Nonprofit Board Crisis

Nonprofit Teaches Sustainability

For the many nonprofits tasked with the day-by-day, year-by-year challenge of getting the resources necessary to achieve mission, Teach for America can share a lesson: do really good and visible work, attract a really large donor and let that really large donor(TFA) attract some other really large donors.  And, once there are some really large donors in the room, have them think about the organization's future and start an endowment.

OK, so I wasn't in the room to get the specifics but you get the idea.  Anyway, check-out Teach For America's big endowment news and remember, what TFA needs for an endowment doesn't match what every nonprofit needs for a sustainability strategy.  Also, be sure to note the other parts of TFA's sustainability strategy.  An endowment is essential but it's one piece of the puzzle.

Nonprofit Governance Pioneer Publishes 3rd Edition

Dr. Eugene Fram is a pioneer in the nonprofit governance arena.  Before John Carver or the folks at Board Source or pretty much any of the folks thinking and writing about nonprofit board governance, there was the illustrious Eugene Fram.

So, I'm anxiously awaiting the 3rd edition of Policy vs. Paperclips and sight unseen I am willing to say that this gem will be packed, like it predecessor editions, with wisdom well worth the consideration of Execs and Board members.

One caution: Policy vs. Paperclips III is about how to best implement the Corporate model of governance.  You should know I generally believe that this model is not perfect for every board, particularly those in their earliest stages of development (infancy and juvenile and some of those in their adolescence stage).  I also worry, particularly as John Carver promotes the model, that getting and keeping board members fully passionate and engaged can be more challenging with the Corporate Governance model. 

That said, many of the concepts Dr. Fram offers for the Corporate Governance model can still be applied to other governance choices.  This book is due in March 2011.  You can get it on Amazon (probably even pre-order).  And, I plan to conduct a proper review when I get my copy.

Nonprofits: Some Really Bad Examples

I love Rick Cohen; I love Senator Grassley (most of the time); and I have real issues with televangelists (those snake oil salesmen) and lo and behold, all in one perfect storm comes Rick Cohen's Report on Senator Grassley and the Televangelists.  The facts are almost like gossip which makes this stuff too true to believe and yet....here it is.

Oh, and do pay attention to the little ads for the Nonprofit Quarterly.  If you are not a subscriber you should be -- besides the bloggers like me (which of course you would miss if we were gone), a few nonprofit "news" sites and maybe some academic journals focused on nonprofits, there's no better source for keeping up on some higher level thinking about the third sector.

Nonprofit From For-profit From Nonprofit

I will start by stating that I have a personal experience with and fondness for the topic of today's post.  The topic is the Newport Folk Festival.  From my 4th through 8th grades, I lived in Newport and actually summered there for the next 4 years. (Ok, so my parents lived there having retired from the Navy -- I was not living in a mansion or a compound on the ocean).

Anyway, this was the mid-to-late 60's and much of the cultural, social and political activity going on in California or college campuses and elsewhere was very much experienced and alive at Newport and particularly at the Newport Folk Festival.  And, I was there.

The Newport Folk Festival is today's topic because George Wein, the founder, announced today that the Festival is going to be owned now by a nonprofit whose job will be to ensure the long-range future of this cultural icon.  According to the Washington Post, George Wein was hired by a Newport socialite and shortly after created a nonprofit to host the festival.  Mr. Wein converted the nonprofit into a for-profit after the board quit following some problems at the festival.

Now Mr. Wein is concerned about the Festival's long-term future and beleives that only as a nonprofit can he have some confidence that there will be a future.  He notes:

Wein said the festivals' conversion under a nonprofit group probably won't make a difference attracting corporate sponsors, although those who give could gain tax benefits, and he sees challenges in raising money for a nonprofit. But he said the change means foundations and music lovers can now make tax-deductible contributions, just as they would to any other cultural or arts organization.

"That is the way culture in America survives. Without that, there'd be a wasteland," he said.

So, is it really true that the only long-range viability of festivals like Newport is as a nonprofit -- even given the huge competing demands for limited resources?  I believe festivals like other for-profits (e.g. media) that face economic struggles do not simply have these struggles erased because they are nonprofit.  So, will conversion back to nonprofit really be the long-term solution for the Newport Folk Festival?

Nonprofit Arts Not Faring Well

According to a recently published study titled the National Arts Index, "nonprofit and commercial arts have grown in many respects over the last decade, they have continued to lose what the report labels "competitiveness" -- the overall ability to command a "market share" of the public's money and attention."

I do wonder if this competitiveness issue is not just specific to nonprofit arts but might not apply to the nonprofit sector as a whole.  And either way, what steps should be taken?

Thankfully the article has the following to offer: "The index shows a trend down that we don't want to see, but it does not show that people are less interested in the arts," Lynch said. The challenge, he and Cohen said, is for arts organizations to continue mastering new ways to reach the public, such as the growing move to beam live performances into cinemas."

I think the whole nonprofit sector might embrace this advice as well.

Nonprofit Board Chair Selection Criteria

Nonprofit Boards generally have one thing in common: they all have a board chair.

While we work on developing a better understanding of how best to develop the capacity of board chairs and even consider, as one of my associates offers, a
career track" we must also think about what elements contribute to making an effective chair and from that, what selection criteria is even used to pick the optimal board chair (as though boards are truly intentional about their selection of a chair beyond "they were willing to do it or no one else was willing".

Here's my list of criteria I have heard boards discuss openly or not so openly.  You be the judge about which criteria are objectively more likely to produce an effective candidate: willingness; availability; history within the org.; looks really good; is really smart; is passionate about the mission; has lots of experience at "x"; works really hard; has been here forever; relates to the exec really well; relates really well to the other board members; has money and/or friends with money.

Have you any other criteria and how would you rank these if they all fit on your list?  A second question: how should a prospective board member be prepared for a role as board chair?

Nonprofit Board Teaches But Does Not Practice Prudence

Prudence is the standard by which the IRS and financial institutions and most other observers of the nonprofit sector measure the performance of a nonprofit board.  Prudent behavior is best measured by comparison answering the question: "what would the majority of other boards or businesses do if faced with similar facts, resources and decisions".

Hence, how prudent has the Board of the Asian Art Museum of San Francisco been while it faced significant financial challenges.  You can be the judge based on the information provided in this Wall Street Journal.

I for one am not sure I have all the qualifications to judge but I do believe the Museum offers some good insights about what exactly prudence may look like. 

Nonprofits Awarded as Models for Effectiveness

So-called geniuses are not the only shining examples of creativity and effectiveness positioned by MacArthur Foundation grants.  Annually some other nonprofits are selected to receive finanical awards for having come up with solutions to some pretty big problems 

Check-out the Wall Street Journal for this year's examples of nonprofits that they believe have proven themselves effective in their problem solving.

Nonprofit Model for Preserving Broke (and Broken) Nonprofits

The Kennedy Center (DC) announced today that:

it will take over most operations of the Washington National Opera because of the music company's financial troubles. Under an affiliation agreement, the opera will remain a separate nonprofit with its own board of trustees. However, the Kennedy Center will take over its business, fundraising and marketing functions. The arrangement beginning July 1 ensures the opera's survival amid several years of financial shortfalls.  The Washington Post noted that the Center's effort with the Opera is similar to the National Symphony Orchestra, which has been a Kennedy Center affiliate since 1986.

I believe that he Kennedy Center's commitment to take-on this challenge may serve as a good model for institutions with similar challenges in other communities.  A well-healed organization may indeed find opportunity to lend its capacities, from back-room to fundraising, to other institutions, particularly if working within the same genres, reducing learning curves about the business and lowering the costs to reach similar if not identical audiences, and, possibly (probably in the Kennedy Center's case) increasing revenues for both institutions. 

The only pause here relates to the use of the "merger" word by the Post.  The rest of the article does not suggest this arrangment is a merger which is when  two organizations become one organization.  Indeed, the Board of the Opera and the organization's nonprofit status is being kept in place.  If anything, this is an acquisition by one nonprofit of another with the acquired becoming a subsidiary - still independent and responsible for productions but financially and operationally managed by the parent. 

In these times, all models for achieving survival must be considered.  The Kennedy Center gets credit for demonstrating some of the possibilities.

Nonprofit Without Checks-And-Balances

The Chicago Tribune Headline: CPS teacher charged with stealing nearly $100K from school & PTA.

I say, WHAT!  How on earth can one person manage to steal $56,000 over two years from a magnet school in addtion more than $40,000 from the school's Parent Teacher Association account?

Now I recognize I don't want a Board to mettle in day-to-day affairs but even from 30,000 macro feet, at least one board member should recognize that a pretty hefty sum of money has dissappeared or is disappearing.   And even if board members are not that good at math (makes me kind-of wonder how good the education really is), the board might have set some policy that included checks-and-balances to ensure thefts like this aren't possible.

This should help serve as a warning to all boards: you can prevent this type of activity.  At very minimum, a prudent person (the standard for a board) should take steps to figure out how to ensure this doesn't happen again.