Nonprofit Board Crisis

Nonprofit Board Conversations About Impact

Rick Moyers (Eugene & Agnes Meyer Foundation and a most wise individual who has been in philanthropy a long time) in today's Chronicle of Philanthropy newsletter wrote an epistle about nonprofit board's readiness for the next generation -- those who would fill the seats to be emptied by the current generation of board members. 

While agreeing with everything Mr Moyers states, I am particularly interested in what he says about what board's need to do next to prepare themselves for this incoming group of folks (assuming they indeed join these boards).  For me though it is Mr. Moyers' next to last sentence that should get all of our attention regardless of recruitment needs: "boards need to have more serious conversations about impact."  Again, this statement is not just about reforming for the future, it is about now -- boards really need to be talking about impact!  This is what it's all about.

 

Nonprofit Partnerships

Nonprofits doing together, aka partnering or collaborating, is not easy, but something grantmakers have been promoting for quite some time now.  While resources continue to tighten, nonprofit partnerships and collaborations are really a necessity, not a luxury, although egos can sometimes get in the way.

In my practice, I have come to believe that successful collaborations are a result of both staff and board work.  To support this belief, I found the following five questions framed in The Corporate Citizen (www.BCCorporateCitizenship.org) very helpful.  Even if it's once a year to just frame the interests and potential (aka, a planning and policy discussion) and then turned over to staff, I believe these questions can be quite helpful.

Does my team have the capabilities and resources to achieve our goals or do we need additional resources or capabilities?

Is there a logical partner who shares the same or related goals?

Do they have complementary assets and capabilities?

Are our cultures compatible?

Can you envision how you would work with a partner to amplify your existing resources and capabilities and maximize your ability to achieve your goals?

Nonprofit Board Diversity

Saturday last saw an interesting opinion piece in the Huffington Post about nonprofit board diversity.  I certainly don't see this topic come-up much in any media but lo and behold.  The author, a labor union grounded think-tank CEO, speaks in this piece about her own experience finding importance and value in having a board whose collective wisdom sprung from the divergent experiences and perspectives brought to the table, which added true value to her work. 

So, for these folks diversity in the seats mattered because the varying lens around the table informs action, perhaps different action, than what might otherwise transpire had all the folks been of one income, race, ethnicity, sexual orientation, etc.

However, I want also to note that the author described board meetings where active conversation took place.  Presumably, action, resulting from these conversations also took place.  My thought: diversity matters most when the conversations matter because they produce results for the organization; for the mission.

Nonprofit Board Large

How large is too large a nonprofit board?  It is very popular these days to suggest that a good or healthy board size is 15.  Not too many to clog up the works; not too few to limit discussion and ensure there are resources (wisdom, money) around the table to be helpful.  And of course a reminder: nonprofit boards are the surrogate owner for the public -- they are all about fiduciary duty, particularly care, to ensure the healthiness of a nonprofit on its journey to pursuing mission.

So when is large too large?  I want to offer that perhaps there is no "magic" number for what is just right.  I want to suggest that when a board's size gets in the way of executing strong fiduciary responsibility, it's too big or small.  When a disproportionate amount of an organization's resources are used to support a really large board, maybe it's too big. 

But what if an organization's culture says inclusiveness is essential and the more the merrier and there's a commitment to supporting a really large board?  Well, maybe it's ok.  The proof is of course in the results.  Is the organization aggressively pursuing mission?  Does the organization have lots of resources and continue to attract new followers and supporters throughouot the years?  And does the organization get results?

Let's ask the NRA?  According to Bloomberg Businessnews, the NRA has a 75 member board.  Whew, I want to say but after calming myself I say, hey, appears to be a commitment, plenty of followers and supporters and lots of results.  Hmm.

Ah, but there are a couple of wrinkles as well you might say.  For instance, 95% of the board is white and 87% is male.  On the other hand, one might argue, good boards are as diverse as their constituency. 

Nonprofit Board Policy Around Social Exploitation

An opinion expressed recently in the Chronicle of Philanthropy around social inequity (policy) and nonprofit's payment of inequitable salaries including the use of volunteers does have me thinking.   I recognize that volunteers (unpaid staff) play a large role in nonprofits and without them, many nonprofits would be very limited in their ability to provide services.  I also recognize that most folks think of the "pay" or benefits for volunteering as an intangible - some need is being satisfied, just not the need for cold, hard cash.  And of course, inequity around salaries does not begin and end with volunteers -- women, for instance, while catching up, are still below men in and between nonprofits.

This said, I believe this topic, both inequity in salaries and the use of unpaid labor are excellent conversations for board members.  This could conceivably be a huge, budget jarring conversation but one that begins with value clarity (yup, back to strategic planning or whenever values are identified and clarified).  Boards, as a nonprofit's surrogate owner should not escape this dilemma leaving it to the staff to resolve.  I believe this to be an ownership and policy issue needing review by every board.

Nonprofit Market Strategy: Stay Current

What should serve as an excellent reminder to all nonprofits about knowing your market audience and staying current (really one-and-the-same) is brought home in the following Governing Magazine Newsletter article about state employee charitable giving programs (you know, one of the lifebloods of United Ways):

Does your state have an employee charitable giving program? A number of states do -- and it seems like efforts to encourage public workers to make worthwhile donations are a good thing. But we’re wondering if any states have actually looked lately at the way these efforts work. Texas certainly hasn’t, according to a recent report from its Sunset Advisory Commission that recommends updating the legislation that applies to the State Employee Charitable Campaign (SECC).

The commission suggests removing charitable organizations with administrative costs higher than 25 percent of their revenue from the approved list. Up until now, if they had been on the list prior to 2003, they were grandfathered in.

In recommending a bundle of administrative changes, the report concluded by saying: "The Sunset Commission found that in the 18 years since SECC’s first campaign, the world of charitable giving has changed significantly, but SECC has not. SECC has continued to operate as it always has, with a paper-based donation system and an unwieldy administrative structure, with little attention given to the cost or effectiveness of its operations to ensure its continued success."

Nonprofit Board HR Committees

Does a nonprofit board need a Human Resource Committee?

I don't think so.  I think HR Committees are mostly a distraction, diverting the Board's attention from focusing on outcomes to focusing on micro and operational issues. 

First rule for a nonprofit board: it has only one employee -- the CEO, Executive Director, or President.

Although I do not think a Human Resource Committee is advisable, I do see a place for a Compensation Task Force, convening once or twice a year to ensure that the organization's executive salaries and benefits are competitive and in compliance with IRS regulations.

Also, someone should be providing oversight to the CEO.  I think the best "someone" to be the Board Chair and/or Executive Committee (yes, an Executive Committee but just for this purpose and for constructing board meeting agendas).

But after compensation and CEO oversight, who needs an HR Committee?  No one.

 

 

Nonprofit Board Size Can Matter

There's a scandal going on in Spain centered on a nonprofit that involves the Royal Family.  It appears that a nonprofit may have been used as a front for passing money to at least one of the five board members. 

All I know about the case is what I read in the New York Times, but what has my attention is the question of the nonprofit's board size: 5.  Now I have regularly been heard to say: shrink the board to the legal limit: 3.  I have said this particularly when the nonprofit looks more like the Executive is really the owner operator -- not financially profiting from the organization but clearly in-charge and ensuring that the nonprofit is pursuing mission.  The board -- nice support team but not bringing much to the table.

Now I know that the rule of thumb is that a nonprofit board should add value in a number of ways.  But when a board does not and it is clear that the CEO does, then shrinking the board, while ensuring that the rules of fiduciary oversight are being observed, might make sense.  Ah, but this gets us back to the Spanish nonprofit.

It appears that the five board members are not providing the full fiduciary oversight that could have prevented the abuse.  But, is it all about the number of members or the composition?  I might propose it's about the composition while recognizing that a larger board might have been able to prevent abuse.

Nonprofit Board Effectiveness

I've been thinking a lot about ways to guide a nonprofit board working to improve its effectiveness.  But rather than trying to be prescriptive, I've developed the following questions which could be used in a brief annual training, during orientations or at an annual retreat.

1. Can anyone describe the board’s “duty of care”? 
2. How would you rate the board’s fulfillment of this duty?
3. Have you as a board, collectively read the bylaws?  Is there any part of the bylaws
   anyone thinks is particularly important or helpful?
4. Do members annually sign a conflict of interest statement?
5. When did the board complete it’s most recent strategic plan?
6. What would any of you describe as the organization's most significant results?
7. Besides the treasurer, can any of you say one sentence that best describes current financial condition and, what is your source of information?
8. What is currently the most effective Board committee and why do you think so?
9. What is the best or most effective part of board meetings?
10. Who is currently responsible for recruitment, orientation, training and evaluation of the board – individually and collectively?  How’s this going?
11. How many staff does the Board of Directors have?

Nonprofit Board Pursues Mission

I very much appreciate a nonprofit board that does everything it can to achieve its mission.  The Allied Veterans of the World board is one such group that is indeed pursuing a mission of raising funds for charity.

Ah, but there are wrinkles in the story.  It turns out that Allied Veterans has steered wrong on at least four counts beginning with filing false (or incorrect?) tax returns that suggest that the organization has not been raising much money.  Next, it's pay-out of reported income does not meet common standards (just 2% of income).  And finally and most importantly, the source of its funds was illegal gambling, which, according to the Wall Street Journal, was happening on a large scale.  "Over a four-year period, the gambling operation allegedly brought in about $300 million." 

But wait, there's more, some members of the "board" and co-conspirators took more than $90 million themselves.  Apparently no one told them the role of a board member was to act as the surrogate owner on behalf of the public interest, not their own private interest.

Sadly, except for a very effective fundraising source, this is not the kind of nonprofit, nor board, I believe we want to hold-up as something to emulate.  Still, an interesting story.