Nonprofit Board Crisis

Nonprofit Says "No More" To Nonprofits

A couple of years ago, the beneficent NONPROFIT Harvard Law School offered to "give back" to the nonprofit sector.  Perhaps it had a moment of consciousness that it wasn't like your normal everyday economically challenged nonprofit.  Back then, the School said "it would waive tuition for third-year students who pledge to spend five years working for nonprofit organizations or for the government".

Well, the School is not going to continue its practice.  Twice as many students as budgeted applied to the program, meaning the school would have to spend about $6 million a year instead of $3.

"That" was just an experiment it says, and the experiment cannot continue because something terrible has happened.  Its endowment has slipped to a measly $26 billion.

Yes, the school has had to make other cuts as well, but this program was special -- it reinforced that Harvard was, well, nonprofit.

For the story, go here.

Board Chair Takes over Exec's Role

In a recent development at GM, the board chair, Ed Whitacre Jr., will serve as CEO while he and the board search for a permanent successor having just completed the firing of the 'till now chief executive, Fritz Henderson.  According to the Wall Street Journal,  Mr. Whitacre and GM’s newly appointed board believed Henderson wasn’t moving the company in the right direction.  Note, the US Government ousted GM's CEO Rick Wagoner shortly after this year’s bail-out in addition to seating Mr. Whitacre.  Perhaps humorously, the Journal suggested that Mr. Whitacre may follow former VP Cheney's action where, given the task to find a VP, he chose himself.

Whatever the outcome, it is not totally unusual in nonprofits for the board chair or some board member to take over, at least temporarily, when the exec moves on (willingly or unwillingly).  But if a board member does take on the role of exec, is it really in the best interest of the nonprofit? 

I'm not convinced that it is.  A long time ago, when I was younger, I was removed from my position of exec of a nonprofit.  Waiting in the wings was a board member, unemployed at the time and ready to step-in.  He and the organization both lasted about a year, giving the organization a sum total of 16 years of life.  Whether I should have been retained is of course not the subject for this discussion.  What is a better discussion is whether or not nonprofit board membership provides enough experience and skill to be an effective exec.  And yes, maybe there's some plausible conflict of interest questions too (duty of loyalty). 

On the question of whether board membership provides enough capacity/experience to be an effective exec -- no, I believe not.  Board members have a special set of skills and experience that do not instantly apply to the fundamental management skills needed for operating a nonprofit, nor even managing a board for that matter (Think: how many board chairs do you know that cause you to wonder what they did to qualify, other than time served?).

On the question of is there a conflict of interest -- I believe not necessarily -- possibly, but not necessarily.  After-all, isn't the board member stepping in to fill a gap?  On the other hand, we must understand what role if any the board member in question had in creating the situation that required a "stepping-in".

Nonprofits and Culture

In my consulting practice, I believe that one of the most significant ingredients that will ensure a  successful partnership or merger is culture.  Culture of course covers a number of behaviors within a nonprofit including the styles of the respective boards and senior managers.  And managing, in today's environment (yes, I know, it's always about "today's" environment) is particularly challenging, as you well know.

I found an insightful article about culture and its impact on the success of an organization in the latest Conference Board Review that may be worth a look-see.  Please be patient though: the story uses Lehman Brothers as the overt subject but believe me, the real subject is as the article's name suggests, Culture Crash.

And, should you not really want to know more about Lehman Brothers, allow me to share a part of the article's wrap-up that I think helps give the whole article meaning.

..a culture that is too strong can also end up too rigid and can shut out diversity, especially diversity of perspective.  It can cause people not to trust others who may be unlike them or who haven't shared their experiences--confusing the unfamiliar with incorrect.  A strong culture attracts people, both clients and employees (and board members and possible alliances).  It also repels them, and the more passionate and proud you are of the culture, the more likely in the end you are to blind yourself to other potentially valuable points of view.

Book Review: The Open Road

Re: The Open Road - The Global Journey of the Fourteenth Dalai Lama

The Open Road is not the new movie with Jeff Bridges but a chronicle, by Pico Iyer, that was offered to provide an insider's insight about the 14th Dalai Lama.  Yes, while my blog does not cover spirituality, it does cover religion, particularly when a religious leader has failed in their duties of care as founders, managers or administrators.

I picked up "Open Road" because the review that motivated me to buy said the book would provide me with insights about the Dalai Lama as a manager.  I can't say that Open Road accomplished this task. 

The Open Road provides a number of insights about the Dalai Lama as a spiritual leader, as a political leader and even as a family member, all of which were fascinating but did not satisfy my hunger to learn about him as an administrator or a manager.

With that said I did find the following, within the section on the Dalai Lama globally, that offers some insight about managing and succession planning.

"You should carry your work as if I didn't exist because that day will come, definitely."

If you would like to learn more, the book is The Open Road: The Global Journey of the Fourteenth Dalai Lama by Pico Iyer, Venture Books, 2008.

Nonprofit and Public Colleges Priced Too High

A recent headline in the Christian Science Monitor reads: Rising College Costs Prompt Student Loan Reform.  The story discusses the affordability of colleges and what the federal government is thinking of doing about the situation.

My question after reading this: why is the solution to college affordability (vs. accessibility): How to make affordable loans?  Rather than making college truly affordable.  There are all kinds of new innovations that should be making colleges more accessible, e.g. electronic books, on-line courses, more self-study through technology.  Maybe these aren't the perfect answers but my take-away from this article was that we just have to accept rising prices and figure out how to lower the cost of lending. 

Hm, sounds a bit like health care.

Nonprofit Social Enterprise

I found an interesting article in the Wall Street Journal chronicling what is essentially the demise of a nonprofit social enterprise.  The enterprise, located in Toledo, Ohio and founded in the 1940's, has, to date, been a successful revenue generating enterprise that trained the disabled.  The rest of the story, simply put, is the auto industry.  The enterprise is now in the wrong place with the wrong product or at least non-productive contracts.  In 2007, 80% of the enterprise's contracts dried up.  Reserves are now serving to meet payroll.

I'm guessing that the board has had serious and deep conversations about what's next.  The questions really revolve around what is "best governance".  Is "best governance" to tell management to keep scratching the earth for the unlikely contracts that can bring life back to the enterprise and use up reserves until success is met?  Or might best governance mean pulling the shades down now and developing a new strategy for providing services to its employees? including finding a new "partner" that can help with management and competition? 

These are questions that I am sure many nonprofit boards must currently face.  Obviously, getting good answers isn't easy.  Nonetheless, this is a job for a nonprofit's board -- one they must not leave to managers to solve on their own.  For more about this story, visit the Wall Street Journal.

Nonprofit a Fake

New York's Attorney General has declared The United Homeless Organization (U.H.O.) a fake. 

As the New York Times reported, U.H.O. has for years been a fixture throughout New York where its "employees" peopled tables asking for donations to address the needs of the homeless.  It turns out though that, while the folks at the tables get essentially paid a percent of the "take", the remaining sums go to the founder and the director who spend their money on themselves.

For shame, for shame.  I suppose though that the good news is that at least the homeless folk at the tables were generating a modicum of income that they maybe wouldn't have generated in some other way.  And also good news: passerbys cared enough to share their wealth.

But, should everyone have know better than to give to the fake nonprofit?  I don't know, but maybe donors didn't really care.  Maybe nonprofit or not, their gifts satisfied their respective needs.  After all, there is a wide range of folks throughout this and many other cities who, while not representing a nonprofit, do solicit funds for themselves, have a real need, and aren't nonprofit.  Take for instance the street musician or the war veteran.

Is nonprofit really the only legitiamate recipient of donative money?

Nonprofit Fired Founder-Exec: No duty of Loyalty or Care

While the Duty of Loyalty is generally applied to a Corporate Board, Larry Jones is certainly demonstrating that it doesn't apply to him -- neither perhaps does the duty of Care.

In what might be considered a prime example of what can happen when a founder/exec is fired, Larry Jones, the founder and 30 year Exec of Feed the Children, has gone public and asked donors not to give money to Feed the Children.  His reason: the money will be used for lawyers, not the kids he cares about.

The details of what has gone on before now can be found well documented by the Oklahoman. 

But, as I have said in previous bloggings, when a board has lost faith or trust in their exec, it's near impossible to regain this.  Even if Mr. Jones succeeds in his suit to regain his job, imagine what life will be like for the Board, staff and Mr. Jones.  It won't be good for anyone and particularly, Mr. Jones' customers: the kids.  Mr. Jones should just move on.  If donors think he was "done wrong to" they can support him in a new endeavor.  Look at Habitat for Humanity's founder for example.  He has continued, of course not without some public struggle, but that's finally past him and his board.

Clearly in court, fault can be found.  But is it in the best interest of the organization and its customers?  I think not.

Nonprofit Board Chairs: Succession Planning and Strategic Nominations

This is around one of those times of the year when nonprofit nominating committees (should be governance committees but not everyone has embraced this concept) start thinking about who the next board chair should be.  Sound familiar?

Well, I believe that the nonprofit board chair is THE most important person in a nonprofit organization.  Let me say that again.  I believe that the nonprofit board chair is THE most important person in a nonprofit organization.  Why?  The Chair is responsible for keeping the board members together, making sure the board is results-focused, and essentially being the best "friend" if not supervisor of the Exec in addition to performing basic functionary tasks like check-signing, public relations etc., etc.

So, how strategic are you about selecting your nonprofit Board's chair?  Most are not and few if any have a succession plan that is focused on long-range governance leadership for their organization.   And this long range-governance leadership begins with thinking about the Board Chair.  Ask yourself: when was the last time you recruited a new board member as a prospective Board Chair 3 years later?  And, have you invested in any training or education to prepare a Board member for becoming the Board Chair?  If the Vice-Chair is to be the next Chair, how prepared are they?

So many questions.....

Corporate Philanthropy Rethought

Is Corporate Philanthropy still relevant?  That was the question asked of some corporate philanthropists in Sunday's Washington Post.

The answer: corporations can make a significant impact by behaving differently in the way they purchase their ingredients and packaging, in the way they treat their employees, and by lending volunteers and expertise.   As one respondent noted:

It's true that 'just send the check' philanthropy has been flat-lining for years -- the figure of about 1 percent of pre-tax profits for America's corporate giving has hardly moved for decades. But from experience, I know that close engagement with leading nonprofits makes a difference to my business and allows it to make a real difference in the results achieved by our nonprofit partners.

But, putting the hat of the nonprofit exec on, "...this stuff doesn't pay the bills and ensure that services continue". 

I'd say this is not an either-or situation -- it's a "both".