Nonprofit Board Crisis

NonprofitBoard Thankfullness? #NonprofitBoards

The following annotated-by-me article in the Tennessee Democrat raises some interesting questions about expectations of nonprofit boards.  I don't totally agree on all but this makes for good conversation with your board.

 

Things to be thankful for this Thanksgiving and beyond | Notes on Nonprofits

Alyce Lee Stansbury

Notes on Nonprofits

As we celebrate Thanksgiving and the holiday season, I am happy to share one of my favorite columns of the year. I am thankful for: 

• Volunteers who serve on nonprofit boards and when their term is up, make recruiting a replacement one of their highest priorities. This might be a good strategy as long as the recruiting board member goes outside their own networks AND uses criteria established by a Governance Committee/Board
• Boards that remember their Executive Director during the holidays with a gift or other remembrance. While the ED supports their staff, the board supports the ED.  Really?  I served for 15 years as an exec and never received nor did I expect or desire a gift or other remembrance.  I was happy to have my position and a solid annual performance review.
• Board members who read the agenda in advance, arrive on time, are fully engaged during the meeting in person or on Zoom, and follow through on their commitments.  Don't forget to add a Board Chair that was thoughtful in preparing a stimulating agenda and ran a stimulating meeting.
• Boards who are writing succession plans, taking steps to grow operating reserves, and establishing endowments to support a smooth leadership transition and ensure future services. 
• Boards of Directors and funders who support sabbaticals for their chief executive. Hm - ok?

 

Notes on Nonprofits is produced by Alyce Lee Stansbury, CFRE, President of Stansbury Consulting LLC. The best part of writing this column is responding to your questions and feedback so please send them to [email protected].

Nonprofit Board versus Org. Values #NonprofitBoards

Is it possible for nonprofit core values (generally developed by the board and reviewed oftentimes during a strategic planning process, might conflict with the board's values?  This is the question being asked by employees at a youth-serving nonprofit in San Antonio.  The article says the rest.

Workers at San Antonio nonprofit SAY Sí demand the group's board cut ties with anti-union law firm

Employees also asked the board to show proof that it didn't hire the firm with donations intended to fund programs and community events.

By Karly Williams on Fri, Nov 25, 2022 at 9:09 am

Attendees watch a demonstration at SAY Sí's recent Dia de los Muertitos event.

Workers vying to unionize at San Antonio arts and youth-development nonprofit SAY Sí have demanded that the group’s board cut ties with Ogletree Deakins, a high-profile law firm now representing management.

The employees made the demand via a Nov. 11 letter in which they also asked the board to reveal how it paid for representation from the South Carolina-based legal powerhouse, primarily known for fighting union organizing efforts.

The move comes as both sides await the results of three weeks of National Labor Relations Board hearings. Workers at the nonprofit formally petitioned the NLRB to seek union representation Oct. 4. Hearings concluded Nov. 15.

“[Ogletree Deakins] has been connected to multiple instances directly counter to the mission and values of SAY Sí, including cases that seem to cover racist immigration policies, voter suppression and union busting,” the workers’ letter reads. "Considering this firm's history, it is obvious that seeking their representation does not align with SAY Si's core values, and suggests a departure of Board Leadership from those same values."

Neither Ogletree Deakins nor representatives of SAY Si’s board returned the Current’s request for comment by press time.

In their letter, workers said the board must explain how it's funding representation by Ogletree Deakins, named the world's 99th-highest grossing law firm in rankings by law.com.

The firm helped Donald Trump fight unionizing efforts at his since-shuttered Atlantic City casino, and it also aided Amazon.com in its effort to shut down a labor campaign by its delivery drivers, according to media reports

"The SAY Sí Union requests proof that money donated from SAY Sí supporters and community members meant for programs and community events is not being used to suppress the rights of the people who carry out the mission and values of the organization," the workers' letter said.

St. Mary’s University School of Law ProfessorJohn W. Teeter Jr. told the Current that it’s common for employers facing organizing efforts to hire firms with national expertise in labor law. Many attempt to shut down the activity because the NLRB's remedies are "weak and ineffectual," he added.

Nonprofit Fails #NonprofitBoards

The following Discourse article is interesting most not because of the solutions but descriptions of failed nonprofits. I believe that fails offer more insight into what not to do than necessarily the sage advice from folks like me, your neighborhood org. development consultant.  That said, wisdom does come from many sources so please take a look at the fails and the advice.

Explainer: How to get non-profit governance back on track

When local non-profits fall apart, the whole community suffers. Executive directors and board members share how to support non-profit governance long term.

BY RAE-ANNE GUENTHER ● VANCOUVER ISLAND ● NOVEMBER 24, 2022

Over the years in Nanaimo, a handful of non-profits have devolved into various levels of dysfunction. Although this is not uncommon within non-profits or businesses, the impact a governance crisis can have on an organization operations is immense, leaving devastating gaps in support for the community. 

One recent example is the collapse of the Society for Equity, Inclusion and Advocacy (SEIA) Society, which was formed through a merger of two long-standing service providers, Nanaimo Citizens Advocacy and the Nanaimo Women’s Centre. The organization provided vital services for community members impacted by systemic barriers, including hosting the only warming centre in Nanaimo. 

In 2021, the non-profit society closed its doors after publicly announcing an alleged theft from within the organization. SEIA is now permanently shut down and all clients are being directed to other organizations, according to an archive off its website, last updated in December 2021.

Local non-profit Literacy Central Vancouver Island’s (LCVI) faced its own challenges in 2018 when executive director Rebecca Kirk challenged her dismissal in court. According to public court records, the former leader’s “deliberate actions significantly impaired the ability of the Board to function and carry out its obligations.” The aftermath of this conflict created mistrust and a lack of communication within the organization.

Over the last few years, Haven Society, which supports women and families, has experienced a breakdown in communication and transparency between staff and the board of directors, causing high employee turnover and disengagement, according to past employees and other sources close to the organization. 

“Boards are there to support the frontline workers who are there to support the people they’re serving,” says K. Louise Vincent, who serves as a consultant to review non-profit governance. “If the board gets derailed or starts serving the board members, rather than the clientele or the staff, the community suffers.”

Although these organizations have experienced unique challenges, experts say a common fault is a lack of transparency between the board, staff and the community it serves.

The Discourse spoke with executive directors and past employees of local organizations to learn more about the common forms of non-profit governance breakdown and ways to improve a society’s long-term success.

How are non-profits governed?

Within every non-profit organization is an executive director and board of directors ensuring the society is serving its community according to its mandate and values. 

More than 30,000 societies in British Columbia are governed by the Societies Act, which was introduced in 2016. 

The regulations outline everything from annual general meetings to bylaws to reporting minutes. In 2021, the act was amended to create greater clarity as a response to feedback received about the initial act. 

Although every non-profit follows the laws of the Societies Act, the rules are very general. This may be partly due to the range in size and type of work non-profits do. Boards have the freedom to shape how an organization operates, which can create prosperity or open them up to conflict. 

There are two types of boards; a working board and a governance board. A governance board is the most common among non-profits in Nanaimo. Its function is to ensure a society’s bylaws and mandates are being followed while not being involved in operations.  I"M Going to weigh-in on this point.  The work of a board IS governance.  The voluntary work, doing the work of the organization, is just that, voluntary and not governing.  In early stage of development organizations, the board often pays more attention to its voluntary role than its governance role and hence I believe what some refer to as the working board.  BIG DIFFERENCE!

Build a diverse board of directors

A governance board is comprised of an executive director and elected board of directors. Every director must be a member of the organization and usually serves in a volunteer capacity. MEMBER of the Board - IF it's a membership organization then by-laws generally also require that the board be composed of members.  MOST nonprofits are not membership organizations.

The executive director is a paid position. They are usually hired by an interview panel of staff and board members. The executive director reports to staff and the board and can be fired by the organization. Meanwhile, the board of directors do not have a “boss.”      

“When you have a governance board that starts to step into operations, shuts down the executive director, and not consulting the staff in terms of what the actual best practices are, that’s when you’re going to build a dictatorship with absolutely no accountability,” says Deborah Hollins, executive of the Nanaimo Family Life Association (NFLA). “The executive director is accountable to staff and the board, but the board of directors are not accountable to anyone.” Spoken like a true exec :)

Purposefully selecting a board of directors can be one of the first steps to ensuring a functional governance system in a society. “Non-profits have to really be diligent in how they train their board, how they relate to their boards, and how they choose their board of directors,” says Hollins.  While I very much agree, this statement is coming from the exec - kind-of ironic.

Nanaimo Family Life Association, which supports individuals and families in all stages of life in accessing counselling, employment skills and housing, models a good practice for recruiting members by advertising what skills they are looking for in a candidate instead of a general callout for board members. Yes, a good practice particularly in identifying what are the desired skills.

“What we’re trying to do on our board of directors is to look for diverse experience,” says Hollins. “We look for people with lived experience and we look for people from different backgrounds.” 

Candidates go through a series of interviews to learn about the role and if they would be a good fit in the organization, Hollins explains. “For people we want to spend more time getting to know, we might ask him or her to come on to a committee for a year and try that role out first.” Also a good practice although matching fit to the board may actually result in limiting diversity.

At the Tillicum Lelum Friendship Centre, executive director Grace Elliott-Nielsen says the organization purposefully has a youth and an elder sit on their board. “The elders are beneficial because they have a lot of wisdom, culture, tradition and history. It’s important for the rest of the world to know that history.”

The Societies Act states that while a director on a board must be 18 years old, they can be 16 or 17 in special circumstances.

 “A young person brings forward ideas of what is the greatest need in the community right now for youth,” she explains. 

Often these youth board members will go on to work in education or social services later in life.  Elliott-Nielsen recalls one past youth board member who went on to serve on the national board for the Friendship Centres across Canada.

Ensure committees work for the whole   

The board of directors should create at least three committees to ensure accountability, says Samantha Letourneau, former executive director of Literacy Central Vancouver Island (LVCI). 

“Societies technically should have a governance committee, a human resources committee and a finance committee. Those three committees are crucial for the success of a society and to make sure that the society is equitable and respectful of who is working there,” she says. I am unclear as to why a human resource committee.  There is an occasional need to review HR policies and there is a need to do an annual exec performance review.  A standing committee is unnecessary in my opinion.

Implementing a human resources and governance committee helps create a failsafe if problems arise with the board or staff as there is a safe place to voice concerns and ensure protocols are being properly followed. Again, not a standing committee.

Although these three committees, or more, are recommended in each society, there is no mandate by the Societies Act to have any. Due to the size of a society and the number of board of directors, multiple committees may not be practical. 

Build an inclusive membership

Just as corporations have shareholders, non-profit corporations have members. The process of gaining new members and how members are then chosen to serve on the board is based on the individualized process of each organization, and can open the board up to dysfunction.  UH, maybe?

Because board members must put proposed changes, like new bylaws, to their membership for a vote, a general or special general meeting is required. But only members of the society can participate in those meetings, so if membership is tightly controlled, this could effectively control the organization.   AH - again, maybe different in Vancouver but the majority of nonprofits in the US are NOT voting member organizations.

“If you are hand picking — if the board decides who becomes a member — then they just recreate themselves in their own image,” says a former employee of a non-profit in Nanaimo, who asked not to be named to safeguard future employment. “If boards don’t want a lot of oversight, they don’t really advertise to have members.”

Due to the freedom boards have to change bylaws, it can be difficult to rectify when things start going wrong. If a bylaw is passed that gives directors unlimited time serving on the board, for instance, or if a society chooses to not have a human resources committee, it could make it extremely difficult to remove a problematic board member or restructure the board completely. 

Support strong communication 

The relationship between staff members and the board can be the pulse to a non-profit organization. By listening to staff members, the board of directors can make informed decisions related to bylaws, funding opportunities or programs. This collaborative approach ensures the organization is relevant and responsive to its clients.  

 “The people who know what’s happening in the community are the ones on the front line; the women on the crisis line at the house answering calls; the people in victim services that are sitting with women who have experienced just being drugged at a bar,” says a former employee at Haven, who asked not to be named to safeguard future employment.  

In years past, the board of directors at Haven invited an employee representative to meetings to gain insight on what clients’ needs were. Employees are no longer welcome to attend meetings, according to people close to the organization.   Well clearly this staff has issues with the board not listening to them.  I'm tempted to suggest the listening is first not happening at the exec level - the staff's boss and then at the board's that assesses exec performance.

Support staff and board members 

At Tillicum Lelum, a number of previous employees have volunteered to sit on the board as a way to give back to the organization. Elliott-Nielsen says this has proven to be an immense benefit as the board has an in-depth understanding and appreciation for the work the organization does for the community. 

Elliott-Nielsen points out that Tillicum Lelum Aboriginal Friendship Centre is recognized nationally for its innovative programming and high employee retention. “I always say we can’t get too bureaucratic, because if you start to become too bureaucratic and talk and act like a bureaucrat, you don’t keep your staff,” says Elliott-Nielsen. “When you come here, this is like your family.” 

The organization recently saw a board member retire from her position after decades of service. Some societies argue that a cap on years of service on the board is essential to ensure fresh perspectives are constantly moving in and people don’t become too entrenched in their ways of thinking.

For Tillicum Lelum, they do not have a bylaw for years of service on the board, however, this model seems to work well for the organization.   Yes board term limits/lengths can indeed have a positive impact and negative to not have.

Get to the root of power

One of the strengths and weaknesses of non-profit societies is that board members serve as volunteers. This keeps non-profit costs low while ensuring people are passionate about the work. 

When I brought this up with Vincent, she suggested some people drawn to these positions are seeking power from a place of feeling powerless. “They assume they will feel better if they think they’re in control. Instead, it actually replicates the trauma,” she explains. 

Elliott-Nielsen acknowledges this perspective too, and aims to bring on board members who are willing to work on themselves. “I always bring forward, are you willing to do some personal work around how you actually do work? How do you feel about anger issues, or how do you work when stressed,” she asks. “I always have said that we will do everything to support you, but if you do not believe that you have issues you have to work with, how can you bring anyone else along to a place of health?”

Recently, NFLA staff and board of directors went through a decolonization training session offered by Indigenous elders. “We wanted them to do the training together to build up that relationship with one another,” says Hollins.  Ah, now here lies what must be an important understanding of and passion for mission.  

How can a governance board be put back on track?

Within every society, there will at some point be dysfunction. How and when the organization responds to it is the line between rebuilding or dismantling. 

Organizations that seek out support before issues become major will have greater success at bouncing back or even preventing it from ever getting to that point. 

“What a healthy organization does is hire a skilled consultant to come in who is neutral and engages everyone equally in that review,” Vincent explains. I certainly can't argue with this point but the board must be ready and on-board for this intervention and its outcomes.

LCVI’s Letourneau says her predecessor did an exceptional job rebuilding trust after the fallout, and during her time as executive director Letourneau also established better governance practices. 

“When I came on, I had discussions with the chair asking, ‘What do we need on our board? Where are our strengths? Where are gaps?’” she says. 

They also reviewed their bylaws. Since every organization must create its own bylaws, it becomes the responsibility of the society to craft clear regulations that ensure effective governance. 

One new bylaw LCVI created was the whistleblower policy to protect staff members from speaking up if they have concerns about the governance board. 

When Tillicum Lelum began expanding quickly, Elliott-Nielsen says they hired a consultant to review their policies and make recommendations.

“We redid all of our policies for the whole organization, which was a really good thing to do. I’ve seen so many organizations grow fast and then they start to fall apart because they don’t have the policies in place to support them.” 

Letourneau adds that when there is a break in the relationship between staff and board, it is essential to have a third party give some guidance on next steps. For this to happen though, the organization needs to be in alignment on bringing in a neutral party for support. 

If that option is not possible, a more public and potentially costly approach is legal action. Members can also bring concerns to the press to publicize the dysfunction, or create a protest at an annual general meeting. 

According to the Societies Act, an annual meeting must be held once a year, and the directors of a society may at any time call a special general meeting. 

Any special resolution — a motion to create a bylaw that will have particular significance to the structure or ethics of the society — must be included in the text of a general meeting notice. 

The drawback to going public is the mistrust it can create, says Letourneau. “When there’s conflict within a non-profit, and it becomes more public, then there’s work that needs to be done to rebuild relationships in the community as well.”

 

Nonprofit Policies #NonprofitBoards

Rocket science this is not but possibly helpful consideration about how to approach setting policies within a nonprofit it could be.

LEADERSHIP

Implementing New Policies? 13 Steps For Nonprofit Leaders To Remember

 

Expert Panel®

Forbes Councils Member

Forbes Nonprofit Council

COUNCIL POST| Membership (Fee-Based)

 

Nov 18, 2022,01:15pm EST

 

A new initiative can dramatically impact how a nonprofit organization operates. That’s why it’s crucial for leadership to not only foster open communication with stakeholders, but also communicate why the desired changes are necessary.

 

Making sincere efforts to ensure decisions aren’t being made solely by those at the top will contribute to the successful launch and implementation of a new policy. Below, 13 Forbes Nonprofit Council members share additional steps nonprofit leaders should keep in mind when implementing new policies in their organizations.

1. Commit To Honestly Communicating With Your Team

The most important aspect of any policy change isn't just one step; it's committing to honest and transparent communication with your team at each step. Policy changes usually mean changes to employees' lives, and that can be scary. We ensure that our team knows why the policy change is necessary and what it means to them. - Renee Williams, National Center for Victims of Crime

2. Help Your Team Understand The 'Why,' What' And ‘How’

Communications, which includes listening and outbound messaging, is the critical component in implementing new policies. Helping the team understand the "why," the "what" and the "how" and then hearing questions and responding to any concerns in a clear, timely way sets the stage for the organization to metabolize and maximize the impact of the change. - Katherine Brady, Catchafire

 

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Forbes Nonprofit Council is an invitation-only organization for chief executives in successful nonprofit organizations. Do I qualify?

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3. Utilize A Change Management Process

Whenever we need to implement new policies, we utilize a change management process. By adopting highly effective business practices and merging them with the core values of a nonprofit, we can achieve impactful and lasting results. It's the best of both worlds! - Jessica Hall, American Eagle Foundation

 

4. Make Team Culture A Priority

The climate for social impact organizations was already charged. Now, due to the Great Resignation hitting our sector hard, and with pre-existing compensation strains now exacerbated by global inflation, our top priority should be building up team culture. We are currently in a company-wide restructuring process, and throughout every single phase, we are reminding the team that they are safe and valued. - Sarah Evans, WellBeyond

5. Involve Staff In The Entire Process

The one important step that should never be forgotten here is that staff should be involved via an inclusive, co-design process from ideation to implementation. This ensures that there is never a top-down approach and that staff do not feel as though something is being "done" to them. It also ensures that they are on board as the process becomes theirs and they own it. - Shane Ryan, Avast Foundation

6. Get Staff Feedback

At Old Sturbridge Village, we make every effort to get staff feedback on new policies before they are adopted. We have an internal staff committee structure that supports this with committees around safety, the campus and landscape and staff culture. Staff at all levels of the organization have a chance to weigh in. If we have to adopt a policy quickly, then we do our best to communicate why. - Jim Donahue, Old Sturbridge Village

7. Use Multiple Channels To Ensure Two-Way Communication

New policies should be implemented using a wide variety of top-down methods of communication as well as two-way communication. Consider multiple channels to communicate the reason for the change, the change itself and how it benefits the user and/or the organization. Also, provide ways for employees to respond with thoughts and questions so they truly feel heard. - Albert L. Reyes, Buckner International

8. Gain Buy-In From Stakeholders

Policy change is inevitable and hard for most. However, when it's tempered, it becomes more palatable. Use buy-in from key stakeholders and cheerleaders well before the policy is implemented. Be Socratic and ask probing questions to explore staff beliefs that can help align views and opinions. Make them part of the process to ensure greater acceptance. This can often result in expedited compliance. - Howard Chi, SF SPCA

9. Provide Clarity To Prevent Misunderstandings

It is important to remember that even the most well-written organizational policies can be subject to many interpretations. To avoid wide interpretations of new policies, it is important for leaders to discuss the intent of the policy change with policy writers and to communicate a consistent message about the intent of the policy change to all stakeholders responsible for policy implementation. - Christopher Washington, Franklin University

10. Maintain Transparency Around Decision Making

The No. 1 thing I keep in mind in this situation is transparency. I'm a strong believer in authenticity as a hallmark of great leadership, and with that comes the responsibility to share insight into why, when and how decisions are made. The more informed people are, the higher likelihood that they'll support change. Information makes stakeholders feel valued. - Christina Allrich, Beta Gamma Sigma

11. Review Policies Regularly

Review your policies in totality at least annually. The mistake that you want to avoid is creating a new policy that contradicts a previously adopted policy. - Kimberly Lewis, Goodwill Industries of East Texas, Inc.

12. Build In Monitoring Systems

Implementing a new policy is a test of that policy's objective and effectiveness. It's critical to build a transparent monitoring and direct feedback mechanism for those using or impacted by the policy. Be prepared to evaluate constantly and react dynamically if the policy isn't delivering the intended outcomes. - Puvan Selvanathan, Bluenumber

13. Remain Cognizant Of The People Being Served

While there will always be a need for top-down executive decision making, nonprofits in particular need to remain cognizant of involving the people they are serving. Human beings resist change. Perhaps the most important step is to acknowledge this reality. Pause long enough to ask if you have thoroughly identified the anticipated points of resistance and addressed them in your launch process. - Gloria Horsley, Open to Hope

Nonprofit Boards Are All the Same? #Nonprofitboards

 

The following is good stuff applicable I believe to more than Homeowner Associations.  The one thing I would quibble with: "best practices" .  I understand the intent of the use of the term but in reality, best practice refers to that with which studies have proven that each practice has a similar result with "best" referring to the optimal positive outcome.  I doubt that studies have taken place but that in itself would be an amazing practice.  Anyway,Take a look.

 

Best Practices For Homeowner Association Directors and Boards

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November 16, 2022

Approximately 74.1 million Americans reside in a subdivision, condominium complex, or other planned community that is administered by a community association. 

Community associations are governed by a board of directors, which is typically comprised of volunteers from the community who are elected by their fellow owners.  The board of directors manages the corporate affairs of the association, and as a result, it can often become a lightning rod for dissatisfied owners.  This can lead to individual board members being sued for alleged failure to fulfill their fiduciary responsibilities to the community association.  The threat of becoming involved in legal actions can often deter owners from being willing to serve on their community association board.  

Board members that follow best practices, can avoid many problems, including becoming involved in legal actions.  Best practices benefit not only the board and its members, but the community association as a whole.

Below are the most helpful best practices for community association board of directors to utilize.  

Be Transparent and Accessible

Communicating effectively with other directors, owners, and professionals hired by the association to help manage the community is essential.  Each board should develop a communication strategy containing, at a minimum, the following elements:

• Publicizing board and member meeting agendas well in advance to all owners and encouraging owners to attend.
• Communicating with owners about current board projects and progress, including the association's financial health on a regular basis.
• Providing owners information addressing the issues important to owners and how the board intends to address those issues.
• Consistent director attendance at all meetings, with full discussion of all matters on the agenda, and votes, whether in favor or against, on each decision that requires a vote of the directors.
• Posting minutes of the board and membership meetings in a timely manner.
• Providing a method for owners to contact the board outside of meetings.

Communication methods can include personal contact, informational meetings, printed newsletters, email, or a website.  Transparency garners trust, which is the key to solid communication.

Be Ethical and Above Reproach

Directors should strive to be above reproach and affirmatively avoid actions and comments that might create an appearance of unethical behavior.  Each board member should strive to:

• Avoid personal agendas, and apply the provisions of the community's governing documents consistently.
• Use sound judgment to make decisions that are in the best interests of the association, taking into consideration all available information, circumstances, and resources.
• Avoid conflicts of interests or even the appearance of a conflict. A conflict of interest occurs when a director has a direct or indirect interest, not shared by all board members, in a transaction conducted with the association. 
  • A director has a direct interest in a transaction with the association when the director, or a member of the director's immediate family, has either a material financial interest in the transaction or a relationship with other parties to the transaction that reasonably might be expected to affect the director's judgment in a manner adverse to the association and its members as a whole.
  • A director has an indirect interest in a transaction with the association when an entity in which the director has a personal and material financial interest, or in which the director is a director, officer, or trustee, is a party to the transaction.
  • If a director is uncertain if a conflict exists, the director should present all of the relevant information and facts to the other directors, and be prepared to refrain from participating in the discussion of the issue being considered or voting on it.
• Be thoroughly familiar with the laws, rules, regulations, and recorded documents that govern the association. The director should not advocate or support any action or activity that is inconsistent with the rules, regulations, or terms of the governing documents. 

By exhibiting sound ethics and integrity, a director can help build the membership's trust in the board.

Be Reasonable

A director should always take the director's responsibilities to the association seriously, exercise sound judgment, and not hesitate to rely on simple common sense.  Discussions with owners and other directors should be respectful even if the individuals disagree with one another; and, importantly, but difficult, even when an owner or another director acts with disrespect. 

Sound judgment is essential and is perhaps one of the most crucial assets required of a director.  Exercising sound judgment requires a director to think about things clearly, calmly, and in an orderly fashion so that a good decision can be made. 

Most importantly, a director should consider all the facts and opinions so that each decision is fair and reasonable under the circumstances.  If a topic needs more investigation, research, or discussion, the director must recognize the need and advocate for it, including involving professionals on matters that are outside of the board's expertise.

In other words, directors should apply their own experience and general knowledge to each situation in order to make the best decision under the circumstances, but also recognize their limitations and bring in experts to supplement as needed. 

Be Fiscally Responsible

Financial stability is essential to the success of an association.  A director should always seek to establish sound fiscal policies, help develop a workable budget, and continually look for ways to carry out the purposes of the association in a responsible manner. 

A director should seek the advice of professionals such as community association managers, legal professionals, accountants, and financial advisors.  The right professionals can assist the board to develop accounting controls to protect the association's assets, realistic budgets which ensure that operating funds are sufficient to cover ordinary expenses of the association, and detailed reserve studies to provide sufficient capital for any future, or unexpected, expenses. 

Owners typically do not like increased assessments and demand the board look for ways to cut costs and effectively budget.  However, sometimes increased assessments are unavoidable, and if the board can increase assessments gradually and have robust reserves for when inevitable expenses and replacement costs arise, many of these issues can be avoided.

Conclusion

Directors of community associations play a very important role in the successful administration, management, and operation of the association.  A successful director will be open and honest, ethical, reasonable, and financially prudent.    

Ward and Smith has a dedicated Community Associations Practice Group with attorneys experienced in representing associations and developers in all matters related to the creation and operation of community associations.  We are happy to speak with you regarding best practices or other topics regarding the operation of your association.

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© 2022 Ward and Smith, P.A. For further information regarding the issues described above, please contact Madeline C. Lipe or Kristin D. Mitcham.

Affordable Farming Project with BWB Solutions

 

 

 

 

Board Evaluation #NonprofitBoards

Dr. Fram has some thoughts about nonprofit board evaluation.  I will concur that EVERY board should have an ANNUAl evaluation of itself, its performance.  There is no reason not to and every benefit.  Dr. Fram offers the following thoughts on how to approach an annual eval.  I myself have created and conducted quite a few evals for nonprofit.  There are also on-line resources to do the same.  One important albeit uber thorough is by Yvonne Harrison.  Yes there are others but Yvonne has been using her tool for many years and tracked the responses thus creating some research analysis about nonprofit board behavior.  You might google her for her other work as well.

Meanwhile, here's Dr. Fram's thoughts on board evaluaton:

Once Again: How Should Nonprofits Conduct Board Evaluations?

By: Eugene Fram    Free Digital Image

 Data from BoardSource show that only about 58% of boards have had “formal, written self-assessment of board performance at some point. Only 40% of all boards have done an assessment in the past two Years,” a recommended practice. With the rapid turnover of directors that nonprofit boards traditionally experience, this seems inexcusable. As a “veteran” nonprofit director, following is what I think can be done to improve the situation.

Evaluate Board Processes
• Value of board materials: board book delivery time prior to meetings, material clarity, meeting notices, etc. Are board books delivered a week ahead of meetings?
• Stakeholder Relations: Board interactions with various nonprofit stakeholders groups, especially donors. To what extent do board members interact with key stakeholders? Are records available of these interactions to make certain they take place? Identify the directors that are most adept at building these relationships?
• Willingness to evaluate qualitative outcomes: (http://bit.ly/OvF4ri) To what extent are data developed that go beyond typical records such as accounting statements and membership records? Are more difficult data developed, such as brand image and impact on the community? Is hearsay evidence discarded in making major decisions?
• Composition of the board in regard to racial diversity, gender, skills, age, board experiences, etc.: Does the organization have a diversity/inclusive policy? Do current board members have sufficient prior board experiences in order to act as models for new members without prior board experience?

• Action plans: including a yearly review of board minutes that obligates the board to review accomplishments. (Lack of some actions may lead to board and/or organization liabilities.) Does the plan provide evidence of a robust CEO & organizational evaluation? Does the organization coordinate field accreditation processes with action plans?

Director Evaluation Approaches
As boards evolve, they can use:
• individual self-evaluations by each director;
• evaluating the board as a whole;
• peer-to-peer assessment,
• an independent third party to conduct the process & to advise on confidentially and to present a report.

Coming from an academic background, in which the peer-to-peer process is strongly ingrained, I suggest a peer-to-peer blind review (source of individual comments not revealed to others) administered by an outside expert to advise on process and develop the report. The report needs to be supported by an assessment of how the board has succeeded in completing the required processes listed above

 

Book Review: Elements of Nonprofit News Management

There are a few folks in different arenas who "have the scoop" on how everything happened from the very beginning.  Richard J. Tofel is one of those folks.  His domain: ProPublica - one of the few benchmark nonprofit investigative news organizations who have found their path to making their mark while achieving sustainability.  This path to achieving mission and achieving sustainability is a sort-of gold standard - the "prize" one might suggest for nonprofits.  

So, with this achievement Mr. Tofel has deemed it appropriate to share with all of us the "secret sauce" behind ProPublica.  He has done this in his new release: Elements of Nonprofit News Management.  Now I must admit that Elements is just that: elements. This is not a comprehensive, tell-all manual that will guide every nonprofit board and exec along the path of success.  But, at the same time, there are just enough pearls of wisdom at least be instructive and help get started on the path.

So, yes, this 83-page primer, may be for you and yes, this is for more than just those who would be nonprofit News folks.  Now here's a couple of citations to stimulate your curiosity.  And because this blog focuses on nonprofit governance - these quotes specific to this topic.

Advisory groups: "They can be helpful for new organizations seeking to reach out, or to better understand their communities."  

About board meetings: "...the two elements each board meeting should contain -- authentic deliberation on a question of real importance and a reminder of the work that bring the people in the meeting together."

About board diversity: "Having diversity of all sorts on boards is very important, and for the usual reasons: to get an array of perspectives you might otherwise miss, and simply because it's the right thing to do."  I would offer that the second reason is not all that important to me.  What is more important is that diversity ensures that the voices of those who would benefit from your nonprofit's offerings are reflected in those offerings.  It's more than just listening and being good.

Anyway, lots of added value for a very small investment.  Get your copy now from the Lenfest Institute: www.lenfestinstitute.org.

 

 

 

Scenario Planning: Not Just for the "Big" Corps #NonprofitBoards

The following is a quick overview to what is Scenario Planning.  While I have iteratively facilitated scenario planning activities as part of strategic planning, scenario planning may be used more frequently to understand and project what could happen "down-the-line" to affect strategic and fiduciary decisions by nonprofit boards.  Perhaps more under the category of a generative conversation, scenario does not call for decisions as much as it calls for exploration and discussion and just simply being informed.  I believe there to be no nonprofit too small or large that cannot gain from scenario planning exercises.  Consider your nonprofit's environment and try it.

From Fortune Newsletter:

Presented by Diligent

Fortune 500 board members share how they’re mapping scenario plans for a recession, market volatility, and global shocks November 11, 2022

What will the future look like? And what are the best companies doing to prepare for it? Pamela Craig, who sits on the board of directors for Progressive, Corning, Merck, and 3M, wrapped up a panel at a leadership roundtable in New York last month with that prompt. Long-term forecasts, she said, have to take into account a long list of business horrors: ongoing inflation, a potential recession, wobbly supply chains, labor challenges, and a weak global economy. Craig was asking the right room. The event, co-produced by the Women Business Collaborative and board software maker Diligent, which sponsors this newsletter, brought together prominent directors. Scenario planning—an exercise that asks businesses to react to a range of potential future outcomes—emerged as the preferred tool to help boards cope with a barrage of challenges. “One thing the pandemic taught us is how to manage through uncertainty, and scenario planning was a big part of that,” said Paula Price, who sits on the boards of Accenture, Bristol Myers Squibb, and Warner Brothers. In recent months, the boards she serves brought in former defense secretaries and other experts for context on macro events like global inflation and the Ukraine-Russia conflict. One benefit of holding virtual meetings is that it makes booking top speakers easier, she noted. Tonie Leatherberry, a director at American Family Insurance and veterinary drugmaker Zoetis, said the insurance company has brought in weather experts to discuss climate change scenarios. Relatedly, Lisa Edwards, Diligent Institute’s president and COO, who sits on Colgate-Palmolive’s board, urged companies that haven’t held a thoughtful conversation about the most severe threats to their operations to do so. “We have enterprise risk matrices for a reason,” she said.   Boards should assess their portfolio of products and services and “push on all the tipping points” to find weaknesses, then cull as necessary, added Maria Morris, a board member at Wells Fargo and S&P Global.  Global diversification is essential right now, said Mary McDowell, chair of the board at Mitel, and board member at Autodesk, and the U.K.-based ed-tech firm Informa. During the U.K.’s economic freefall earlier this fall, she said, Informa was able to tell investors, “We are a global company, so we are impacted, but it’s not wiping us out.” Scenario planning, however, was the most commonly cited tool to help boards respond quickly to unknown circumstances. Moreover, it takes the emotion out of a corporate response because leaders can refer back to scenario-planning results to justify their actions, Craig said. “It’s like, ‘We said we were going to do this if this happens, and that’s what we’re going to do.’” Lila MacLellan [email protected] @lilamaclellan

Rights to Know #NonprofitBoards

 

Dr. Fram has offered the following sort-of nonprofit "Board Knowledge Bill of Rights".  As its surrogate "owner" I pose that nonprofit boards have a right to know anything and everything they want and sometimes don't want to know about their nonprofit.  Of course the basic knowledge is whatever informs fiduciary and strategic decisions.  But beyond that is everything that informs evaluation measures to ensure mission is being pursued with integrity and values fully followed and budget clear and used for mission.  This of course is not just about knowledge but about evaluation and subsequent action.

There are some intriguing points made by Dr. Fram.  Please read and consider what is too much or unreasonable in terms of expectations by the board and then what is mission critical information by the board.  

WHAT NONPROFIT & TRUSTEE BOARD MEMBERS HAVE A RIGHT TO KNOW.

By Eugene Fram        Free Digital Image

A blog developed by an internationally known  board expert* raises some pertinent governance questions mainly targeted to for-profit boards. Following are my suggestions how these questions could apply to nonprofit and trustee boards. In addition, field examples show what happened when the questions had to be raised in crises situations.

Does bad news rise in your organization?
“You may be the last to know.” For example, the board of a human services organization knew that the professional staff was not happy with a new ED with an authoritarian management style, but the board felt it needed to give him a chance to modify his style. Board members didn’t know that the staff  professionals had been meeting with a union organizer for nine months.
A labor election resulted, with the professional staff agreeing to work under a trade union contract.

Do your CEO & CFO have integrity?
“If the CEO or CFO holds back, funnel information, manages agendas, is defensive or plays…. cards too close to the, vest, this is a warming sign.” For example, a CFO was delinquent in submitting a supplementary accounts receivable financial report. The board and CEO accepted his excuses, but the data, when submitted, had a significant negative impact on the financials. Both the CEO and CFO lost their positions.  Should the board have also accepted some responsibility for the crisis?  

Do you understand the (mission) and add value?
The board members need to seriously answer this question:
If this organization were to disappear tomorrow, who would care?

Do you know how fraud can occur in your (nonprofit)?
Common wisdom prevails that there is little for-profit or nonprofit boards can do avoid fraud. To review nonprofit boards actions that can be taken, especially for medium and small size nonprofit boards, see; Eugene Fram & Bruce Oliver (2010) “Want to Avoid Fraud? Look to your Board,” Nonprofit World, September/October, pp.18-19.

Do you compensate the right behaviors?
“You are at the helm as board members. Whatever you compensate, management will do.”
Be certain the organization is compensating for outcomes and,more importantly, today impacts. Too often compensation is given for completing processes that are not tied to client impacts

Do you get disconfirming information?
Management is only one source of information. With the agreement of management, visit privately with people below the management level. Set a Google Alert for the name of the organization to see what others on the Internet are saying about your nonprofit’s relationships.

Do you get exposures to key (operational areas) and assurance functions?
“Bring key people into the boardroom, without Power Points. See how they think on their feet. It is good for succession planning and is an excellent source of information.”

Do you get good advice and stay current?
“Bring tailored education into the board room and stay on top of emerging developments. “ This is especially important for the nonprofit directors or trustees who serves on a board that is out of their area of expertise. For example, bankers might serve on a hospital boards.

Do you meet with (stakeholders) – apart from management?
Board members need to join with management in meeting key funders occasionally to determine if their expectations are fully met and what the board might do to foster a continuing relationship. This lets funders know that the board is involved over-viewing the organization’s outcomes and impacts.

*Richard Leblanc, “The Board’s Right to Know and Red Flags To Avoid When You Don’t.” http://www.boardexpert.com/blog, September 14, 2012
Note: Bold & quoted items are from the above blog.