Nonprofit Board Crisis

Nonprofit Board Chair & CEO

Today's blog is not about the relationship between the Board Chair and the CEO.  No, it's about the Board Chair as CEO.  Yes, you've read this correctly.  While most consultants will tell you that board members should not be operational and instead should be focused singularly on governing (fiduciary duties of care, loyalty and obedience and particularly care which includes planning, policy setting and evaluation).  

But I would like to wager that far more nonprofits, particularly those without budgets or that much money at all and frequently without paid staff, disproportionately focus their energies and time and discussions on operational activities -- planning these, managing them and in many cases, doing them.  And it is in these forums (likely the infancy and maybe juvenile stages of development, that the Board Chair, often a founder, will be wearing the hat of Board Chair and hat of CEO.  And other board members will be heavily engaged in the work of the organization as well and some of them will be managers of other volunteers.

I believe this behavior counter to all the "best" board advice, is just fine until the organization is able to raise the funds to "buy" staff.  But in the meantime, one sometimes lost focus in this stage of development is the replacement of the Chair when they determine their time is up -- effectively, succession planning.  I propose that succession planning is particularly difficult of the Chair with these duties.  With this much involvment, the organization is their "baby" and there's little if any thought about what's next for them.  

But great leaders think about succession -- emergency (hit by the bus syndrome) and planned departure.  They do this because they recognize that the baby they birthed must go on without them -- someday.

If you are a Board Chair and the CEO of your nonprofit, please share your experience and particularly what if any succession planning (for your position) you have developed.  Others may just want to share what it's like to serve as a board without staff and how your duties changed once staff were in place, that is, IF duties changed when staff were brought on board.

 

 

Nonprofit Board Role Confusion

The most commonly agreed upon thinking about nonprofit boards is that they do not, when they have put staff in place, have the role, responsibility or authority to make day-to-day decisions or, except as volunteers reporting to the Exec/CEO.

It appears that role confusion or conflict is just one of the many issues going on at the Chesco SPCA shelter (located in Pennsylvania).  Now, authority and role is one thing but I can honestly say in my 35 years as a governance consultant I honestly can't think of a time I've seen the Exec call the police to remove two board members from a nonprofit property.  But it happened here according to the Philadelphia Inquirer.

And to top it off, the board itself doesn't wholly agree on what the way the shelter should be operated (policies and procedures).  One might offer that there is a lack of confidence in management which has developed these policies and procedures.  But for the moment, there is not as much a discussion about the role of the ED (at least not published in the press) as there is about which roles board members can play: 

"Some think board members are to govern and set policy and not get involved in operations of the shelter," said Pat Biswanger, a board member from Delaware County, while others "think you can go into the shelter and do what you want to do."

For sure, this board needs to get to an agreement about where members' authority begins and ends and what other roles members can play and who has authority when they are in non-governing roles in particular.  But I also wonder about how it sits with members having the ED call in the cops and cart away board members.  Does an ED really have the authority, in the name of mission I presume, to take this step?

Whew!!!

Nonprofit Mission Question

The Denver Art Museum bet the Seattle Art Museum on the outcome of the Super Bowl.  Whichever team won, the losing team's museum would lend the winning team's museum a piece of art.

It is currently very fashionable to encourage partnerships, yes, even mergers, between nonprofits seeking to grow vertically or horizontally or just achieve new efficiencies or of course, ensure survival.  Does an exchanges like this exercise between the two museums qualify as a "partnership"?  And in what way does this exercise promote mission?  I suppose that more folks get to see a work of art that they certainly might have not otherwise viewed and that, in the end promotes mission.  And, finally, who actually decides that this type of exercise is "ok"?  Is it strategic enough to require board-level conversation or is this really an executive decision?  

I have many more questions than answers and I wonder now whether the respective boards don't have similar questions given what has now become a public event.

Nonprofit Leadership Succession

Following Geoffrey Canada's announcement that he is stepping away from the operations-side of the Harlem Children's Zone, the Chronicle of Philanthropy offers in its February 27, 2014 edition additional insights about succession planning for long-term (20 years in Mr. Canada's case).  My takeaways:

1. Mr. Canada and his board have been working on this plan for nearly 3 years;

2. Mr. Canada played a significant role in identifying and "grooming" the selected replacement, Anne Williams-Isom; and,

3. Mr. Canada will be staying on in a different capacity remaining committed to ensuring Ms. Williams-Isom is recognized as the individual now in the leadership role (which I imagine will require significant work by Mr. Canada with the board, the employees, donors, and the Zone's customers).

For nonprofit CEOs and boards considering succession planning (and, uh, shouldn't everyone be?), these are points to consider.

 

Nonprofit Public Interest

A dispute between members of the Martin Luther King family is raising a variety of questions over the nature of what is public and what is private.  In question is what should become of one of Doctor King's bibles (the one used to swear-in President Obama) and his nobel prize.  

At this point in time, both items are in the possession of family members but two family members want to sell these items to raise money "to keep the family’s nonprofit organization, the Martin Luther King, Jr. Center for Nonviolent Change, financially viable."  It's actually not unusual for institutions to dispose of some items as means to raise money to pursue mission.  Which items is I am sure a cause for great discussion by the nonprofit board.  Or, if thinking strategic, what policies guide the disposal of items is surely a cause for great discussion.  

Interestingly enough, at this moment the conversation in the courts centers on who's interest in the nobel prize and bible effectively "ranks" highest.  Family members argue that their interest comes first.  Others argue that because of the importance of Doctor King, items owned by him are close to being "public".  In the case of selling items to sustain a nonprofit, the competing demands become clear: because a nonprofit is established for a public benefit and on the one hand, sustainability to ensure that benefit is achieved is indeed an important concern for the nonprofit board.  At the same time, what is "owned" by the nonprofit on behalf of the public and pursuit of mission is of equal importance (see the Detroit situation for instance).   

This is not an easy case to resolve.  Go here to read the complete Christian Science Monitor story.

Nonprofit Boards Caliber

An editorial by THE Arts & Leisure editor of the Wall Street Journal regarding Monday's news about the Corcoran essentially selling-off itself raises the question about the caliber of todays (2014) trustees over back in the 1920s and the negative impact this "lower" caliber is and will continue to have on the art world in particular.

The answer to why this is happening can be found in "The Whitney Women and the Museum They Made," the 1999 memoir by Flora Miller Biddle, granddaughter of Gertrude Vanderbilt Whitney, founder of the Whitney Museum of American Art. The book traces Biddle's involvement with the museum from 1958, when she was in her late 20s, to 1990—years in which she witnessed a dramatic change in the boardroom. In the 1960s, she writes, trustees were "idealistic and committed to public service" and possessed "a genuine love of art and faith in the museum." By the late 1970s and into the 1980s a new breed had emerged, one that "wanted to use the museum and their contacts there for social and business purposes."

Not everyone on a board today is an opportunist, of course; many are serious, dedicated supporters and benefactors. But it's impossible to ignore the shift away from boards populated by individuals who understand the values of the institution and the discipline. One now-retired museum director once told me that one of the hardest parts of his job was teaching new trustees from Wall Street that a museum is not a business in the sense that they understand the term.

I don't know that the same assessment is specifically applicable to the rest of the nonprofit sector but if correct, there's is much to be concerned about.  And I would propose that passion is not enough and will take from the line I used in a previous blog that governing is not intuitive.  Perhaps if it were the specific needs of the type of directors described above would not be dominant.

 

Nonprofit Board Makes Big Deal

Today the Board of the Corcoran Museum made a big deal.  The Board, according to the Wall Street Journal, "reached a preliminary agreement with the National Gallery of Art and George Washington University to take stewardship of its art collection, college and landmark Washington, D.C. building."

The museum's future had been in question since the board announced in 2012 that it was considering selling the building amid a needed $100 million renovation. After an outcry, Corcoran officials began looking for partner institutions that could help the gallery and its college remain in its original home.Under the agreement, George Washington University would take ownership of the building and pay for the renovation. The college of art and design would become part of George Washington University. The National Gallery would present exhibitions of modern and contemporary art in the building under the name Corcoran Contemporary, National Gallery of Art. It would also show a selection of works from the Corcoran collection in a Corcoran Legacy Gallery. The galleries would be open to the public for free.  The Corcoran will continue as a nonprofit with a programming role in conjunction with the university and the National Gallery and some but not all staff would be transferred to George Washington.

So, even the really big folks are seizing opportunities.  And while it appears there are economies of scale and perhaps new efficiencies to be gained for all parties, it also appears that the Board took advantage of the fact that it is currently operating with an interim director.  I might guess that the same opportunity might not have been available under its previous director.  And I'm sure there are many more details to work out to create a win:win:win situation.

 

Nonprofit Board Addresses Having Done Serious Harm

What do you do when your organization's president and other top administrators appear to have failed to significantly develop and institute polices and procedures that would fully protect the organization from harm and harming?  Well, first you release yourself from any obligations and connections to those that failed.  You also start developing and putting into place the means to ensure this does not happen going forward.  And finally, you look to put into place individuals you, those you serve, and the public can have confidence that going forward, all will be well.

And thus, the Penn State board begins a new chapter having followed the above route and Monday announced the appointment of its new President .  For those harmed, the University Board may always be in debt.  For the future, now's the time to ensure that no new harm will occur under its or anyone's watch.

Nonprofit Boards As Teams

It is popularly believed that when governing board members work collectively they will be more effective -- essentially, the sum is greater than the parts.  In a Conference Board Report we learn from Solas Charas that indeed, this premise may be indeed be sound and inform how to manage boards.

First, allow me to recognize that the Conference Board is principally focused on for-profit corporations so that much of the language in the report speaks to a role of boards focused on increasing shareholder/economic value and profits.  Allow that substituting "mission" for these references works just fine for applying what is presented to nonprofits.

Mr. Charas examined four elements in the board performance/financial outcomes relationship: (1) the qualifications of individual directors, (2) board team dynamics, (3) collective board outcomes, and (4) measurable firm performance with the intent to "reveal and confirm" two relationships: boards that function as a highlyndynamic team generate more economic value for their organizations than those that do not and that the impact of the collective board is greater than that of any individual
director on financial performance.

So here's some takeaways:

"Therefore, directors who are predisposed to effective team work, or demonstrate greater behavioral capital, are more likely to contribute to high governance-rated boards."  In other words, screening for "team work" disposition and/or experience matters if a board values working as a team.  Charas calls this team-leaning disposition and/or experience cultural intelligence (QC).  Charas considers cultural intelligence a part of behavioral capital, one of three "board-ready characteristics in addition to social capital and professional capital.  The premise here is that when a board is seeking new members it should look at candidates to posess these characteristics.

Charas developed a very complex and understandable portrait of the attributes of board members that makes for strong foundational and effective team dynamics. Understaning this is essential to creating an environment and recruiting members who will function effectively as a team.  Deeper explanation is lengthy for a blog but well worth a look.

Charas further set out to link firm performance with what the results of board work looking specifically at the board's ability to perform its "control and service tasks".   He looked at board skills, innovation and quality to "reflect the critical components of board control and service tasks as reported by board directors.  In addition to measuring what boards do, Charas also "measured the degree to which boards believed they could achieve their goals, their “self-efficacy.” Team self-efficacy
is the “collective perceived capability of working together to achieve tasks which has been shown to be perhaps thenmost critical aspect of team success. Teams with high levels of self-efficacy “set higher goals, develop strategies to achieve their goals, and persist in the face of setbacks.”

Finally, Charas' research "measured a firm’s profitability relative tothe average of a size-adjusted, comparable industry profit margin index. This relative measure allowed us to determine whether the profitability of the participant’s company over- or underperformed the industry averageand by how much."  Admitedly, this last area would prove challenging to assess for nonprofits.  However, nonprofits could compare with sustainability capacities within their respecitve industry and comparable sized nonprofits.  Mission achievement levels would be illuminating as well but we may be aways-off toward being able to complete this type of assessment.

Anyway, great study with appreciation to the Conference Board for sharing.  

 

 

 

Nonprofit Sustainability

A recent New York Times article began with the article's title: It May Be A Nonprofit Theater but the Tickets Look For-Profit.

The article and interviews from New York's nonprofit theaters reps emphasized that theaters cannot afford to annually lose money and must use market prices to stay in business.  New York's nonprofit theaters identify themselves as the incubators for new productions and new artists. 

Of course, a nonprofit cannot annually lose money.  Nonprofit sustainability demands that a number of strategies be employed.  That number often looks like philanthropy, fees and the use of interest from savings (from either philanthropy or when days were luctrative).  Of course, raising prices when those prices are significantly below market can make sense.  But then comes the market/mission question.  The market question: will audiences pay market prices for yet untested productions?  The mission question: does the theater need to change its offerings to something more tested or commercially exciting and emphasize less introducing untested productions and artists?

Balancing mission and market, particularly for social enterprises like nonprofit theaters, is the challenge for the nonprofit board to resolve.  Indeed, the board must answer the question: if may be nonprofit but if it charges market prices and doesn't make mission-offerings, is it nonprofit?  And, from the public's perspective, why offer a nonprofit exemption if the offerings are not mission-specific.

Of course, the answers could say: do both to be sustainable.