Nonprofit Board Crisis

Nonprofit Board Culture

Nonprofits and nonprofit boards in particular have a culture -- a way they operate that is more often than not one of those "you know it when you see it" -- essentially informal far more than formal (written and decided upon by the body).

Nonprofit cultures can be very dominant defining how members should address each other and can easily close off or exclude new board members or those who some think aren't "proper". 

Cultures are driven by values.  I think this piece from the Conference Board Review, "What Do You Value" by Kevin and Jackie Freiberg with Dain Dunston, is very helpful in both describing culture and its importance.

Corporate culture is an expression of the company's personality and genetic makeup--its DNA.  Culture reflects the rites, rituals, traditions and values that both describe and instruct how you handle big ideas, treat big thinkers, take extraordinary risks, and respond to dramatic change.  Culture isn't something that is peripheral or collateral to the business-it's your very way of doing business.  Thus, culture touches everything, influences everything, and affects everything.

Bottom line: Culture matters and not as an obstacle to but as a vehicle for achieving mission.

Nonprofit Board Meeting Attendance: Does It Really Matter?

The Iowa Governor can help every nonprofit board member answer the question: do I really need to attend all the board meetings?

Check out this article. 

Nonprofit CEO Pay

One of the most common complaints about nonprofits is CEO pay.  These complaints are not always, in my opinion, based on something rationale, but it is certainly common for somebody or the press to holler that x nonprofit CEO is being paid "too much".

Perhaps a wider distribution of the following article would be helpful, if not sobering to remind all that the majority of nonprofit CEO's are, at best, paid reasonably and more likely, actually underpaid for the jobs they do.

Les Moonves Making $69 Million Shows How Boards Manipulate Data   CBS Corp. (CBS) directors decided to give Chief Executive Officer Leslie Moonves a $69.9 million pay package last year after assessing the competitive market for senior executive talent. The board defined that market as pay for CEOs at companies that are on average more than twice as large as CBS, and many in businesses far afield from media.   Such lopsided comparisons aren’t unusual at U.S. corporations. To justify how much they offer CEOs, board compensation committees measure against the pay of CEOs at other companies, often picking larger firms from different industries that pay more and don’t consider themselves rivals for management prospects.   “There is pretty straightforward evidence of cherry- picking, and it’s pervasive,” said Thomas DiPrete, a sociologist at Columbia University who has studied the use of self-selected peers to set CEO pay.   The size gap between CBS and its peers, for instance, is one of the widest in the Standard & Poor’s 500 Index, according to data compiled by Bloomberg and more than 10,000 peer relationships supplied by Equilar, a company that sells compensation data. The data reveal companies with traits that researchers say are associated with bias: those that set pay against peers that are much larger, in different industries, or that rarely cite the subject company in return.   Peer Groups In the 1980s and 1990s, when increasing executive compensation created controversy -- it is once again a contentious issue in this election year -- pay consultants sold many companies on the practice of benchmarking against peers. The idea was to compare compensation with similar-size companies in similar industries as a way of setting a fair compensation package.   The choice of peers can itself be arbitrary. Four teams of academic researchers have found evidence of bias in the peer groups that U.S. companies use to set pay. None identified specific companies. A fifth study concluded the process wasn’t biased. Intentionally picking better-paid peers “has been a big part of the ratcheting up of executive pay,” said Bill George, a Harvard Business School governance professor who’s a director at Exxon Mobil Corp. and Goldman Sachs Group Inc. and former CEO of Medtronic Inc.   The adjusted average compensation of CEOs in the S&P 500 (SPX) rose to $12.9 million in 2011, or 380 times the average worker’s pay, up from $625,000, or 42 times the average worker’s pay, in 1980, the AFL-CIO said in a report released this month.   Incentives Many directors “have incentives to make compensation decisions that are more favorable to executives” than to shareholders, said Lucian Bebchuk, a Harvard Law School professor who has researched CEO pay. Directors may not want to risk upsetting their board position or their relationship with a CEO, he said. “There’s a significant body of research indicating that boards don’t deal with executives completely at arm’s length,” he said.   Most companies vary pay based on performance yet still use competitive data to determine the size of target compensation, set at the beginning of a company’s fiscal year. This includes salary, a bonus whose final amount varies based on annual performance, and an award of stock or options. New York-based CBS said in a statement that benchmarking is “just one data point” it uses when setting CEO pay and it emphasizes pay that varies based on performance.   CBS Comparisons Directors at CBS measure pay for Moonves against CEOs at five other media companies, all of them larger by market value and all but one larger by sales. Directors also look at bigger non-media companies, such as International Business Machines Corp. (IBM) and General Electric Co. GE had 11 times CBS’s sales, based on the latest figures available, while IBM had 14 times CBS’s market value. Neither company sets its pay by reference to CBS. GE’s CEO Jeffrey Immelt had total compensation of $21.6 million last year and IBM’s Sam Palmisano, who stepped down as CEO at the end of 2011, had compensation of $31.8 million that year. -More: http://tiny.cc/e0qddw   Sourced from www.bloombergnews.net 04-26-12 To contact the reporters on this story: Zachary R. Mider in New York at [email protected]; Jeff Green in Southfield, Michigan at [email protected] To contact the editor responsible for this story: Carol Hymowitz at [email protected]

Nonprofit Hospital Collection Agency

A nonprofit hospital in Minnesota hired an aggressive collections agency known to even collect before services are delivered.  The San Francisco Gate story made a point of noting that hospitals, or at least nonprofit hospitals, are obliged to give care regardless of ability to pay.  Hmm to that. 

But, is it unfair for a nonprofit to put income generation ahead of service delivery?  That of course is the question introduced in the article, and I for one absolutely endorse the concept that quality health care should be accessible to everyone no matter their ability to pay, but until this reality is law, what should a nonprofit hospital do?  Should it not be guided by its values and balance these two competing demands?  What's your thought?

Nonprofit Boards: New Source of Members

Today's Washington Post has an article on the potential of baby boomers as the next source of volunteers.  It appears though, that baby boomers have not really been tapped and this is of course the task for those seeking board members.

First some numbers.  There are an estimated 77 million baby boomers.  Next, "About a third of boomers, ages 48 to 66 years, tend to gravitate toward opportunities with a religious underpinning, followed by volunteer opportunities in education, 22 percent; social service, 14 percent; and hospitals, 8 percent."  But, volunteering by this group is on the decline.

This means that for those of you seeking new board members, you have to get on the move AND you need to really hone your marketing message to tap into what baby boomers most value.

Seems like an opportunity and perhaps a lot of work.

Nonprofit Board and Getting to Know New Members

Serving on a nonprofit board has many challenges for the unseasoned board member.  One of these challenges I beleive is getting to know who exactly everyone is.  Now you might think that in a board with only 9 people, this shouldn't be so hard but what about a board with 12 or 15 or even 21?

A customer of mine, and one who was pretty seasoned but new to this particular board, was reflecting on her lack of familiarity with who exactly were the other members.  Her board only meets every other month, and yes, they had an orientation but really, how exactly is she supposed to remember everyone?

So, here are two ideas:

First, what about a playbill?  Yup, just like in the theatre or sports event.  A little booklet with the names of each member, a picture and some specs (e.g. graduate of x place, business person or some other professional, maybe a hobby, and maybe some  expressions of what the member is passionate pertinant to the nonprofit.

Second, I see this regularly but mostly by really big nonprofits -- name "tents" which have the name of every member to be picked-up at the beginning of the meeting and placed in front of the member.

Have you any ideas about how to help board members recognize their fellow board members?  Please share.

 

Nonprofit Is Not Always THE Answer

In today's New York Times I found at least two stories about for-profit enterprises "going" nonprofit and a separate story about the next batch of nonprofits who face losing their tax-exempt status for simply failing to comply with the IRS rule about annually filing.

Regarding the conversion from for-profit to nonprofit I ask again and again and again, what about being nonprofit makes an enterprise more sustainable than a for-profit?  The generally accepted paradigm is that a nonprofit fills the void left by a lack of incentives for for-profit (which must be the case) and the lack of demand by the public for government commitment.

So, the Mineolla Theatre declares it can't make it as a for-profit -- basically, it couldn't generate enough revenue to accomodate its costs.  As a business, if there's simply not the demand for your goods or services, you find other goods or services to offer or consolidate with another business or go out of business.  But become a nonprofit?

This just doesn't set well with me.  On the other hand -- if there are donors to be found -- even among the way to many competing demands for donors -- then so be it.  Either way, for-profit or nonprofit, the consumer (aka donor) still determines success.

Nonprofit Board Members: When they fail their fiduciary duties

How difficult is it for a nonprofit board to remove an underperforming member?  And, how difficult is it for a nonprofit board to remove a member who some suspect has been personally profiting from the organization or has been taking other actions which are harmful to the organization?  And, finally, does anyone really care?

Based on correspondence I've been recently receiving, removing a board member is not easy and few if any other members are even clear about the steps.  And, few even know that the first resource for understanding what action is possible is likely the by-laws (e.g. board member removal clause, whistleblower clause). 

Of course the simplist method for removal is to not provide a second term to a member, assuming that members have term limits.  The Governance Committee should annually review all member's performance and determine if particular members should not be place on the slate for a second term.  And yes, there should be conversations and a member who is identified as "questionable" should be involved in understanding the situation and have a role in determining what next.

But what if a situation demands more immediate reaction?  I would first direct a board member with suspiscions and hopefully evidence to the Governance Committee or if not, an Executive Committee for an off-line disussion which should then start a ball rolling to assess what next.  Whistleblowing policies can help if a member is anxious about taking such action.

Whatever, a member who is not fulfilling their fiduciary duty and worse, is personally gaining from or doing harm to a nonprofit should be stopped immediately.  I believe it the failing of those who learn of this to not take action.

Nonprofit Could be Results Focused and Mission Driven

Imagine you are a nonprofit and you have lots of resources, and you get paid up-front for your services, and the only result you have to demonstrate and in many ways, the only deliverable you have to produce, is a diploma.  Yup, that's pretty much the way it is for higher education.

But now imagine you are the same institution with all the same conditions but you don't get paid until your student gets a job.  Would this change the way you do business; the nature of your deliverables; the relationship with your customer?  Perhaps so and I would suggest, positively.

Some folks at University of California have organized a group called Fix UC with this agenda in mind -- not specifically the results agenda but equally important, the agenda to change when paying your tuition would begin.  These folks suggest that the "when" would be when the graduate gets employment.

Lots to think about when this proposal and I believe definitely introduces the idea that Universities would need to be far more results focused than they are today.  And I for one believe being results focused in part and parcel of what being an effective nonprofit means. 

To learn more about check-out Fix UC or the April 2012 Governing Magazine article titled: Tuition? Bill me later.

Nonprofit Traditional Fundraising Methods Challenged

The story about the kid in LA who constructed an arcade in his dad's garage has many buzzing about a new use of social media: crowd-funding.  Since the story broke following a filmaker's capture of the story, more than $150K has been contributed to the kid's college fund.

I would opine that crowd-funding is another form of American Idol philanthropy.  American Idol philanthropy, often corporate organized (e.g. the pepsi challenge grant program), is dependent on the "what strikes me at the moment" disposition of a random albeit somewhat homogenous group, that is, that portion of the population which is watching or surfing or reading.  Crowd-funding is not much different from this approach to fundraising only way less organized, or at least that's what it appears to be.

To date, effective use of social media for fundraising purposes has been relatively well structured, targeted and appropriately "selling" what is believed to be in the "target's" interest.  This is as it should be.  The question for crowd-funding as a method: can this too be highly organized?  The answer: why not?

Here's a Christian Science Monitor article that talks about this "event" and the so-what.