What to do. What to do.
Revulsion, anger, sadness, resolve. All of these emotions have been filling my head since Charlottesville. Well, really for much longer but seeing Neo-Nazis and Klansmen in the streets made them very raw again.
I found myself weeping reading some of the first hand accounts coming through my Facebook feed. Fear. Bravery. Disbelief.
I’m continuing to accept the challenge of confronting the protections of my own white privilege as I hear the anguish from my friends and colleagues.
I’m still shaking my head as to why we are still here, still at this point in 2017.
I believe the US desperately needs a Truth, Reconciliation and Reparations Process to take a hard look at its storied past on race. Our school history books have merely skated over the brutal aspects of US history that includes genocide, slavery, racism, and war crimes. We must come to a common understanding of what we have perpetrated as both a government and a people before we can begin to put an end to this hate.
It’s also time for a hard hitting inclusion reality check for your own organization.
If you want to respond to Charlottesville, it’s long past time to put an end to the half-hearted attempts at inclusion in your organization. Yes, your non-discrimination policy was a nice start.
But where are the individuals of color on your board? On your staff? Among your client base? At your events? Among your partnerships? Who else are you leaving out?
What is staff’s response when a big donor makes a racist or bigoted remark? How will a fellow board member respond? It happens all the time. Shocking stories.
Get comfortable with discomfort, as a recent article in Nonprofit Quarterly advised.
I promise to remind you, to challenge you, to hold you accountable for fulfilling your espoused values.
There is much work to do. Let’s get to it.
The board’s role in approving the budget provides a great teaching tool for the difference between management and governance..
Okay board, what are you really approving?
In the typical organization, your Executive Director with her leadership team have crafted the budget to review with the board of directors. But when the budget gets to the board level, what exactly is the board approving? Is it that $10,000 printing expense? The $6,000 you are spending this year on electricity?
Here’s what a focus on governing would lead you to consider:
Does your spending match your priorities?
Your budget is a reflection of your annual plan. It shows what investments you are making in the organization. Have you decided that you want to grow your education program, yet your advocacy work is eating up all the personnel? Or was this the year you decided you had to deal with your antiquated technology, but there are no dollars included in the budget to support this work.
Can you pay the bills?
This can be determined in many ways. First and foremost, does the income projected for the year cover the expenses you have outlined? Does your income receipt and expense spending schedule cause cash flow problems at various times of year? If you’ve decided to take on a deficit, what is the implication on your financial reserves this year, and into the future?
Are you spending donor restricted dollars as required?
This is a subset of the above. It may look as if you have a lot of revenues coming in this year, but cash is not always fungible in nonprofits. That grant that doesn’t arrive until the third quarter and can only be spent forward could leave you with a deficit in your unrestricted assets. Or your expenses are meeting the promises of those grants. Or are revenues meant for your capital campaign hiding income shortfalls in your operating budget?
How much risk are you accepting in your income projections?
What is the data behind those revenue projections? Is there a well-defined plan based on past experience and carefully projected new revenues? Do you have the capacity to execute the level of effort behind those growth numbers? Or are you carelessly plugging holes with fictional new revenues because you don’t want to cut expenses that really should be cut.
What are the implications of compensation and benefit increases in the budget?
While I’m not one to want to deny staff well-earned pay increases, I also know that when you raise salaries you are fixing personnel at a higher level for years to come. On the flip side, did you budget staff increases but forget to make any provisions for an increase in compensation for your Executive Director or leadership team? Remember to document the level of your ED’s compensation based on market and any other considerations to justify should the IRS inquire.
What’s Plan B?
If you don’t make your revenue projections, when and what do you start cutting? Do you have another solution, say a line of credit? How much debt are you willing to take on?
Are you following your spending policy?
If you’ve got investment income, what is your policy for moving earnings into your operating budget? Are you staying in those guidelines or making an exception? Why? What are the long-term implications of this decision?
Is there anything suspect or unjustified among the line items?
Theft does happen. More than we want to imagine. So a quick check on growth in expenses from one year to the nest should pop out anything that seems highly unusual and may need a second look. If there is a completely new line item, its okay to ask how that was calculated and if other options were considered. And it doesn’t always happen through pilfering, but also in the forms of inexplicable payrolls, unabating troughs in graphs related to finance, etc. It is always a good idea to hire a payroll company like Fort Collins PEO services to make the company immune against these perpetrations.
Do you have a overhead to program spending ratio? Is the budget within that guideline?
Yes, overhead ratios are highly controversial in this sector. Yet for organizations that submit to charity watchdogs or participate in state or federal payroll deduction programs, there are ratios you need to stay within. If you are part of an international federation, there may be nationally mandated limits in other countries that influence your spending ratios. Does a full cost look at your budget meet those guidelines?
What else? What does your board consider when it reviews the budget?
Yes, the election left me gobsmacked.
But this is no time to act like a deer in the headlights. Hundreds in my community and across the US are already thinking and planning to prepare to act strategically.
You don’t have to be for or against the incoming administration to recognize that a lot is going to change.
As a board and strategy consultant, I’m troubled that very few of the boards with whom I’m working are talking about planning for scenarios that might be heading their way. While front line advocacy organizations are already moving forward, I’m not seeing discussions happening in very many other sectors.
I understand that there is considerable uncertainty. I recognize that it might feel like a waste of time to talk about the unknown.
But isn’t that your job as a governing board? Shouldn’t you be considering best case, worst case and starting to prepare a plan of action? Haven’t you enough evidence of the policy changes that are likely to be made to start planning for those changes?
Your board has a lot of thinking and planning to do.
Need an example? We’ve already in a profoundly new world order. Jobs are vanishing fast, not necessarily because of global trade, but because what can be automated will. And there are very few jobs that can’t be automated.
What does this mean for your clients? What about your donors? Your community? Your employees?
Here’s another: How is the shifting landscape of philanthropic giving affecting your organization, where the rich are giving more and the rest of everyone less?
And the big one: What policies have the new administration and the majority party been championing over the last eight years or eight months? How will that affect us?
If there was every a time for both strategic and generative thinking, it’s now.
When the proverbial sh*t hits the fan, it may be too late to mobilize a satisfactory response.
- I’ve felt that way at least three times before in my voting life. But yes, this one seems completely different. Having been a member of Amnesty International for more than four decades, I’ve read the stories on how democracy can be lost seemingly overnight.
What are the basic principles of nonprofit governance?
Friday I attended an ARNOVA colloquium called A Pluralistic Perspective on Nonprofit Governance: How should context be taken into account?
Four non-US academics cautioned us to think about the many factors that influence how governance is practiced in civil society organizations. They hailed from the UK, Southeast Asia, Reunion and Sweden.
Ola Segnestam Larsson of Ersta Sköndal University College asked the provocative question I repeated at the opening of this post.
A question yes, but really it was a challenge.
- What are the principles that guide governance in our organizations?
- Does our approach to governance flow intentionally as an expression of those principles?
For example, we’ve all learned that boards act as fiduciaries. Fiduciary embodies the principle of stewardship, or having in your care something you don’t own. This fiduciary role requires the duties of loyalty and care in making decisions. Behind the duty of care are the principles of reasonableness and prudence.
Yet, the principle of stewardship is likely not enough to sufficiently guide your governance practices.
Some nonprofits place high value in being democratic. If so, it’s very likely that your organization would spread the ability to influence decisions beyond the board. At Amnesty International USA members have the opportunity to propose and debate policy at regional meetings, at their annual general meeting and in the international body.
In the colloquium, Ola Larsson suggested other principles at play, such as independence and transparency, He did not suggest that there was one prescription for what those principles should be.
If you were to describe the principles of nonprofit governance guiding your board’s practice, what would they be? Would all directors agree?
I’m hearing you say: but we have articulated our values as part of our strategic planning.
Yes, that may be a starting place. But do those values translate to the way you approach governance?
I know I’m going to start this conversations with the boards with whom I work and serve.
The tough challenge for all volunteer nonprofits is finding people to do the work that isn’t so much fun to most people, jobs like fundraising, membership, financial management, communications, human resource management, IT support — you get it.
My colleagues and I are still digesting the lessons to be learned from the Voices of Board Chairs research. (I served on the research team, a subgroup of the Governance Affinity Group of the Alliance for Nonprofit Management.)
One area our research team wanted to learn more about was board chair succession.
Very interestingly, what we heard from these chairs was:
- Fewer than half of our chairs had previously held the role of vice chair, a position commonly accepted in our sector as the primary precursor to the board chair.
“The board chair and vice chairs just quit one day and I was left.”
“.. I was a member of the Executive Committee when the Vice Chair, who was to take over as Chair in three months, had to resign from the board for a significant family health situation.”
- 16% of our chairs had been on the board of their nonprofit for less than a year, and just over half for three years or less.
“I had been on the board for 9 months. Because of my profession, and also my dedication to the group, I was a natural choice to become chair… but it was really early…”
“…all the members of the Board of Trustees, with one exception, indicated they were resigning. I was not on the board, I was a volunteer.”
” the board chair … needed to vacate the position for family reasons, and since I was vice-president of another nonprofit, I was asked to step in.”
My take-a-away from this:
Even well-crafted chair succession plans hit unexpected bumps in the road, such as health issues, new family or work responsibilities, or job relocations.
That left me thinking a lot about building a deep bench of potential leaders.
- What would your board do differently if right from the start it considered every director a potential leader?
- What would you do differently to nurture a big bench of future leaders rather than just one or two?
- What do you do now? How is it working for you?
Other research tells us that boards have come to count on their chairs for ensuring their good functioning. We wanted to follow that up by asking chairs how they prepared for their position and how they understood their roles.
The 635 chairs in the study told us:
- 51% did nothing specific to prepare for this particular chair role
- Many haven’t been on their boards very long
- In hindsight, they say they would have benefited from mentoring, etc
- Yet most report they are focusing on the top priority areas for their boards and have a good relationship with their CEOs.
I’ll have more to share on the results later this week.
P.S. Did I mention that I was part of the research team?
What did matter: Group Norms. But what norms, what behaviors in the group?
The other items on the list:
- Dependable members
- Clear roles, plans, goals
- Knowing that the work was meaningful
- Doing work that had an impact
I was cleaning old files a few days ago when I stumbled across the beloved “Governance is Governance” by Kenneth N. Dayton.
If you are too young to know this monograph, it’s the text of a keynote address to a professional forum hosted by Independent Sector’s Effective Leadership and Management Program given in May 1985 and published in 1987.
I was delighted to find it and read it again. As someone who works with many nonprofit boards and executive directors, the simplicity and clarity of the advice continues to ring true.
Here’s Dayton’s Function of the Board of Directors:
“As representatives of the public, be the primary force pressing the institution to the realization of its opportunities for service and the fulfillment of its obligations to all its constituents.”
And his Function of the President and CEO (that is, chief staff officer/executive director)
“1. Serve as the Chief Executive Officer of the institution, reporting to the board of directors, accepting responsibility for the success or failure of the enterprise. (emphasis added)
“2. With the Chair of the Board, enable the Board of Trustees to fulfill its governance function, and facilitate the optimum interaction between management and the Board.
“3. Give direction to the formulation [of] and leadership to the achievement of the institution’s philosophy, mission, and strategy, and to its annual objectives and goals.”
You can find the full monograph online at the url below.
Reading and discussing this would make for the great start of a board retreat.
Jon and I just finished binge watching the first two seasons of Mozart in the Jungle on Amazon.
The cast includes Bernadette Peters, Malcolm McDowell and Gael Garcia Bernal who just won a Golden Globe for best TV actor in a comedy or musical.
It’s rare that any TV show brings us into the wacky and soul-fulfilling world in which we spend our days and many nights. This charming romantic comedy touches so many themes many of us have confronted.
Spoiler Alert — sharing some content
What’s not to love:
- Crazy charismatic but unpredictable new artistic director
- New artistic director succeeds long time and beloved director
- Board infighting
- An Interim Managing Director who is also the Board Chair
- Fundraising, fundraising, fundraising challenges
- Nurturing wealthy donors
- Traditional classical arts program grappling with cultural changes
- Staff-management relations (and relationships! not advised)
- Vision/mission/ values conflicts
- And many more
You’ve heard me preach that you need to create transforming emotional experiences for your donors and your board members. Without getting into the details, the fundraising scene in Episode 4, Season 1 is priceless.
It’s worth dissecting that one scene with your fundraising staff and board volunteers. For what works, and what doesn’t.
While I’m not recommending that your nonprofit conduct itself as the NY Symphony does in this show, I think you’ll find yourself relating to some of the challenges they face.
Are you already a fan? Why?
If not, let me know what you think.
P.S. My musical friends tell me not to get all crazy about whether the musicians are playing their instruments correctly. And for those who abstain from watching shows with some nudity and drug use, not for you.