In the next four years, nonprofit boards will face exceptional challenges affecting long-term financial and operational sustainability. It is likely that governmental grants will substantially decline. Business/individual donor gifts can be reduced should the economy teeter towards recession or the tax code changes in an unfriendly way. But, as usual, demand for nonprofit services will increase substantially.
Based on national survey data, Alice Korngold, highly regarded nonprofit consultant, concludes that these issues are driving the problems.
Demand for services has increased every year since 2008.
50% of nonprofit survey respondents are unable to satisfy demand.
Half of the organizations surveyed only have three months of cash readily available.
Government contracts don’t provide full costs for programs. *
Nonprofit Board Discourse: a Meeting of the Minds??
By: Eugene Fram
Several years ago, a nonprofit director complained to me that there was too little “conflict” at board meetings. Too few hands were raised to challenge or simply question the efficacy of certain important agenda items. Having participated in hundreds of nonprofit meetings, I can vehemently report that this laissez-faire response still typifies the majority of director attitudes, especially for items that deserve vigorous discussion. Why is that? And why is the term conflict perceived as an asset to an organization that is determined to move forward? Below are some answers based on my own experience in the nonprofit environment. (more…)
As the nation is reeling from the jolt of the 2016 election results, I happened to read a recent report from Deliotte Consulting suggesting ways that for-profit organizations can improve their performance in uncertain times. The report centers on key drivers of board effectiveness that, in my opinion, resonate with similar nonprofit situations. Most nonprofit boards typically live with uncertainty and are perennially “on the edge.” Here are some ideas from the Deloitte * report that, when adapted early, can bolster their operation in times of disruption.
Bold, decisive leadership: Nonprofit boards are responsible for donor and charitable types of revenues that place directors in a public trust position. In addition board members typically will only be active for a median tenure period of four to six years. As a result they often become overly conservative in their strategic views and may accept CEOs that “mind-the-store” with modest incremental growth annually.
To prevent the organizational boat from capsizing in the perpetual seas of uncertain times, the board needs rely on the best forward looking information about strategy, culture, people and clients. All of this must be in solid alignment with a substantial mission, or a modified one if the external environment requires it. This allows the nonprofit to cut through the cultural barriers that impede strategy development. As Peter Drucker has noted, “Culture eats strategy for breakfast every morning.”
Opportunity mind-set: Even when the organization is prospering, the board has a responsibility to press for innovations and to support small-scale experiments as called for in a “Lean Management” structure. Within this structure, the staff can test the waters via experiments to move more boldly, as long as the experiments yield positive results. **
Stakeholders: Nonprofits have a multitude of stakeholders, complicated by the fact that often those who receive the service are not the ones who support or pay for it. This requires management to balance the needs of the various groups and that can call for heart-breaking decisions. For example, should revenues be allocated to marketing or used for needed client programs? To solve the dilemmas Deliotte suggests, “Building valuable, open relationships across multiple stakeholder groups is key to building trust and organizational resilience”
Match fit: Boards have a responsibility to motivate the nonprofit to realistically evaluate the tensions between new models and existing ones. Two examples show contrasting results. Easter Seals boards perceived the market changes involved with polio vaccines and modified their missions. Nonprofit counseling agencies failed to assess the positive impacts of new pharmaceuticals and the need for face-to face counseling declined. To develop a fit, Deliotte suggests, “the board and the organization need to be agile and open.”
Culture, culture, and culture: Nonprofit boards’ cultures play a key role in determining the level of risk the board is willing to take. With key drivers, nonprofit boards have to take reasonable risks to survive and even encourage management to take it. Small scale, yet bold, experimentations that are jointly reviewed by board and management provide a “Lean Management” approach that has been used by venture supported business firms.
Cracking the diversity Code: Instead of recruiting new board members and maximizing the best they have to offer, nonprofit boards try to orient new board members to the current culture. A new member with a financial planning background, for example, will be asked to work with the CFO on accounting related problems. Instead, he/s should be asked to develop a long term-term financial plan. Board background (such as strategic planning abilities, critical thinking) diversity, as well as demographic (such as gender, ethnicity) ones, must be carefully crafted and utilized as well as demographics.
Curiosity is Key: Deliotte Consulting concludes, “Directors should get out of the ‘same old’ board room, and should even look across borders to learn from approaches in (different nonprofits) and companies… . Developing news skills and insights are essential for innovation and should be sought to create the questioning and challenging environment needed to imagine, inspire and deliver better outcomes (and impacts). Complacency (in uncertain times) can be a killer.”
Can A Nonprofit Organization Have A President/CEO & An Executive Director?
By: Eugene H. Fram
Viewer Favorite Revised & Updated
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. The executive director should have final authority for all operational matters related to the organization, except those designated for the board in the bylaws. For example, pensions plan changes.
The big question is who carries the CEO title. Some nonprofits, in their early stages, have a volunteer, part-time, President/CEO and an operational Executive Director. This signifies the volunteer, representing the will of the board, can have final authority in all daily and policy issues. This is not a good structure because the CEO title might lead to the volunteer having liabilities that other board members don’t have. (more…)
Should the CEO follow or lead the board in fund-raising?
By Eugene Fram
In my opinion, the CEO should be a leading partner with the board in development. He/S is the advanced guard when it comes to fund-raising. First to be successful, she/H has to be alert to all places where the CEO can raise funds on his/her own initiative. (more…)
My Nonprofit Governance Blog-Site has reached a Landmark at 500 Followers! And here’s a sampling of the most viewed posts of 2014
By: Eugene Fram
Over the last several decades I have published about two dozen articles and four books related to corporate governance, most of them covering nonprofit governance. These have appeared in a range of publications including MIT’s Sloan Management Review and, more recently, in the Huffington Post.
About two years ago, I decided to “become modern” and use social media to generate comments about my (sometimes controversial) ideas for improving corporate governance. There are now over 250 blog posts available on my site. I am amazed at social media’s drawing power and the daily reports of “likes” and professional comments about my ideas. The work has been fun and has allowed me to reach people worldwide, sometimes in as many as 12 different countries daily.
I am happy to share this list of my followers’ favorite posts. Feel free to forward it to others, especially nonprofit CEOs and board directors.
Blog site: http://bit.ly/yfRZpz
# Most Viewed Posts -1/1/2014 to 5/15/2014
Can Nonprofit Boards Suffer From Agenda Deficits? -272*
A Special Relationship: Nurturing the CEO-Board Chair Bond – 178*
Is Your Nonprofit Board Ready to Recruit a Transformational Leader? – 195*
Do Today’s Business Leaders Make Effective Nonprofit Directors? Revised & Updated – 145*
What Nonprofit Boards Are Not Doing – But Should! Revised & Updated -256
When Will Nonprofit Boards Learn to Plan for Succession? – 236
Does the Nonprofit CEO Need to Go?? – 469
Is Your Nonprofit Board Fundraising Committee Strategically oriented? Revised & Updated – 305
Nonprofit Boardroom Elephants and the “Nice Guy” Syndrome: A Complex Problem – 578
A Nonprofit Board’s Most Important Job! – 347
Major Donor Has Remorse — Nonprofit Board/CEO Failed to Meaningfully Engage Him? -350
Once Again! Should a Nonprofit CEO Become a Voting Member of the Board of Directors? – 208
Nonprofit Boards 2014 – Two Recurring Concerns of Directors & Managers – 326
A Nonprofit Board’s Best Friend — A Robust Business Plan – 276
An Action Agenda for Nonprofit Board Management Discussions -211
* Current posts receiving views and comments.
Many people believe as I do that a nonprofit board’s job is to find the best possible person to act as CEO of the organization, then stand back and let that person manage. If your board is in agreement, here are guidelines for action:
* Recruit Widely
* Understand the Partnership
* A Nonprofit Board Has an Overview Responsibility
* Organization and CEO Measurement
* Nobody Does His/Her Job Perfectly
* The Board and CEO Must Partner on Fundraising