Trustee Responsibilities

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…)

Establishing Effective Nonprofit Board Committees – What to Do.

Establishing Effective Nonprofit Board Committees – What to Do.

By Eugene Fram

Following are ways that many nonprofit boards have established effective board committees using my governance model as described in the third (2011) edition of Policy vs. Paper Clips. http://amzn.to/eu7nQl

• In the planning effort, focus board personnel and financial resources only on those topics that are germane to the organization at a particular time. For example, financial planning, long-range planning or
short-range planning. However the board needs to be open to generative planning if new opportunities present themselves or are developed via board leadership. (more…)

Does A New Nonprofit Board Director Really Understand Your Organization?

Does A New Nonprofit Board Director Really Understand Your Organization?

By: Eugene Fram

The careful nurturing of a board member, whether for-profit or nonprofit, is critical. The pay-off of a robust orientation process is an informed and fully participating board director. The following are very similar occurrences in both for-profit and nonprofit boards:

The CEO of a transportation firm agrees to become a board director of a firm developing computer programs. He has risen through the transportation ranks with a financial background, but he knows little about the dynamics of the computer industry.*

A finance professor is asked to serve on the board of a nonprofit school serving handicapped children. She has no children of her own and has never had any contact with handicapped children, social workers or teachers serving handicapped children.

In these similar cases, the new director needs to become reasonably conversant with a new industry or a new human service field in order to be able to better apply policy development skills, strategic planning skills and to allow generative thinking.

On nonprofit boards, the problem is exacerbated when the new director often is asked to immediately join a specific board committee without being able to understand the board perspectives and the organization’s mission vision and values. Following are ways in which the nonprofit board can resolve this problem:

• Don’t appoint the new board member to committee until she has completed a board orientation program including a review of board procedures, attending several board meetings, has had visits with the staff, as they normally operate, and becomes alert to the major trends in the field. This ideally should take about six months assuming the director is employed full-time elsewhere.
• During this time, the chief executive and board president should be available to the new director as frequently as she wants in order to respond to questions.
• Hopefully, the chief executive would informally meet the new director (and each established director) quarterly to review current issues and opportunities. ** In addition, to the information presented at the board meetings, this will provide a better perspective of the board’s mission, vision and values.
• Ideally, the board volunteer should attend one staff meeting and one outside professional meeting to acquire a feeling for the topics reviewed at these gatherings and the field terminology.

If most of these actions can be accomplished within a six-month period, major blind spots are removed, and the new board member can then join a standing board committee. Now, reasonably understanding the organization and her own participation on the board, she has a background to make a substantial contribution for years to come.

• *Robert Frisch, Managing Partner of The Strategic Offsites Group, presented this type of example as a common one for business boards. SVNACD Meeting January 17th, 2013, Rock Center for Corporate Governance, Stanford University.
• ** For more details, see my book and blog site:
Blog: http://bit.ly/yfRZpz

Book: http://amzn.to/eu7nQl

Once Again: How to Keep a Nonprofit Board Informed – Reissued based on viewer interest.

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”

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.

What’s In a Name? Benefits Of The Nonprofit President/CEO Title

What’s In a Name? Benefits Of The Nonprofit President/CEO Title

Note: This article has received constant attention since being published

in May 2010 by The Alliance for Children & Families.

I am reissuing it here in the event some new readers might have missed it.

Best wishes to my U.S. viewers for a happy and healthy Thanksgiving holiday.

What’s in a Name? Benefits of the President/CEO Title

BY EUGENE FRAM

Over the last 100 years, senior managers of nonprofits typically have held the executive director title. For about the last 30 years, many nonprofits have changed the title to president/CEO, following a common business practice. Many more nonprofits need to consider the same change to obtain some subtle but useful organizational benefits.

A recent study reports that only 22 percent of trade association chief staff officers hold the president/CEO title. For professional societies, the proportion is only 9 percent.1 Many chief staff officers in larger faith-based human service and health-related organizations still hold the executive director title. Even the senior manager of Carnegie Hall in New York City still carries the executive director title.

A wide range of nonprofits use the executive director title: churches, human service agencies, trade associations, and medical facilities. An executive director can be the only manager in a church with an annual budget of $200,000, or be the head of a medical facility with a $10 million annual budget and 200 employees. These significant differences in responsibility levels can serve to: <–more–>

    1. demean the significant contributions of many executive directors in the eyes of some important audiences, and
    2. minimize audience perceptions of the contributions of their organizations.

The Executive Director in Nonprofit Organizations

Nonprofit senior managers are called, “executive director instead of chief executive officer in order to avoid the business connotation which the latter name evokes. … It also distinguishes them from … members of the (volunteer) board of directors from non-executive directors who are not actively involved in running the corporation.”2

Using the title of executive director made sense during the early part of the 20th century when nonprofit organizations were modest ones with a handful of employees, and volunteers regularly filled managerial or service roles. As late as the 1960s, one occasionally witnessed volunteer board members having internal operational roles. Those who advocate for the continued use of the executive director title argue that use of the title is empirical evidence of board involvement in the activities of the organization. However, the negative side of the argument is that continued use of the title leads to board micromanagement of operations, which stunts organizational growth.

Nonprofit organizations became larger and more complex in the latter part of the 20th century. Local professional societies became regional organizations; hospitals became regional healthcare systems; and so on. The proportion of volunteers involved in management operations and staff work declined. Consequently the trend to use the president/CEO title became more appealing to focus operational responsibility on management and staff. If properly structured, the title requires the chair and CEO to develop a more trusting professional relationship and assures the stakeholders of higher levels of performance. Organization results become focused on outcomes, not process.

The President/CEO in Nonprofit Organizations

In the latter part of the 20th century, business organizations began to add the title of CEO to the title of either their president position or board chair position.3 The objective was to clearly designate which of the two had final operational authority, except for those actions which are reserved by the firm’s bylaws for the board (usually acquisitions, pension plans, and long-term contracts). In the business environment, as contrasted to the nonprofit environment, both the chair and the president can be corporation employees.

Share your thoughts. Choose the appropriate survey from below. Surveys are quick, and responses are anonymous.

About 1980, nonprofit organizations began to mirror business organizations managerially. Many developed marketing departments, installed complex information technology, and a few even hired experienced business executives to head their organizations. The older philosophy, listed above, of “avoiding the businesses connection” was quickly being eroded. Today, specialized programs operated by many associations prepare aspiring nonprofit executives to advance through managerial positions to presidential positions.

Nonprofit boards, after 1980, when hiring new senior managers, offered titles of president/CEO4 and made bylaw provisions for other persons in the senior management teams to become vice presidents.
Nonprofit board chairs can do their job well without final CEO operating authority. Traditionally, chairs are volunteer personnel who should focus board activities on strategic issues not operational concerns. Some president/CEOs even became voting members of their boards, if permitted by their state laws. It was not unusual for some incumbent executive directors to seek the new title, if it was politically expedient. However, many conservative boards still look upon the change as a managerial power grab, which evidently has slowed the change process.

Nearly three decades have passed since the early adopters made the first changes. Yet, as indicated before, there are still thousands of complex nonprofits operationally headed by managers holding the executive director title, although these persons may have robust and complex operational duties.

Changing the title of the chief staff officer to president/CEO can positively influence:

  1. the organization’s internal and external perceptions,
  2. its culture, and
  3. its financial growth.

Perceptions of the Organization

There appears to be little public understanding of the robust responsibilities of an executive director of larger nonprofits, although a board may have delegated him or her full operational authority. Most persons holding the title can relate stories of how frequently they have had to describe their jobs to persons not familiar with nonprofits. On the other hand, a substantial portion of the population recognizes that a person holding the title of president/CEO is the head of the organization with substantial authority to lead its employees and to direct operations. (Nonprofit senior managers are not the only ones who face this issue. Persons in legal firms with titles of managing partner and those in financial organizations with titles of managing director also face the same title recognition challenges.)

Read the original article, which prompted Eugene Fram’s response.

A nonprofit operating head with a president/CEO title can more easily help focus on building the public brand image of the organization through his or her force of personality and the clear perception of who is leading the organization’s mission. She or he should be in the best position to staff the “bully pulpit” for the mission of the organization.

Staff discipline and morale may also be compromised when the executive director title is employed. In local or regionally based nonprofit groups, staff members often are personal friends of their board members. It is not unusual to have disaffected staff personnel directly complain to the board when they disagree with one or more of management’s operational or human resource decision.5 It can be hypothesized that some of these cases may have their roots in a lack of understanding of the role of the executive director and who has final operational authority in the organization.

Also, the senior manager from time to time may have opportunities to be interviewed by the media. This can be a critical responsibility when a rapid response to a crisis is needed or an unusual public relations opportunity arises. Consequently, the president/CEO title enables him or her to move quickly and authoritatively; there is no ambiguity related to the leader’s authority.

How leaders and organizations are perceived by stakeholders are realities with which leaders must deal, whether or not the perceptions are accurate. Providing the chief staff officer with the president/CEO title can help develop more desirable internal and external perceptions of the strength of an organization and the responsibilities of the person leading it.

Organization Culture

Organizations which make the title change quite often do so in connection with developing a structure that brings more formality and managerial professionalism to the culture. In the past, years of volunteer involvement in operations often developed a more family culture which is a positive force when the nonprofit is in its early stages. But it is hard to maintain a family environment as the number of employees grows. A new formality, brought about with the senior manger’s title change along with a group of former managers now titled vice presidents, may be seen by older members of the staff as making the operation “uncaring” towards staff and clients.

As time progresses, with the president/CEO being the communications nexus between the board and staff, there will be less personal contact between the two groups This requires the CEO to be concerned that a mistrusting atmosphere may develop. Under his or her guidance, contact between the board and staff can take place on ad hoc committees, on strategic planning projects, at various board orientations, and at organization celebrations. In these ways, the board can seek the participation and advice of all staff in establishing the major programs involved with missions, visions, and values.

If managed properly, the change in top titles and the greater formality it can bring may raise some trust issues with older staff.6 However, management needs to convey a message to the staff that the change is a result of the board placing more trust for operations in the hands of management and staff.

Financial Growth

Some nonprofits take the position that fund development is the responsibility of the board, since board members have the broadest range of community and other outside contacts. With a president/CEO in the top management position, fund development becomes the joint responsibility of the president/CEO, the development person—if one is employed—and board members capable of fundraising. The new title gives the senior manager the immediate recognition necessary to credibly approach donors and, with the consent of the board, to make commitments on behalf of the organization.

To involve the board more directly, the president/CEO can work collaboratively with board members to develop contacts opened by the board. (As one nonprofit executive person explained the situation, “Top people readily communicate with persons in similar positions.”) In seeking support funds, the new title can open doors and communications that might not be available to one holding an executive director title because the title conveys such an unspecified range of responsibility. It might, per se, even raise an unarticulated question in the minds of some donors as to why the person has not been given the title of president/CEO to clearly demonstrate his or her operating authority.

Summary and Final Thoughts

Compared to the duties of a president/CEO, the duties of an executive director range much more widely on a management activity scale. Some executive directors are simply clericals  while others are sophisticated senior executives. Any organization that ignores this fact can leave a psychological gap in public perceptions relating to the group’s strategic posture and the senior manager as a substantial leader. Where warranted by higher responsibility levels, changing a senior manager’s title to president/CEO can help present a better public posture for the senior executive and a better strategic posture for an organization.

END NOTES:

1. Mark Alcorn, “Evolving Titles for Association Executives,” Articles & Whitepapers, ASAE, September 2006.

2. See http://en.wikipedia.org/wiki/Executive_director. Non-executive directors are volunteers who mentor or advise an operating division within the nonprofit, such as the development office.

3. In the nonprofit corporation, the board chair is usually an unpaid volunteer who also might hold the CEO title, indicating that person has final operational authority.

4. Eugene Fram, “Changing Expectations for Third Sector Executives,” Human Resource Management, Fall 1980, pp. 8-15. Eugene Fram with Vicki Brown, Policy vs. Paper Clips: Selling the corporate model to your nonprofit board, 1988. 1st edition, 1995, 2nd edition, Families International, Milwaukee, 3rd Edition Policy vs Paper Clips: How using the corporate model makes a nonprofit board more efficiency & effective, Create Space, March, 2011.

5. This action is often called an “end run” by nonprofit managers.

6. This also assumes that those directly reporting to the president/CEO are concurrently given vice president titles.

Eugene Fram, Ed.D, is professor emeritus at the E. Philip Saunders College of Business of the Rochester Institute of Technology. In 2008, Fram was awarded the university’s Presidential Medallion for Outstanding Service, and in 1997 he received Rochester Institute of Technology’s highest award for outstanding teaching. Recently (2011) an anonymous alumnus donated $3 million to establish the The Eugene Fram Endowed Chair in Critical Thinking.  Now semi-retired in California, Fram continues to add to his published list of more than 100 articles, is involved in for-profit and nonprofit consulting, and is frequently quoted in newspapers, magazines and blogs. Marketing, corporate governance, and nonprofit management are his major expertise areas. Well known in the Alliance community, Fram served on the board of Family Service America, which merged with the National Association of Homes and Services for Children in 1998 to form the Alliance for Children and Families. He was an active participant in the merger. After the merger, he served as co-chair of the first Alliance Board of Directors. He also served on the board of Families International, the parent organization of the Alliance.His book, Policy vs. Paper Clips,Third Edition (2011), has been used by thousands of nonprofits to model their board structures. Available on Amazon.com (http://amzn.to/eu7nQl).  His blog site on nonprofit governance  and management can be found at http://bit.ly/yfRZpz


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

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

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 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–>   

Dailey presents options as to how these situations can be corrected on for-profit board by seeking directors who have seven behavioral attributes.  Following is how I think the behavioral attribute mix can be applied to nonprofit boards to keeping strategic planning on the rails:  “Seven (attributes) standout as key differentiators of directors’ ability to shape strategy and long-range planning“ in both for-profit and nonprofit boards.

1.Curiosity –  “Curious thinkers explore far and wide, into areas that my have no obvious connection to the core” mission of the nonprofit.  For example, a banker may be on the board of a hospital, with no experience in health care issues, but a curious banker can contribute to the hospital by the ability to think about the hospital’s problems in broad terms.

2. Debate Skills –  “Directors who … engage in persuasive arguments with others, which serves to polish and clarify the thinking of all members of the board.”

3. Tolerance of Ambiguity – Some may perceive their way is the only right way. “  It is also difficulty for them to accept other ways.”

I have often observed these types of people are staff people  (such as lawyers, IT programmers and accountants) who have little management experiences and want to try to show a faux management expertise.   Because they hold significant staff positions in, but many have had only managerial responsibilities for one for two people, the nonprofit’s management, staff and other directors often accepts their recommendations with disastrous results.  Another opportunity is often missed by nonprofits in terms of culture.  These organizations often attempt to acculturate a new director to organization instead of allowing the director to bring his/her expertise to the organization.  For example, a person with financial strategy expertise is asked to overview a bookkeeping operation, instead of being asked to lead the board in developing a financial strategy.

4. Prudence –  “Rule-bound directors are strong in compliance and less comfortable in gray areas in which many board discussions may dwell upon.”

They may be what I call process people who consistently want to continually cross check everything. “Rule– lax directors… believe everything can be nuanced or ignored.”   For example, I was on a nonprofit board that made a major acquisition with only the approval of the executive committee and then asked the board for post hoc approval. The results were quite costly.  I resigned quickly after the acquisition with the usual excuse of having increased job responsibilities.

 5. Analytical Speed – “Analysis of facts, arguments and assumptions depend upon experience and perspective, but, most important, on cognitive processing cognitive ability. “  Nonprofits boards need more of this type of director but they are in short supply for for-profit and nonprofit boards.

6. Coaching –  “The transition from executive leadership to board service requires the emotional maturity to dial down personal competitive practices, (reduce the emotional desire to micromanage), and to dial-up interpersonal skills so directors may more successfully engage peers and senior mangers in (critical thinking, civil discourse), problem-solving or developmental conversations.”

7. WHO TAKES THE LEAD IN THE NONPROFIT WORLD?

Board engagement is fine, but overall the consequences for (nonprofit boards like for-profit boards) are not all positive. “It is the job of the nominating committee to seek diverse (behaviorally based) candidates on “who we need” rather than “who is available” criteria.