Nonprofit Board Crisis

Nonprofit Succession Planning: Just-in-time

Back sometime in June of this year I blogged about how creative and thoughtful Merce Cunningham the choreographer was.  Mr. Cunningham died on the 26th of July. 

Thoughtful he was indeed.  While he had hoped to do more, his succession planning will do exactly what he hoped: "not leave the future of his life's work to chance."

Kudos to Mr. Cunningham and those who will continue to preserve and further his legacy.  I hope that this kind of planning will be studied, embraced and practiced by all, especially nonprofit founders.

For one view on this story, visit the Christian Science Monitor.

Nonprofit Governance: Least Bad Option

Here's a somewhat amusing op-ed from the UK discussing the dilemna that the form of nonprofit governance used today is dysfunctional.  Interesting that this comes on the same day I identified the fiduciary challenges facing the Sorority whose members are suing the board for failure to fulfill its duty of care.

Here's the piece.

Nonprofit Leadership Fails to Fulfill Fiduciary Duties

Not always clear about the nature of a nonprofit board's fiduciary duties?  This story provides some insight about what failing them looks like.  This is truly a teachable moment.

Alpha Kappa Alpha's leadership is having one of those moments when it can not get its members to agree to disagree. Some of its members are really upset and filing suit against the paid and volunteer leadership for having spent the organization's money in ways that did not benefit the membership but did benefit some of the leadership, as individuals.  From almost anyway one looks at it, the leadership appears to have seriously violated its fiduciary duty of care (protect and use the assets for mission) and loyalty (self-gain).

Prepare yourself, this story does have some unusual if not odd elements.

Nonprofit Insubordination

I recently became aware of a situation that has me wondering what exactly is insubordination and what are reasonable consequences.

As I understand the situation, the management team had great concern about the economic viability of the nonprofit.  They did not believe that either the exec nor the board understood the gravity of the situation.  They believed that if the exec and board understood the situation, action could be taken and a full-out crisis could be averted.  The team went to the exec and expressed their concerns.  The exec accepted their arguments and took the position that more time was needed before alerting the board.  It's too soon to know what will happen next but this is where my questions begin.

The exec hinted that if the team went to the board after saying to wait on the news, the team's action would be considered insubordination and all would be at risk of being fired.  And, it does seem correct that the team's going to the board after the exec says to wait, would indeed be insubordination.  But is there a "greater good" issue and the team should just take the risk of firing with the possibility that the board would recognize that the team did the "right" thing? 

What is and who are exactly "right" in this situation?  Any thoughts? 

Nonprofit Board against former Nonprofit Board

"Remember the Alamo" may carry on new meaning after the dust settles from the current battle between the Daughters of the Republic of Texas, the site operators for over 100 years, and former staff.

The kicker, the break-away group got formed as a result of a disagreement over sustainability.  The original caretakers believe they are doing just fine and it's hard to argue with their logic: their gift shop provides more than 90% of their $5.5 million budget, they get no state money and more than 2.5 million visitors get free admission.  One might think this can't be beat.

But, the break-away folks think the current operators need to run "like a modern museum with national accreditation and a business plan that includes foundation funding, licensing and marketing".

I must say though, I do appreciate that governance with a focus on long-term sustainability is being given so much attention -- even if it isn't by the folks currently responsible. I also must admit that the break-away governors have offered some sound strategic points that I would encourage following up on.  Now, what would it take to get everyone back on the same page?  There's really not room or authority for 2 caretakers of the Alamo.

Thanks to the San Francisco Chronicle for the story.

run more like a modern museum, with national accreditation and a business plan that includes foundation funding, licensing and marketing.

Read more: http://www.sfgate.com/cgi-bin/article.cgi?f=/n/a/2009/07/24/national/a103505D19.DTL#ixzz0MTC3xSVz

Gift-shop sales have successfully provided 90 percent of the site's $5.5 million operating budget, and the Alamo receives no state funding and offers free admission to its 2.5 million visitors each year.

Read more: http://www.sfgate.com/cgi-bin/article.cgi?f=/n/a/2009/07/24/national/a103505D19.DTL#ixzz0MTBHiaPL

Gift-shop sales have successfully provided 90 percent of the site's $5.5 million operating budget, and the Alamo receives no state funding and offers free admission to its 2.5 million visitors each year.

Read more: http://www.sfgate.com/cgi-bin/article.cgi?f=/n/a/2009/07/24/national/a103505D19.DTL#ixzz0MTBHiaPL

Gift-shop sales have successfully provided 90 percent of the site's $5.5 million operating budget, and the Alamo receives no state funding and offers free admission to its 2.5 million visitors each year.

Read more: http://www.sfgate.com/cgi-bin/article.cgi?f=/n/a/2009/07/24/national/a103505D19.DTL#ixzz0MTBHiaPL

Famous 50 year-old For-Profit to Become Nonprofit

The "founder" of the Newport (music) Festival has announced that he intends to make what is currently a for-profit a nonprofit according to the Providence Journal, via the Chronicle of Philanthropy via the Linked-in Professionals Forum (this gets kinda tedious).  I have to admit a particular interest in the Festival, as the Newport Folk Festival literally took place in my back yard when I lived in Newport from 63-67, some of THE greatest times.

Anyway, Mr. Wein says that going nonprofit should strengthen the Festival's ability to get state and city money. 

Now I am sure, if you are reading this, you are painfully aware of how hard arts organizations are getting hit by this economy.  So what on earth is Mr. Wein thinking?  Well, he says making the festival a nonprofit is really a succession plan -- giving it longevity. 

Even so, can't this be done with a for-profit structure?  That, my friends, is the $1 million question.

Nonprofits Embezzled; Offender gets off light; Citizens Protest

There's an amusing but very serious protest going on in Philadelphia.  Citizens fuming over the incredibly light sentence given ex-state senator Victor Fumo have taken to the streets to say to the Judge -- you don't appreciate the harm Mr. Fumo has done.  Their protest has begun with a lining up of vacuum cleaners at the Capitol.  The vacuum cleaners represent one of the ways Mr. Fumo ripped off his nonprofit by purchasing 30 Oreck vacuum cleaners (who can really say why).  The protest hopes to collect many more vacuums and send them to the judge as a statement that the little less than 5 years and 1/2 of the amount of money stolen (to be repaid) does not represent justice for all the harm done.

I must admit that this is one of the few instances I can think of where citizens have rallied against a verdict focused on nonprofit embezzlement.  Ideally I would hope that the nonprofit boards and those who would be served by these nonprofits would also be loudly protesting the verdict.  And yet, that does not appear to be the case.  No, the citizens that are protesting are protesting out of principle -- Fumo committed a crime against all citizens and should be fairly punished.  This is at least a good reminder that nonprofits are indeed, owned by the citizens and it is in all our interest to ensure their welfare is safeguarded. 

For more on the story, see the Philadelphia Inquirer.

Nonprofit Mis-spends Federal Emergency Planning Funds

A North Dakota EMS Association (that represents ambulance and emergency workers) received more than $800,000 over 5 years to produce a disaster preparedness plan.  The group did complete a plan but have also been audited and found to have spent more than $100,000 on unallowable expenses (including alchohol and dinners).

$810,000 between 2004 and last year to help produce a plan to fight bioterrorism and other mass disasters.

Read more: http://www.sfgate.com/cgi-bin/article.cgi?f=/n/a/2009/07/22/national/a135930D83.DTL#ixzz0M624UqJ5

My usual question on matters like this: how much did/does the board know?  The Association President says the group will pay back the money they've spent.  The group's Executive Director position is vacant according to its website.  A consequence of the problem?  Let's hope so.

And, if so, I am relieved to think that the board has a clear policy about how grant money should be spent (generally, according to the grant terms like any restricted money) and what happens if the staff don't comply.  This would be good governing.

See the article here.

lobbying, cell phones, meals and alcoholic drinks, salaries and bonuses.

Read more: http://www.sfgate.com/cgi-bin/article.cgi?f=/n/a/2009/07/22/national/a135930D83.DTL#ixzz0M638esln

an audit found $157,425 in expenses that were either "unallowable" or lacked receipts. The letter said $33,300 would be denied and $124,125 must be repaid.

Read more: http://www.sfgate.com/cgi-bin/article.cgi?f=/n/a/2009/07/22/national/a135930D83.DTL#ixzz0M62fqHLW

When (Nonprofit) Directors Sweat the Small Stuff

I found a fine article in the Summer 2009 issue of The Conference Board Review that I think is worth a mention for all you nonprofit board members and execs who struggle over what is the "right" content or focus of a nonprofit board vs. the exec.  The article's title: "When Directors Sweat the Small Stuff: Micromanagement in the Boardroom" begins with this introduction:

For the most part, CEOs accept the board as their boss and as a valuable sounding board and source of input.  But they don't always get what they're looking for from their boards.  A common complaint among chief executives is that directors get into the weeds, digging into operational details that have little strategic value.

(continuing on) It's a common pattern for one director to raise a question and then for one or two other directors to pile on.  Before long, a handful of directors are getting into minutiae, and the whole dynamic is derailed.  The danger, of course, is that it takes the focus off more serious issues such as strategy, perception of external trends, succession and enterprise risk.

(and) The difference between micromanaging and appropriate questioning is not always a bright line.  What really defines micromanaging is not whether a director is digging into details.  It's really a question of which details, and for what purpose.  Is the director making a small point, like nitpicking expenses? Or is the director drilling down into details that help reveal a higher-level issue - detecting a structural change, getting at the root cause of a problem, or questioning the effectiveness of a process?

ASKING QUESTIONS OF AN OPERATING NATURE IS NOT IN ITSELF MICROMANAGING, AS LONG AS THE QUESTIONS LEAD TO INSIGHTS ABOUT ISSUES SUCH AS STRATEGY, PERFORMANCE, MAJOR INVESTMENT DECISIONS, KEY PERSONNEL, THE CHOICE OF GOALS, OR RISK ASSESSMENT.  THE KEY LIES IN THE ANALYTICS OF WORKING BACKWARD TO LINK THE OPERATING DETAILS WITH STRATEGIC ISSUES.

(and) Asking questions at the right altitude, with the right tone, and about the right things refocuses managment's attention while respecting the CEO's decision-making authority.

This is good stuff and really, good fodder for the annual meeting where the Board and CEO decide what's on the agenda for the coming year in addition to what the measurable expectations (dashboard) will be for the year .  And, I believe, the work of keeping the Board focused at the most helpful altitude is the job of the Board Chair.

Nonprofit and For-profit Carbon Management Software

Nonprofits and for-profits alike are competing to provide the Carbon Management Software that will help businesses and others achieve their carbon reduction goals (and maybe in the future address regulation).

I found Reuter's list of "providers" to be most enlightening noting in particular that two of the ten providers are non-profit.  Equally interesting: the list identifies how the for-profits are capitalized while only noting the tax status of the remainder: nonprofit. 

So -- what's the takeaway?  I beleive there are a couple.  First, putting a range of assumptions aside, nonprofits can compete in the marketplace alongside for-profits.  Next, nonprofits clearly need to come up with some money to finance their venture although somehow that financing, likely donations or grants, is not viewed as financing. 

Now, why do nonprofits and for-profits need to compete in this sphere?  What do nonprofits bring to the table that for-profits do not?  I'm not sure I have the answer but clearly, the market will provide one.