That’s the difference the right person can make.

From time to time, I run into organizations that have developed an internal narrative that says they will always be stuck where they are. They will never raise more money than they are, or run better programs or have better relationships with their community. In many of those organizations, it eventually becomes clear that they don’t have the leadership skills at the top that they need to move forward.

When you consider how much of your organization’s success depends on your Executive Director, it’s essential to have the best person in the job.

What do you need in your ideal CEO?

Knowledge, skills, ability and personality are on the list, of course. And I’d underscore the ability to make good things happen. But you need to be clear on what your organization specifically needs from its leadership to accomplish your strategy.

Consider this imaginary scenario:

Your technology school hires a well-known engineer as its head. She wowed the board with her expertise and innovative ideas. But as the board soon learned, the new executive didn’t have the political savvy to get her ideas past the faculty senate or the interpersonal skills to generate alumni gifts.

What made this individual a great engineer, and a terrific interviewee, didn’t translate into being a great leader. She lacked what human resource professionals call the right competencies for the job – the blend of behaviors and actions that allow people to perform in the position successfully.

Whether you are hiring a new CEO or examining the performance of your current one (or a development director for that matter), you’ve got to identify the leadership qualities that will enable your organization to thrive. Maybe you need an entrepreneur who can overhaul a moribund program or funding model. Or perhaps you’ve experienced rapid growth and need a skilled executive to build the systems to sustain it.

Other qualities that I personally think are essential in a CEO are a deep-seated passion for the mission, a fervent commitment to your organization’s values, the ability to respond to the unexpected, an uncanny knack for securing support from all quarters, and a heaping dose of self-motivation and self-discipline.

I’m with business guru Jim Collins who says the best people “wake up every day, compulsively driven to do the best they can because it is simply part of their DNA.”

How can you be sure you have found the right person if you are looking? You can’t really — only time will tell. But certainly it’ll help if you verify — thoroughly and exhaustively — your candidate’s achievements in his or her last few positions.
And if you are assessing your current CEO, it’s going to take true grit to decide if he or she is capable of leading you where you want to go.

But remember, once you have the right person, even a superhero would find it hard to spearhead an organization where board members meddle in operational details, strip the CEO of power and authority, or allow the board chair to unilaterally direct what is really management’s bailiwick.

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Adapted from Gayle’s new book:

How to make your board dramatically more effective, starting today.

In this post, I wanted to go beyond the standard remedies of more strategic agendas, consent agendas, etc. to suggest that you also reconsider your meeting surroundings. If your meetings are anything like most of the meetings I attend, you’d be happy for a window in that conference room now and then.

But what if you could be someplace else? Say, take the board meeting on the road?

When planning retreats, boards are often eager to find an inspiring venue to gather and reflect. I find it interesting – sad really-  that our regular meetings are not equally worthy of inspiring or interesting locations.

So I thought I’d share a few places that created memories for me. These were regular board meetings, not retreats. And while the meeting itself was likely in a perhaps not so spectacular conference room, the tour was the highlight of the visit:

• A  neo-natal intensive care unit
• An electric generating power plant under reconstruction, hard hats and all.
• The oldest synagogue in the USA
• A board member’s living room… open onto a spectacular waterfront
• Cathedral-like, totally empty, industrial building, a possible new home. We drove our cars right inside!
• Court and conference room of the state Supreme Court — just what I expected it to be.

I can hear you say: but we don’t have the money to spend renting spaces for each board meeting. I’m not suggesting you do that. But I’ll bet that if you are creative about organizations with connections to your mission, you’ll find partners eager to welcome you now and then. It doesn’t have to be every board meeting. And the excursion gives your directors new opportunities to listen directly to your stakeholders.

Where do you hold your board meetings? What have been memorable places for you?

I’d love to hear.

That doesn’t sound like a hard question, but for many boards it’s the toughest one to answer. And the most important.

When asked to set a goal for how they’ll enhance their community, too many boards hedge. It’s tempting to think about your organization only in terms of what you are – a community center or youth orchestra, for example.  Boards adopting that viewpoint judge their effectiveness by limited standards: Did we conduct a range of interesting programs? Is our building well-maintained?

But the impact of that community center is much greater than its activities and buildings. It brings generations together. It’s a safe space where children and the elderly can thrive. It rekindles community spirit. These are the results that matter.

What do you want to achieve for your community?

One of my early clients, a community land trust, learned the power of that question first hand.

For many years, the board believed its primary purpose was to boost public support for land conservation. Although the land trust had protected five hundred acres in its first ten years, its only adopted goals were to expand membership and education programs.

Yet the directors were acutely aware that the last few farms and open spaces in their community were at risk from intense development pressures. So, during a strategic planning process, they asked themselves how, exactly, would more members and more awareness save land? Would the lands’ owners wait for these other activities to pay off?

With help from the prodding of several major supporters, we were able to get the board to shift their questions to ones of purpose and impact. Are we really making a difference? they asked. Are we doing enough?

Their answer was: We can do more! The board set a bold new goal – to permanently protect two thousand acres of land – nearly 10% percent of the community. They restructured the organization and produced astounding results. In the next four years, the land trust more than doubled its protected holdings, and today has surpassed its two thousand acre goal. And they have grown to be one of the most respected and professional land trusts in their region.

Too often, I meet boards that are extremely reluctant to quantify the community impact they’d like to make, fearing they’ll fall short of the goal.

Maybe you will.  But as the renowned opera singer, the late Beverly Sills, once said,

“You may be disappointed if you fail, but you are doomed if you don’t try.”

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Excerpted from Gayle’s new book How to Make Your Board Dramatically More Effective, Starting Today. Chapter 3.

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Bylaws aren’t the only rules governing your organization. Board-voted policies also guide your staff and your own actions as a board.

Effective boards make policy rather than decisions. If that sounds confusing, let me make a distinction.

Decisions answer a particular question confronting us here and now. They often lack application to any future questions that might arise.

Policies, on the other hand, provide a framework for making decisions that can be applied to future questions. Not only are they key to sound board decisions, but policies allow boards to more effectively delegate authority to others.

Here’s an example:

Your well-known organization regularly receives offers from businesses interested in marketing opportunities. For example, a local supermarket would like to put your logo on its product and offer you a percentage of the proceeds.

Every time an offer like this arises that the CEO feels unsure about, it goes to the board for a decision. Largely because the reasons for accepting or rejecting are based on the likes and dislikes of the directors in the room, tonight’s decision may contradict one made last month.

This rehashing of similar issues, whether welcomed by the board or forced upon them by the CEO, is inefficient and borders on micromanagement.

Policy-making offers a better approach. The board can streamline decision-making, ensure consistency, and even delegate more decisions to staff by creating a policy for this type of venture.

In this case, a cause marketing policy would outline the conditions that must be met before any deal is acceptable, (e.g. minimum dollar guarantees, agreed payment schedules, written contracts, use of your name and logo, prohibited businesses or types of deals, and compliance with Better Business Bureau guidelines). Once in place, the next offer can be accepted or rejected by the staff by applying this policy.

Of course, policies only have value when they’re followed. If the only record of your policies is in the meeting minutes, within a year no one will remember the details – or even if you made a policy at all.

You can improve board memory by incorporating each policy into a Policy Manual. Arrange the policies by topic, mark them with an adoption date, and tuck them into your board and staff handbooks.

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See “Cause Marketing: 10 Cautionary Principles for Nonprofits”

Wondering how to get a copy of the book? Just click here. Discounts are available for bulk purchases.

* Formerly How are we doing? The 1 hour guide to evaluating the performance of your nonprofit board.

The survey is the latest of five conducted in two-year intervals by Nonprofit Finance Fund. While the survey does not represent a statistically valid sample of all U.S. nonprofits, the number  and diversity of respondents (4,500 nonprofit managers from representing all major nonprofit fields and a range of annual budgets) does create a revealing cross-section of American nonprofits.

The financial squeeze has been particularly tough for nonprofits addressing child poverty, housing insecurity and homelessness, hunger and other human needs that have exploded during the last four years of economic decline and dislocation. These service providers take the brunt of state and federal disinvestment in social services and penny-pinching tactics such as delayed reimbursements.

More than three quarters of nonprofits said that state and federal funding did not cover the full cost of services provided. Sixty-six percent of respondents affected by government cutbacks and shortfalls dipped into reserves to meet the excess cost of services. Among all nonprofits responding, 57 percent said they had only enough cash on hand to meet operating costs for three months or less.

Gayle’s newest book was just released by Emerson and Church, publishers of Contributions Magazine.

It’s an updated version of How are we Doing? her one-hour read to help your board start a conversation about its own effectiveness.

We’ll be sharing excerpts from chapters in future blogs. Meanwhile, here’s what the publisher said:

A high-performing, diligent board that takes its responsibilities seriously is the Holy Grail of nearly every nonprofit in the U.S. Such a board means more money raised, swifter policy decisions, steady governance, and less ibuprofen for the CEO.

But can you realistically get there from here? Can you put your average or good board on the road to greatness? Indeed you can, says Gayle Gifford in How to Make Your Board Dramatically More Effective, Starting Today. And you’re closer than you think.

Gifford’s approach is ingenious. She doesn’t lecture, doesn’t scold, doesn’t harangue. Instead she challenges your board to transform itself by answering a series of trenchant questions. Here’s a sampling:

• How well do we know our community’s needs?
• Do we know if our programs are having an impact?
• Have we given our CEO the necessary support?
• Have we decided the board’s role in fundraising?
• Do our committees improve the functioning of our board?
• Does our board govern and resist the temptation to manage?
• Is our relationship with staff what it should be?

This organization didn’t have a big farm team waiting to be called into service, so they needed outside help.

But even if you do have reserves, you can use this process to expand your circle beyond the usual suspects.

If you are wondering how to invite people to the invite, here’s a start:

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Dear [Name],

From what we’ve heard, your participation and expertise will spark our board member brainstorming session on [day and date] from 6:00-7:00 pm at [organization name and address]. So please join us!

[Add two compelling sentences on what organization does and is looking forward to do].

Our small group of current board members needs your help in identifying and connecting to a wider pool of potential board and committee members. That’s why we are turning to you.

We very much hope you can join us for just an hour on [day and date] to hear about our needs and to share your ideas of individuals we can talk to about volunteer service. There’s no expected commitment from you if you do attend — we’d just like an opportunity to broaden our network and identify people who may be interested in serving [organization].

I’ve attached our “Call for Board Members” to give you a sense of what we are looking for and to spark your thinking in advance about the types of people, skills and connections we are hoping to recruit.

I’ll follow up with you in the next few days to provide more background in advance of the meeting. Or you can reach me at [email, phone].

If you can’t attend, I would still welcome your ideas of people we can reach out to.

Thank you in advance for whatever help you might be able to lend.

Sincerely,

Jane Smith,

Board Chair

P.S. Goodies will be served!  Please join us.

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We had a great turnout and received dozens of names. If you’ve tried this, I’d love to have you share what you did and how it worked for your organization.

The Pros of Term Limits

At a February workshop on board transitions that I led for the Rhode Island Foundation, participants contributed many reasons that term limits make sense :

• They provide a structure to get rid of nonperforming board members when courage is lacking.
• They offer an infusion of “fresh blood.”
• They enable a graceful exit for members who would like to leave.
• They can strengthen recruitment as potential new members or officers know they aren’t committing to  a life sentence.
• They create a sense of urgency in the nominating committee which might otherwise drag its feet on recruiting new members.
• They enable ongoing reconfiguration of the ideal board composition, including opportunities to increase the diversity of board perspectives.
• They grow the base of board alumni and groom a growing field of organizational advocates.
• It’s easier to enter as a new member when you aren’t the only one.
• They light a fire under existing members to complete what they’d like to accomplish during the length of their service.
• A hiatus before bringing back a beloved and missed member re-invigorates their next term of service.

The cons of term limits

But there is a down side to losing long-term members.  In that training, we also discussed what is  lost when board members are required to leave due to relatively arbitrary time limits. Lost assets include:

• The expertise of that particular board member
• Hard to replace know-how or connections that some members may hold
• The passion and interest of that particular board member
• The coherence of the team, which needs to recalibrate after every shakeup
• The commitment and work of a tested member, exchanged for a newer and thus riskier one
• Money, as often a higher level of giving comes with board service, including family foundation or corporate giving tied to service on the board
• Your investment in training a member in your governing process and the strategic issues of your organization
• Wisdom
• Knowledge, not only institutional memory, but also the intricate knowledge of community connections and the history of issues
• Relationships held by that particular member, with donors, with  elected officials or government workers
• Interest, which may fall off as terms are reaching their end

And as to that hiatus… on more than once occasion I’ve noticed that board members who return after a short hiatus aren’t always vetted as well as they should be. The loss felt by the organization is often so great that, in a rush to bring back a beloved former member, no one notices that the interests and enthusiasm of the returning member are different, and often less, than the past.

What’s your experience with board term limits?  What would you add to the pro and con list?

Related reading:

Lions and Longevity

So when my colleague Jane Garthson happened to share this wonderful piece on another list on which I participate, I just had to ask her if I could share it with you.

Jane is President and Principal Consultant of the Garthson Leadership Centre, based in Toronto, Ontario, Canada.  Jane’s been a part of an online peer circle of consultants that I’ve known and relied on for advice almost as long as I’ve been consulting.  It’s always great to share advice with you from a such a wise international colleague .

Thank you, Jane.

P.S. We do have a sample “board matrix.” You can find here it in our free toolbox. You’ll see we’ve already taken Jane’s advice.

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Four reasons to throw away your old board recruitment Matrix

By Jane Garthson

I remember when we first started plotting board member skills and demographics in a table—we felt so organized. We could put check marks on a grid; plan our board recruitment to fill current and upcoming gaps, and document that plan. It was a big step forward over just brainstorming to get a list of people we knew, with no thought to what we really needed. And consultants like me started routinely recommending the board grid or matrix to governance clients.

That started about twenty years ago, and I see the same old formats and lists still being used. We have learned much since then, but these outdated matrices have not been updated to match. Here are four key reasons the old matrix format is critically flawed.

1. The matrix demographics encourage “representational” thinking.

Here’s how the thinking plays out. “Given our current composition, we need one member under 30, one member from Quebec, one director who is a visible minority and one (insert your custom specification here).”

There are three major problems with this thinking. One is that passion for your mission, and skills to govern, should always be considered; never recruit for demographics alone. You should be looking for people who have the passion, skills AND knowledge of some part of your community. Don’t look at different parts of your matrix in isolation.

The second is thinking that any one person can “speak for” a whole community. No one can speak for all young people, all members from the prairies, or any other such group. These individuals often feel like, and are made to feel like, tokens. The retention level is poor for people who feel that way, and often their contributions are lessened while they are on the board.

The third problem, not unique to boards that use matrices, is that the individuals may feel they represent their demographic group. When that happens, they may vote in the best interest of one part of your community or membership and not in the best interests of the whole. They then fail to carry out their duty of care to your organization.

The problem is often made worse by having people elected by segments of your membership, such as provinces, and then failing to educate them on their true board role. Such election processes often also lead to boards of unwieldy size as more segments are added. I have yet to hear of any organization that retained this system of electing board members after a facilitated and independent governance review.

Bylaw changes, however, take time, and in the meantime you can readily communicate to both the directors and the communities that elect them that once on the board, they can bring knowledge of their community to the table so everyone can make informed votes. And they can be a communications link back the group that elected them or is part of their demographic. But they must put the whole community and whole organization first.

2. The traditional matrix skills encourage operational thinking and meddling.

There are dozens of accepted lists of roles and responsibilities of board members, and CSAE among others sells a monograph on the topic. The lists quite properly focus on governing the organization, such as hiring and managing the chief staff officer and carrying out fiduciary duties.

In twenty years of reviewing, and creating, such lists, I’ve never seen a reference to engineering, information technology, marketing, operations management or public relations as board responsibilities. But these operational areas and others like them appear on many board matrices under skills or knowledge. There are even organizations that will help recruit board members for nonprofits that foolishly list ONLY such operational skills. If you try to sign up as a candidate and indicate skills in an area like strategic planning or audit, there is no place to do so.

Once you tell candidates they are being considered because of their operational specialty, they quite naturally expect to use it in their board work. One of two things then happens. The board, operating well, avoids getting into operational details and areas for which the chief staff officer is being held accountable—and the new board members are confused. Or the board has set up board committees in operational areas such as facilities management or newsletters, that often duplicate the work of staff and blur the lines of accountability.

Of course many Canadian associations are not large enough to have all the operational skills they need within the staff, or enough staff time to carry them out. Wise organizations know that the board cannot delegate board work, but both the board and the chief staff officer can find other volunteers to help with operational work, often on operational or program committees properly reporting to or through the chief staff officer. Board members can also volunteer for such committees, but only after making sure they have enough time for their board commitments.

Your matrix should list only the skills and knowledge directly relevant to board work. It can be very valuable to have someone with experience in hiring and evaluating senior leaders, and overseeing high level human resource policies, but a check mark against “human resources” won’t help you know that kind of detail.

3. The traditional matrix focuses on occupation not knowledge.

In the next few years, most Canadian associations will be redoing their bylaws, due to new federal or provincial laws. Do you think it will help to have a lawyer who specializes in real estate and isn’t even aware of the new legislation, let alone how to develop nonprofit bylaws? Or would you prefer directors who understand the legal framework applicable to your nonprofit, and maybe even have recent bylaws experience?

Remember that while lawyers make excellent board members because their education teaches them to ask good questions, others can ask good questions too. And the lawyer on your board is primarily a board member, not a lawyer, so solicitor-client privilege likely does not apply. You can’t just recruit a lawyer to save legal fees.

Similarly, do you want someone with a current understanding of financial reporting methods, risk management and investment policies to head the audit committee? Not all accountants have that sort of expertise. A CFO, or someone who has chaired an audit committee before, may fill the bill better for you, so don’t restrict your search to professional accountants.

In other words, specify the knowledge or skills you need, rather than the professional designation or occupational title.

4. A two-dimensional matrix is not helpful for board education planning.

Finally, it is just no longer appropriate to have yes/no answers in areas where all the board members need to have enough knowledge for informed decision-making. Yes, you want a few people with good financial backgrounds, but EVERY board member needs to be able to understand the financial reports and statements. You need to find out what level directors rate themselves at for such comprehension. If eight out of ten members say they cannot read the financial statements at all, you need an in-house workshop for all directors, so the two that do understand can help the others (and perhaps fill in gaps of their own). If eight of ten can read the statements, you could schedule a coaching session for those two or send them to a local public workshop for nonprofit leaders.

Every board member needs to be a positive ambassador to the community, to participate in group decision-making, to comprehend reports to the board, and, now in many organizations, to be comfortable in electronic communications and virtual meetings. You do not need IT expertise from your board members, but you do need to know which directors need training to participate between meetings.

So learn from the hot trend in movies. Put on the 3D glasses and see skills and knowledge as a cube and continuum, not as yes/no. Have the training needs jump out at you! You can ask people to rate themselves. Have a scale from “I need training” to “I have expertise” with several points between.

For candidates, ensure they understand that low scores in certain areas will require a willingness to take training. And of course, you are able to more readily see which candidates come closest to having the skills and knowledge you need.

Start Over

The old matrices are so detrimental to your recruitment that I truly suggest you just throw them away. Rethink your needs from scratch, based as with all board work on the Vision, Values and Mission Statements, and the current strategic priorities in your plan.

I predict you will have a stronger pool of candidates, more satisfied directors, and more directors prepared to take an active role, become committee chairs or officers, and be your next leaders.

Sidebar:

A national association that was a client of mine in governance in 2009 had one-half of the board seats reserved for a particular demographic, to match the fact that half of their programs served that demographic. They thought this would be important to the communities being served, but my consultations showed hardly anyone in those communities were even aware of the board composition.

These directors tended to speak only when the board agenda topic was about their community, and be much less involved in overall governance of the organization than the directors at large. Also, while they were legally part of the demographic in question, many were not living in the same areas as the programs were being delivered, and were poorly connected with those geographic communities.

Once those issues were disclosed to the board, there was unanimous consent to change the bylaws and focus more on skills and knowledge, and much less on demographics. That actually made the board more appealing to the most qualified candidates from that demographic, as they no longer saw themselves being asked to fill the quota specified in the bylaws. And the board had more ability to seek directors from another demographic that had been identified as greatly needed at that time.

They threw away their old matrix, and they are glad they did.

The notion that stodgy old tax-funded social programs will soon wither away to be replaced by dynamic private sector social enterprises at no net cost to taxpayers has captured the imagination of  social entrepreneurs and is gathering believers among politicians facing brutal budget choices.

If that privatized future comes to pass, then Yvonne Fischer at PublicAdministration.net is right to remind us that government itself will not disappear from the social sector. Her recent article, Public Administration and the Impact Economy, looks ahead to the day when administrators in the public sector will play central roles in leading the impact economy, from capitalization to rulemaking to creative leadership.

So, will government bureaucrats and nonprofit fundraisers really be forced to make elevator pitches to venture capitalists to get money for social needs like child welfare services, group homes for disabled adults or immunization? Maybe. President Obama included $100 million for Social Impact Bonds in his recently proposed 2013 federal budget. And several states have already jumped ahead to offer “Pay for Performance” bonds on their own.

But hang on. The very first and so far only SIB was issued in the UK in 2010. It hasn’t paid off yet and remains an experiment in progress. We haven’t seen even one success so far.

But the fundamental problem with SIB-mania is this: truly transformative social innovation isn’t profitable.

As Kevin Starr argues in The Trouble with Impact Investing, you can’t have your cake and eat it too:  ”… there really is only one bottom line. It’s either impact or profit.” Society does not have a single financial interest in any social circumstance. And potential financial savings do not drive transformative social change.

If cost (or common sense) were decisive, America would not now have 2.6 million of our people locked up in prison. Taxpayers might like to save money spent on prisons, but guards, construction companies, host communities and private prison operators all have a market interest in growing the prison industry regardless of its social impact. You really want to close wasteful prisons? Prepare for political battle.

Did anyone project a return on investment from abolishing slavery or child labor or racial segregation? How would social entrepreneurs monetize these huge social impacts?

Women’s suffrage did not reduce government expenditures as far as I know. Social Security and Medicare have vastly increased social spending, yet most Americans believe this is money well spent.

These transformative innovations in social organization did not solve financial problems. They changed conditions that society, as a whole, could no longer tolerate because their persistence violated new moral, political and intellectual beliefs.

Significant social innovations create social conflicts, making them painful, difficult and time-consuming to design and put in place. The final shape of change responds to far more than money. It usually disappoints those who worked for it.

Social Impact Bonds may help government save a few dollars here and there, although I think taxpayers will eventually balk at paying off bonds with notional savings to budgets created years or decades later. But I’m quite certain that true social impact will always be far too complex, contentious and messy to capture in dollars for investor profit.