Nonprofit Board Crisis

It's All About the Results

Whenever I want to critisize a nonprofit I look up and down at the governance and management functions.  Few nonprofits do well with these two functions so it doesn't usually take me long to find something to critisize.

Today's New York Times had two feature stories on Teach For America, a $110 million nonprofit.  Why I ask?  Results, plain and simple.  Teach For America delivers results -- improved educational scores and equally improved volunteers with invaluable experiences that will leave college students with lasting impressions. 

Yes, I am sure there are bumps and even maybe in the governance and management functions but when it matters most, it's about results.  Congratulations Teach!

Can Nonprofits Play Well Together?

A story in Tuesday's Hartford Courant is a case-in-point that demonstrates sometimes why nonprofits prefer to do their work independently vs. collaboratively.

As the story goes, two West Hartford, CT nonprofits have been sharing the cost and income from an annual "maryoral sponsored" charity event for 9 years.  This year, the larger income-sized nonprofit has announced it will no longer be a partner and will run its own event, on its own. 

Both nonprofits serve youth.  One serves about 200 people a year and gets 1/3 of the proceeds.  The other annually serves 10,000 youths a year.  The larger organization says: "...his organization over the years had shouldered a disproportionate share of the work and expense to organize the event.  Having a separate event to raise its own funds became a matter of fairness.  We wanted to move ahead and have our own gala event.  It's not part of our mission to fund raise for another organization."

It's not part of our mission to fund raise for another organization!  Her lies an interesting fact being used as an excuse for non-co-operation.  I would tend to agree that it is likely not part of many nonprofits mission to fund raise for another organization. But, is this the point?  Is this really a valid reason not to cooperate and create win:win opportunities for both the nonprofits and the community. 

Thanks to this declaration, a relatively small community must endure two events and slice a small pie smaller.  And why?  It's not part of the mission to fund raise for another organization.  If I were the community, I would think twice about supporting what will be a new and additional event in town.  After all, it's not part of the mission of the community to support every nonprofit's fundraiser.

Most CEOs Think Board Members Stink

According to the NonProfit Times, "Most CEOs think Board Members stink".

The article in the Times notes that according to an Urban Institute study, "some 62% of the chief executive officers say their boards do a fair or poor job raising revenue and 60% assign similar marks for boards' self examination.  And, more than 1/4 of CEOs rate their boards as fair or poor when it comes to evaluating the CEO, planning, monitoring programs and services, dealing with the community, and educating the public about the organization.  Finally, ...the only area in which a majority of CEOs rate their boards as excellent was respecting board-staff boundaries while just 1/2 say their boards are doing an excellent job of financial oversight."

And if any of this comes as a surprise, I want to meet your board.

Does age define readiness for governance?

Does age define readiness for governance?  That's essentially the question being addressed in discussions going on at the New York City Council.  According to the 5/11/08 New York Times, a bill has been presented to limit to two the number of 16-17 year olds that can serve on a community board. 

Maturity and preparedness are the supposed issues.  Says Brittany Britt (real name I didn't make it up): "Some people our age aren't mature, and make decisions based on what other people think....But she said that she would be interested in joining her local board and that young people should have the chance to voice their opinions."

Meanwhile the current borough president remembers his time as a 15 year-old serving on a community board in his first meeting: "...where he occupied his time with a bit of clock-watching, a little note-taking, one raising of his hand, a lot of serious attentiveness with his chin poised on his thumb and one trip to the candy machine."

From my thinking, youth who are willing should indeed have the opportunity to serve.  As the author of the bill to enable service says: "denying members of this age group the right to take part in their city government leaves them "disenfranchised" and "second-class citizens".  Supporters further say that "16-17-year-olds would bring a unique perspective to local government, especially with regard to issues involving schools and youth services, and suggest that youthful enthusiasm that has been evident in national politics in recent months can fuel involvement at the local level."

My only caution: the board must be willing to orient, train and support members who are not like them and take extra steps to listen to voices that are different than theirs, if indeed these voices are different.

Free Students: Really and Opportunity?

The New York Times featured the continuing trend of using undergrad or grad student projects as "consultants" to help for-profit and nonprofits achieve a particular goal -- mostly in the area of planning.

The article did a nice job of telling the good side where outcomes matched goals and folks did ok.  But this is, in my experience, only one side of the story.  The number of student/class groups I have witnessed that fail or do at best a mediocre job far outweighs the success stories.  More importantly, little was noted about the need for time and supervision by the recipient ("free" costs money) and the very little support given by the professors "managing" the class and their project.

No, class projects are not all they are chalked-up to be.  The successes are limited and if the beneficiary is lucky, the most it will cost is a lot of time.

Good governance, micro-managing or what?

When a public pension (the US' largest) loses 3 of its senior execs in a year's time I ask: good governance, micro-managing, just ill-informed?  I don't know the answer but this story is a living example of board-exec tensions and what happens when the tensions are not so reconcilable.

NYC Council members getting in deeper and deeper

A few weeks ago I picked up on a story in New York that highlighted suspicious budgeting practices by the City Council.  Council members were budgeting dollars for nonprofits, some of them real, others just ghosts, so that they could create a slush fund for some good and some less than good purposes during the budget year.  It was sort of a clever way to budget for the unknown but instead of budgeting for the unknown ('cause what sane public would approve), the council created a nonprofit fund.  Good for everyone except maybe the public -- but that's another story -- no?

Meanwhile, as we dig deeper, we are learning that some of the friends of the council really should not be in the business of ever receiving city funds and likely, were it not for this process, would not.  Check out the latest news in the New York Times.

Nonprofits: Filling the Void

Today's LA Times described how MacArthur Genius Grant Winner Rueben Martinez's Liberia Martinez is at death's door.

Liberia Martinez is a latino-focused, independent bookshop.  Like newspapers and for all kinds of reasons, independent bookstores are dying.  Market demand and competition (big stores and on-line) are two primary contributors to the problem.  Of course, neither the big stores nor on-line (more so) have passionate and knowledgeable sales people to guide buyers but buyers don't seem that concerned. 

Could one answer be the conversion of these institutions to nonprofit status?  Nonprofits fill the void between the for-profit and government sectors.  The bookstore could recruit some passionate readers who value the gifts of the independent bookseller and who could serve as board members and provide access to capital to subsidize financial losses that are sure to otherwise occur.  And the philanthropic community, with clearness about the need for literacy could pitch in too. 

Yes, the nonprofit sector could indeed be the last bastion for the caring bookseller and caring reader.

Board "Service" - More than service in Corporate World

According to today's Chicago Tribune, unlike service on a nonprofit board, it can really pay to "serve" on a for-profit board.

"Half of all corporate directors made between $52,479 and $165,000."  Some made a lot more.  Take for example, Allen Wise, former CEO of Coventry Health Care who got $7.7 million and Dennis Horowitz of Wolverine Tube who got $5.94 million.  Both of these totals include "compensation that's part of their retirement packages."

"Making sure the corporation performs well" is one justification for great pay levels.  Paying competitively is another rationale.  Plus there's an increased workload and regulations going back to Enron.

And still in the nonprofit sector, board members aren't compensated, or when they are they are certainly not compensated at these levels.  And isn't the workload equally demanding?  Maybe it's time to reconsider the tradition of not compensating for nonprofit board service and coming up with some degree of standard compensation.  Maybe then nonprofits would get more consistent whole-hearted service.

Nonprofit Hospitals Not Nonprofit!

Check out the April 28 Wall Street Journal article titled "Cash Before Chemo".

OUTRAGEOUS - the article provides a detailed analysis of recent nonprofit practices asking for the cash up front! 

One note: "net income per bed nearly tripled at nonprofit hospitals to $146,273 in 2005 from $50,669 in 2000."  And these guys are tax exempt?  And how much are their Execs making?

Come on -- The health care system is broken and unfair (universal health care where are you).  At the very minimum, let's not pretend that nonprofit hospitals mean nonprofit.  Congress, make these folks give away more service or take away their tax-exempt status.  This is no different than universities except that health care is everyone's right and society's obligation.