negatively, it may allow the additional costs of engaging an outside candidate to overshadow the review of candidates. Consequently the organization may engage an internal person with less management potential.

Also, within six months of hiring a new CEO a nonprofit should have a succession plan in place in the event that the CEO is temporarily incapacitated.

3. Pay for Short-Term Performance? Many NFPs review executive compensation annually. But the impact of NFP programs and efforts may not be known for longer periods of time. Would it be desirable to structure some CEOs a deferred compensation plan dependent on measuring long-term impact? Would such a change provide more executive motivation in a nonprofit setting? Measuring qualitative impacts also are important, but require using imperfect metrics (http://bit.ly/OvF4ri) over time to obtain a robust picture. Change is difficult for nonprofits. But in the 21st century, some tangible experimentation should take place to consider these options.

Do you also agree the NFPs, like FPs, also fall short in these three major areas? Brief comments on field experiences appreciated.

* Gretchen Morgenson (2013), “ Directors Disappoint by What They Don’t Do,” The New York Times, May 11th.

Is Your Nonprofit Board Fundraising Committee Strategically Oriented? Reissued & Updated

Is Your Nonprofit Board Fundraising Committee Strategically Oriented?

By Eugene Fram, Professor Emeritus, E. Philip Saunders College of Business, Rochester Institute of Technology

Nonprofit boards have struggled for years to develop effective board fundraising committees and strategies. According to the BoardSource 2012 Governance Index, 46% of nonprofit CEOs gave their boards “D” or “F” grades for their fundraising efforts and fundraising is the lowest ranked of 10 board board responsibilities.

Simone Joyaux in a current NPQ Newswire* raises some pertinent questions related to the “struggle to get the board to carry out its fund development role.” I have listed her questions below in italics. My overall response to her questions is that fundraising committees are not always necessary for effective fund raising! Where the committee is doing a poor job (graded average or below), it is best to cultivate and support a few board members to drive fundraising. After all, not all nonprofit directors have a strategic orientation. (more…)

Fundraising Foundations: Important Nonprofit Tools for the 21st Century?

Fundraising Foundations: Important Nonprofit Tools for the 21st Century?

By: Eugene Fram

Nonprofits for decades have established – or want to establish their own own fundraising foundations. However many have backed away from them because of the complexity involved, the potential loss of control and the feeling they have a proactive board fundraising committee. In terms of board fundraising effectiveness, a 2012 BoardSource study shows that only 24% of CEO respondents gave their boards and “A” or “B” grade for fundraising, the lowest evaluation among ten board responsibilities listed by the study. * (more…)

Absenteeism at Nonprofit Board Meetings On the Rise? Technology Can Help!

Absenteeism at Nonprofit Board Meetings On the Rise? Technology Can Help

By: Eugene Fram

Dear Fellow Board Members: as you know, we have had to cancel recent board meetings due to a lack of quorum. It is imperative that we take certain annual administrative actions that require a duly called meeting and quorum of our board. To date we have been unable to do so due to our lack of attendance….

Twenty-four directors recently received this note from the organization’s volunteer president at the end of June. His sense of frustration was obvious. Lack of a quorum had precluded action on a number of important issues. And although no meetings are scheduled during the summer months, the president felt impelled to call one to take care of unresolved business.

From my experiences with a variety of nonprofits, this single case is indicative of continuing problems. What are the expectations of board attendance at these meetings? And why should it matter when directors have poor attendance records? Finally, what can be done to get a majority of the directors to the boardroom for what is usually no more than nine two-hour sessions a year? How can technology best assist? (more…)

The Nonprofit Overhead Myth – Devil Is In the Details?

The Nonprofit Overhead Myth – Devil Is In the Details?

By: Eugene Fram

Do nonprofits have to consistently report low overhead percentages for administration and marketing to satisfy donors? Do these modest overhead percentages do more long-term damage to the nonprofit’s ability to fulfill it mission than short-term good? * (more…)

Nonprofit Board Responsibility Social Media – What Needs To Be Done? Revised & Updated

Nonprofit Board Responsibility Social Media – What Needs To Be Done? Revised & Updated
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 concluding that 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:
Assess current capabilities. (more…)