Probationary Board Terms

When I hear of a new idea in nonprofits, I listen, consider, perhaps investigate a bit and wait for a while to see if it's repeated somewhere else. Second time; interesting. Third time, OK, this may have merit.

Just that sequence has happened to me about the concept of a probationary one-year term for board members. The idea is that both the nonprofit and the board member need to get to know each other. The nonprofit needs to know that the board member will show up, show up prepared and show up ready to participate. The new board member needs to know whether the board obligations they were told about are true or an......understatement.

After a year, a probationary board member is, hopefully, asked to serve the first of two three year terms. If he or she agrees, all good. If either party is uncomfortable, they can back away and not take up a valuable board slot for three years.

I think this idea has some legs. With board members getting harder to recruit, it allows the good ones to be on the board one year longer, avoids "empty seat" syndrome and sends the message to all board members that they are expected to participate.

We'll see if I hear about it a fourth time.....

Going to Scale, Part 2

(Note: This post comes directly from my new book Smart Stewardship for Nonprofits: Making the Right Decision in Good Times and Bad, to be released in February 2012 by John Wiley and Sons. You can pre-order at Amazon by clicking on the link above.)

Models for Scaling

In the first post on scaling, we looked at whether or not your service could be duplicated. There are other questions as well:
How much time, talent, and treasure do you want to invest?
What's a reasonable (read, safe) growth curve?
Can I develop a model that people can follow?

Lots of complex issues to decide. But if you choose to proceed, what options do you have? What have other nonprofits done? How have they done it? What are the models, methods and structures they’ve used? There are many options but only really two questions to answer.

The first question  might surprise you: How much control do you want of the scaling? Does your board (or management team) feel that tight control is essential to see that the mission is done properly? That’s fine, but costs more money, time, effort and liability. Or, can you give up some control and put the idea in the hands of others? If so, less time, money and oversight are needed. Or, is your need for control somewhere in between? The choice of level of control comes first. That’s the strategic issue.

The second decision is more tactical. What mechanism will you use to scale?

Are you planning on opening more offices under your current 501(c)(3)?. That would result in complete control; control of staff, budget, office location, decor, branding, etc.

A bit less control would come from a subsidiary model, where you open or take over another local 501(c)(3) in a remote community. There could be a local board overseeing a local staff. Perhaps the local gets budget approval from your organization, perhaps not. Perhaps your board has representation on the subsidiary board, perhaps not.

A third option would be for you to brand and deliver; developing a  how-to guide on a website, but to copyright the idea and trademark the brand. This might bring you some funds, but more importantly it would give you some control of the way the idea is used in other communities. You could set standards to go along with use of the brand name, offer on-site consulting, etc.

The least control comes from simply floating the idea, with your experience and a set of suggested processes. I call this the open source option, named after the very common software model, where programmers develop code, either in snippits, or in complete programs, and then put them online for others to use and/or improve. Nonprofits already do this for things like policies and procedures, and websites such as IdeaEncore.com have led the way in facilitating the free exchange of documents. In your case, you would not just share a document, but an entire service concept.

Just remember that once a programmer posts open source code online, anyone is free to use it and, more importantly, to modify it. The original programmer loses control, and so would your nonprofit.

Remote board participation

Let me start and the end and work back: Should board members be allowed/enabled to attend board meetings remotely by conference phone, conference video and/or Skype?

There's a confluence of events that's pushing us in this direction: A reduction in people's willingness to serve on boards resulting in a lessening of nonprofits dunning (or canning) board members who don't attend in person; the improvement of technology; the expansion of many nonprofits to multiple locations and, as a result, having board representation from those often disparate sites; top flight board members traveling for work less and being used to attending meetings electronically.

So, the next time you revise the part of your bylaws that deal with board attendance and quorums, should your nonprofit allow remote attendance? What's the impact on board cohesion and discussion? What's the policy impact? Is this simply inevitable?

I have a good friend who runs a large nonprofit in Virginia, one that recently merged with a nonprofit in another part of the state. Board members representing both service areas come to meetings with a video hook-up that's hosted at the agency location nearest to them. My friend notes that anyone doing this kind of thing needs a dedicated tech person at each site so that the staff or board members won't be distracted. My friend also feels the technology works well, dialogue is easy since everyone can see everyone else, and that it has increased attendance at meetings.

My question to him was, "..and what about the board member who is on the road and wants to attend via Skype?" He stopped and said, "We can accommodate that, but only to the point that our video screen fills up too much. We'll probably have to set a limit on that."

There you go. You don't want a future where board members never meet in groups, but at the same time, the trade off, if well done can benefit the organization tremendously by increasing board participation.

This will be interesting to watch unfold.

Keys to Smart Stewardship

I'm working on a new book tentatively titled: Smart Stewardship: Making the Best Decisions for Your Nonprofit. The book will contain some new ideas on innovation, growth, going to scale and a decision tree for both board and staff to use.

This month's Mission-Based Management Newsletter contains the first of two part series on the key elements of Smart Stewardship. In the next issue, I'll lay out my decision tree.

Take a look and feedback is welcome!

Junk food or no food?

Tough times always equal tough choices. For families, for businesses, for governments and for nonprofits. And therein lies today's discussion:

Trust me, I know every reader out there works or volunteers for a nonprofit that has a great and valuable mission. That said, I challenge any of you to say your mission is MORE mission rich (not equal, but MORE) than those organizations among us that feed the hungry.

Thus, there is extra poignancy in the piece posted January 13 on the NPR website entitled "Overburdened Foodbanks Can't Say No to Junk".

I'm sure you can guess the tradeoffs reported in the story. Junk food or no food. Or less food.
And, you can see in the interviews that the staff of the foodbanks are really working the problem, not simply accepting a downgrade in the nutrition level of the food they are handing out.

Good for them, and there is NO criticism implied here.

That said, this kind of dilemma faces nonprofit staff and boards everywhere in a recession. How much less quality can/should we do? When should we stop a service rather than do it less optimally than we would prefer? These are hard strategic and mission questions, and ones I wouldn't be surprised if most readers have faced. I can't tell you what the right level of service/quality is for your organization; only you and your board can make that decision.

But I do have a couple of suggestions on process.

First, well before you have to make very hard decisions, develop a decision tree/format/sequence that everyone has input into and then agrees on. Rely heavily on your mission and values in developing this decision tree. Next, practice using the decision tree with a couple of real world cases to see how it works. Finally, apply it to staff meetings, board sessions and larger strategy meetings.

If everyone is both aware of as well as on the same page regarding HOW decisions are made, they'll be more comfortable with all the outcomes. This is not to say they'll love the decisions: Sometimes the best decision is simply the least worst.

I'd put junk food in that category.

The more things change....

Yesterday, I had a great day working with the annual learning event for Ronald McDonald House Charities, a session I've had the good fortune to speak to three or four years running. The staff and board of local Ronald McDonald Chapters from the US and Canada are here, and they are a terrific and fun group of people.

I talked a bit about being a mission-based manager in the morning and then about innovation in the afternoon, and the group was responsive and attentive, even when they were tired in the afternoon.

What intrigued me were the one on one questions during the break. Here's the breakout:

"My board president is too controlling" (3 CEOs)
"My CEO doesn't give the board enough to do." (2 Board Presidents--and no, I don't know if they were the same agencies as the CEO's above!)

"My CEO doesn't ask for enough staff input (2 younger staff)
"My 20 something staff just want to have input on everything!" (4 boomer CEOs)

This is a pretty standard breakout these days of questions from a large group. The first set-regarding board-staff balance--hasn't changed in the 30 years I've been consulting, and I suspect never really will. The second set is coming to a head as more young staff enter the workforce and demand/expect a seat at the decision table.

Today, I go talk to the board representatives. Should be interesting to see what they ask....

New Practices in Board Terms

For many years, (probably 30, since I was an ED the first time) I've been preaching the benefits of having board terms. In that time, the concept of limiting board service has become best practice, and even required by some funders.

The standard is pretty much the same everywhere, with a tweak here or there: two 3-year terms for each member. Many organizations, due to a shortage of great board candidates, allow a member to come back on after a brief hiatus, perhaps one or two years.

Over the past two years, I've been getting emails from people challenging my stance on this issue, and I've begun to rethink the whole thing. The basic concern is that by forcing everyone to leave the board, a nonprofit can a: lose historic perspective in their policymakers and, b: lose the few true governing volunteer stalwarts who support the organization with real passion. Certainly both of these concerns are valid and worth considering.

So, what's the solution? Board turnover is still a good thing: it brings in new ideas and perspectives, and allows an organization to root out any policymaker deadwood. It gives board members a graceful exit from their job if they want it, and, like it or not, it is one of the standards by which governance is measured today.

Some nonprofits have come up with what I think is an interesting and innovative solution, one that bears watching. These organizations reserve some percentage of their board seats for exceptional board members who have both demonstrated their passion for the organization, and agree to stay. These members are offered a longer term after their first two terms, say five years, with an opportunity to extend that one more time.

I've seen this eight or nine times now, and the percentage of "reserved" seats ranges from 20% to 40%. The latter seems a bit high to me-and offers the opportunity to slide back into perpetual boards. 20-25% seems about right. On a 15 member board, 20% would be 3 seats. This "experience bloc" would certainly not always vote together, but would serve as a guide to other board members on tradition and prior activities that could be valuable. 3 members would also not be so many as to be "the old boys/girls club" and this inhibit new members from fully engaging.

As I said, I think this bears watching. I'm curious about what guidelines organizations use to pick this class of board members, and how the internal politics play out.


What do you think? Does your board have this policy in place or is it thinking about it? What percentage of seats would be reserved? Do you have guidelines? If so, please share them with us.

File or lose your (c)3

An excellent headsup in the New York Times on the risk that 400,000 nonprofits in the US have of losing their tax-exempt status if they don't file their 990 forms by May 15.

http://www.nytimes.com/2010/04/23/us/23exempt.html

The bottom line is this: If you are a smaller nonprofit and have not filed your 990, or 990N in the past three years, on May 15 your tax-exempt status will vaporize.

Check this out and file NOW.

Great reporting on a cautionary tale...

OK, this is a story every nonprofit board member should read. All of it.

The story, from the Austin American-Statesman, is about the collapse of Austin's Family Connections. It is unusually well written and thorough. It analyzes the causes of the collapse of this successful, acclaimed service organization.

And, unlike much reporting on nonprofits that I have seen, it gets to the many (not just one) root causes.

Although there were signs easier to see in the rear view mirror, the ultimate bottom line (no pun intended, since this is a sad tale) is that there appears to have been a basic breakdown in board oversight. No audit, no audit committee, and the board allowed the ED to control all the financial reporting herself. All easy to see warning signs from the outside, but outsiders never got the chance to get in to take a look.

Again, well worth your time to read the entire article. And, a shout out to Andrea Ball for a great job with her story. I suspect it will help many other nonprofits avoid similar fates.

Younger Board Members

There's been a bit of an online discussion recently about why nonprofit boards don't have younger members.

Emily Hearst had an excellent post on her Board Life Matters blog, titled Why Don't More Members of GenX and GenY Join Boards? which got a great response. Then, Rosetta Thurman took her turn in her post titled Do Nonprofit Boards Really Want Younger Members? on the Chronicle of Philanthropy site. Both posts make excellent points, but I'm compelled to add my 2.0 cents here.

First, as is well known, boards, if left alone, tend to recruit themselves (i.e., people who look, act, think, live, etc. as they do). Thus, it's important for board recruitment to be a joint board-staff effort...it's the only way to break out of the homogeneity bubble.

Second, many senior staff have come to depend more and more on boards either primarily or solely for fund raising. (As an aside: This is a very, very bad thing. When boards are concerned only with development, they aren't concerned enough about planning, strategy, financial oversight, etc.) With this increased emphasis on boards as a conduit for incoming cash, staff make the assumption that the board members need to be rich--and that only older people have, or have access to, money.

Wrong--just look at the texting response to Haiti. Younger people bring huge networks of friends and associates with them. They (and their friends) are nearly bottomless resources of volunteering and donations--even if only in small amounts individually.

Lastly, boards often don't have two-three-four board slots open at once, and younger people tend to stick together. Imagine, if you were 28 and invited to join a board whose average age was 58, how you'd feel, particularly if you were the only face under 50 in the room....oh goody, I joined my parent's Rotary Club......

We DO need to age down on our boards, and we need to do it soon. Age diversity needs to have the same priority as other kinds, and it's just as difficult to achieve. But that doesn't mean we don't need to get to work and try.

What to do now? Part 1

On my last post, I promised I would start a series on What To Do Now?, based on the chapter in my book Nonprofit Stewardship entitled "Stewardship in Good Times and Bad".

Times are tough, or worse, for many nonprofits. I just finished the current issue of the Chronicle of Philanthropy and was depressed all over again. Then I read through the economic news on Google News and felt worse. As I've said before here, we're in for a loooonnnngggg haul. My longstanding view is that, at best, things will only get worse through 2009 and that we may see a leveling in 2010, with a beginning of a recovery late that year or early 2011. At best, could be worse.

So, if you aren't already cutting, strategizing and re-thinking, you need to be. The economy is NOT a short term problem.

Today, we'll start with organizational signs of trouble for nonprofits. Next post, we'll look at strategic things you can do.

Signs of trouble are things that I see in my consulting role that are indicators of less than optimal performance or warning signs of impending crises for any nonprofit. We start here because you want to make sure that your basics are in shape for the downturn for your nonprofit.

Look for these issues and fix any you can now:

No (or insufficient) financial reporting. Sounds dumb--of COURSE you're going to report, right. You'd be amazed. Anyway, keep the financial reports coming, and definitely develop a six month cash flow projection and update it every week. Every WEEK, not every month. More about this when we get to tactics.

Excessive staff turnover. This is less of a problem in a steep recession/depression, but look at organizations like FedEx. Everyone took a pay cut rather than lay people off. Hmmm.

Excessive board turnover. You need to keep your board on board now. So, keep them informed, use them as resources. Don't scare them off by lack of information or involvement.

No new programs or methods of provision. Keep trying new stuff. Really. I know your dollars are tight, but keep innovating in program provision, fund raising etc. You may not be able to do BIG innovations, but you can still do lots of small ones. These keep staff energized and show the community you are moving forward.

No regular and repeated Asking. You gotta ask. Keep your staff, board, funders and the people you served involved. Ask them what they want, ask them for ideas on how to weather the storm (notice I did NOT say "cut back"), ask what's critical to them about your organization. Ask, ask, ask. It's cheap and essential.

No Staff continuing education. Ooooh, easy to cut right? Non-essential, right? Wrong. When you cut staff training you cut the quality of service, reduce staff morale, hurt services. I know you can't send everyone off to a conference, and perhaps not anyone can go out of the area to a meeting this year or next. But there are still book clubs, local training, online options, etc. Get creative, and DON'T stop pouring new ideas into your people's brains.

Out-of-date internal policies. I know, I know you're in a crisis. But life (and good management) goes on. Make sure you regularly update your HR, financial and QA policies. These are essential and help prevent distractions and problems down the line. You're keeping your insurance, yes? Keep your policies up-to-date, too.

No Strategic Plan. Again, I know you're in a crisis. But the most important time to have a strategy is now, not when thing. More on this in the next post when we talk about strategies.

Little or no sharing of information internally. Regular readers know I'm a zealot about this. Use all your staff's minds, not just some of them. Same with your board and volunteers. To do that you HAVE to share information, like budgets, plans, contingencies. You need people's ideas more than ever. You need them to have a sense of contribution to the problem. No matter how smart you are, you don't have all the ideas or all the solutions. As John Chambers, CEO of CISCO says: "No one of us is as smart as all of us". I could not agree more. We'll come back to this in our tactics post.

Inadequate marketing materials/website. Focus focus focus in your materials and website. Too big an issue to cover here, but suffice it to say that this is a great time to look over your marketing materials and website and to make sure they focus on your current priorities, and that they reflect the current economic times.

Poor use of technology. See the last two issues above? They beg for better use of technology, as does more asking and more sharing of financial situations. USE your tech to help you through this. Whether with staff wikis to hone ideas, or special online editions of your newsletter to keep people informed, push your tech. Ask your young staff how to best do this--they know!

And, don't panic. Ever.

Nervous? Fine.

Scared? Me, too.

Panic? Not a useful leadership response.

You need to go home and scream into a pillow? Good. Do that. At home. Not at your nonprofit.

As my Dad (an engineer and attorney) used to say, "Don't angst, work the problem." I agree. The people we serve need us to FOCUS on still getting the most high quality mission out the door as possible.


Think about these, and next post we'll look at some strategic responses you can start with.

Character first for boards

I just returned from having a terrific two days with the Ronald McDonald House Charities board leadership session in Oak Brook. Great people, lots of fun discussion. I certainly learned a lot.

Yesterday, the group was focused on better board recruitment and retention. Most sessions on this start with what skillset the organization needs. We started with something different: what kind of person you should seek to have on your board. This set the group back a bit--they were ready to talk about skills. I pushed them to talk about character, and we got a great list going. Things like this:
Integrity
Dependable
Open minded
Entrepreneurial
Smart
This is not a complete list, but you get the idea.

Then we talked through a good laundry list of skills needed, repeatedly noting that the skills needed by any nonprofit change and should change in sync with their strategic plan.

But when we got done with those two lists, we focused on which is more important to start with: character or skills?

My feeling on this is strong: focus on character first. This is very consistent with pretty much all good leadership development advice: Hire character first in employees. Why shouldn't that extend to board members?

As John Maxwell says in his leadership writing: "You can't coach tall." Character first.

As you evaluate your board recruitment, make a list like the people at RMHC did: what kind of person do you want on the board? It will help avoid a lot of pain further down the road.

Board Re-org?

Much has been said recently about the need to re-think the Executive Director role in light of the combination of that Boomer-heavy position's transition to GenX and Gen@ combined with those generations hesitancy to even take on the position. I think that discussion is important and, while no clear models have surfaced yet, worth pursuing.

But what about boards? We all need them, we all should want them to operate as efficiently and effectively as possible. We want diversity of background, a great skillset, and commitment to our cause. So should we just do the same-old same-old, or try a new model?

While no model is for everyone, and certainly starting from scratch is unlikely for pretty much any nonprofit not in a huge crisis, tweaking your board model now and then to match both the needs of the organization and the capacity of the board members is probably a good thing. And that's the topic of my January issue of the Mission-Based Management Newsletter: Reorganizing Your Board of Directors.

Take a look. There may be a tweak there that's good for you.

Exec Transition Resource

As everyone knows, exec transition is a big topic as boomers move out the door. Bridgestar's newest Leadership Matters article contains help on an important part of this: setting up and running an effective search committee. Many boards are totally vexed when presented with this problem, so this article is well worth the read.

In a related piece of news, I've just started a hilarious book on boomers versus Gen@ entitled "Boomsday". The first 50 pages that I got through last night were priceless, and I'll get back to you on this more soon.

Give your Treasurer a break

It happened again. An email from a nonprofit board treasurer asking how she could graciously get out of her job...."I've been on three nonprofit boards in the past 15 years, and because I'm a CPA everyone ASSUMES that I want to be treasurer. I understand their assumption, but I'm sick of it. Been there; done that...three times! Is this a problem on every nonprofit board?"

Sadly yes, and for many its worse than that. Sometime you're like the Pope-you have the job for life. Why? Because it takes a few years to really figure out what the organization's finances are all about, and the board counts on the treasurer to be the trusted interpreter. So, once you invest the time, they want you to stay.

They could give you help. And this is what I told my email correspondent...click the link to see the full answer. As you'll see, it doesn't help her much, but it can help your organization. I also told her to simply give a year's notice....and find a deputy treasurer ASAP.

Here's a resource....and its free

Here's a resource you may not have seen:

Free Nonprofit Management Tools, from the Fieldstone Alliance. The collection includes all kinds of good things in such areas as Boards, Collaboration, Lobbying and Advocacy, Finance, Community Building, Marketing, Management and Trends.

You can find some assessments, and subscribe to their free newsletter "Tools You Can Use."

Great stuff. Check it out.

Great nonprofit website improvements

I've been doing New Year's cleaning and adding on my website, and in doing my checks, found significant improvements to two superb nonprofit resources. Check them out.

www.boardbuilders.com Carol Weisman has a new look, new resources, and great content. If you have a board, you need to know about this site.

www.managementhelp.org Carter McNamara has reformatted his incredible site, with easier search, and a more usable indexing system. This is one of the most useful resources on the web.

Board bits

I had a question the other day from a gentleman trying unsuccessfully to get off the board of directors he was on. He had sent two letters resigning, had not heard back and then saw his name on a current list of board members. He was concerned that he was still a fiduciary and wondered what legal action he needed to take. I gave him my answer (and have never heard back, interestingly/ironically enough: most people at least acknowledge the response) but then wondered a bit about the organization in question. If the story is true, they are either clueless or totally unorganized. Why would you keep someone on your board who doesn't want to be nor, I assume, ever attends meetings, contributes time, talent, or treasure?

Now, I have known execs who would be happy with as many empty chairs as possible at board meetings and others who, while having bodies in the seats, still have "empty chairs"--and want it that way. Of course, I know nothing about this organization, starting with which time zone its in, but you have to think that things are pretty bad.

Here's what apparently didn't happen after the letter of resignation was sent...(with a noted caution that there are always about 4 sides to any situation)

1. The exec didn't call the board member and ask "why do you want to go off?", or "would you stay?", or "thanks for your resignation and your service".

2. When no response was received to the first (or second) letter, the (former?) board member didn't call the agency staff or board president and ask to be taken off the board list.

Methinks that there are some serious communications issues showing their ugly head here, and probably a lot more just barely out of sight.

Too bad.

Back for real

OK, so the book took longer than I thought, planned, or wanted. But I think it's pretty good and I am excited to see how it turns out after some good editing.

Anyway, thanks to all of you for your notes and comments. And your patience. But I'm back at it and will post regularly from now on.

First thing to bring to your attention is the terrific new Communique #5 from ListeningPost on the difficulty that nonprofits have accessing capital. A must read for funders, board treasurers and CEO's. It's in .pdf form at http://www.jhu.edu/listeningpost/news/pdf/comm05.pdf

Also, my May newsletter is out--this month on Boards who Cross the Policy vs. Management Line.

If you missed a few while I was gone, here are links to the last three issues --and the subjects of the issues.

April-Staff Satisfaction
March-Ethics and Management
February-Accountability

See you more regularly!

SOX stuff

No, not the White Sox (who?) or even the Red Sox. Most readers know what SOX is. The Sarbanes-Oxley bill, which Congress enacted to counter the excesses of Enron and WorldCom, has some implications (although no outright provisions) for nonprofits. And, pretty much everyone (including yours truly) feels that there are provisions of SOX that make sense for you to implement at your nonprofit.

Independent Sector and BoardSource have done some good work on this. Two papers are available, both in .pdf form:

The Sarbanes-Oxley Act and Implications for Nonprofit Organizations

and

Learning from Sarbanes-Oxley: A Checklist for Nonprofits and Foundations

These two documents are worth both reading and printing out to have on hand if you are asked what your organization is doing in this area.