Should a CEO sit on the board of his/her own directors' companies?

Tuesday, December 29, 2009

IRS Issues 990 Guidelines to Its Agents

It's time to start thinking about filing your organization's 990. As you undoubtedly know, the new form looks very different from that in years past. The IRS has been providing its agents with guidelines that will help them evaluate the completed forms they receive. We thought you might want a copy of those guidelines so that you can be sure you are meeting the agency's expectations.

Governance Project: Guide Sheet for Completing the Project Check Sheet

1. Enter the Agent’s name and group number.

2. Enter the name of the organization examined.

3. Enter the EIN of the organization examined.

4. Enter the tax period or periods examined.

5. Enter the Form being examined (Form 990, Form 990-EZ,or Form 990-N). If different Forms were filed, enter the Form filed for the primary year under
examination. If the organization was not required to file a Form 990, Form 990-EZ,or Form 990-N, select Not Applicable.

6. Enter the organization’s foundation code.

7. Select Yes or No depending on whether the organization has a written mission statement that reflects its current I.R.C. § 501(c)(3) purpose(s). If the organization does not have a written mission statement, answer No. Likewise, if the organization has a written mission statement but its current activities do not reflect that mission statement, answer No even if the organization is fulfilling other appropriate I.R.C. §501(c)(3) purposes.

8. For each item, select Yes – just officers, Yes – just directors, or Yes – both, as appropriate, based upon whether the organization’s bylaws address the listed
information with respect to those individuals. Select No if the bylaws do not address the listed information at all, or N/A – No Bylaws if the organization has no bylaws.

9. Select the appropriate box or boxes corresponding to those individuals or groups of individuals to whom the organization provides copies of its most recent articles and bylaws.

10. Enter the number of board members with voting rights as of the first date of the primary tax year under examination.

11. a. Select the appropriate response (Once per year, Twice per year, Quarterly, Once per month, Twice per month, or Other) depending on the number of times the board met during the primary year under examination.
b. Select the appropriate response (Once per year, Twice per year, Quarterly, Once per month, Twice per month, or Other) depending on the number of times the board met during the primary year under examination. The board includes members with voting rights as well as those without voting rights. For purposes of this question, the term full board does not require that all board members actually be present.

Example: If all board members were invited to attend a meeting and the board
actually met, then this would qualify as a meeting of the full board.

12. Select the appropriate response (Yes-met the requirements, Yes-exceeded the requirements, No-did not meet the requirements) depending on whether the number of meetings actually held by the board met or exceeded the meeting requirements as set forth in the bylaws.

For example, if the bylaws provided that the board would meet monthly (twelve times in a year) and the board only met ten times during the primary year under examination, then the response would be No. If the board does not have bylaws, the appropriate response is N/A – No bylaws.

13. Select Yes or No depending on whether compensation arrangements for all officers, directors, trustees, and key employees are approved in advance by an authorized body of the organization composed of individuals with no conflict of interest with respect to the compensation arrangement. If anyone with a conflict of interest with respect to a particular compensation arrangement participated in the approval of that particular compensation arrangement, the appropriate response is No. Select N/A – No Compensation Provided as appropriate. For purposes of this question, officers,directors, trustees, and key employees are the same as the definitions contained under I.R.C. § 4958.

14. a. Select Always, Sometimes, or Never depending on whether the organization’s authorized body relies upon comparability data in making compensation determinations. Select N/A – No Compensation Provided as appropriate.
b. If you responded Always or Sometimes to 14a, select the appropriate box or boxes corresponding to the comparability data considered by the organization in making its compensation determinations.
c. If the Other response is selected for 14b, please write in a brief description of the other comparability data referred to.

15. Select Yes or No depending on whether the organization contemporaneously documents the basis for its compensation determinations. For example, do the organization’s meeting minutes or other documents, created at the time compensation is approved, reflect the reasons underlying particular compensation determinations?Select N/A – No Compensation Provided as appropriate.

16. a. Select Yes or No depending on whether any of the organization’s voting board members have either a family or business relationship with any other voting or nonvoting board member, officer, director, trustee, or key employee. Family relationships include those of spouses, brothers or sisters, spouses of brothers or sisters, ancestors, children, grandchildren, great grandchildren, and spouses of children, grandchildren and great grandchildren. For purposes of this question, officers, directors, trustees, and key employees are the same as the definitions contained under I.R.C. § 4958.
b. If you responded Yes to question 16a, enter the number of such family or business relationships that exist.
c. If you responded Yes to question 16a, enter the number of voting members with family relationships, the number of voting members with business relationships, and the number of voting members with both types of relationships with any other voting or non-voting board member, officer, director, trustee, or key employee. The number of family, business, or both relationships should equal the number of relationships indicated in question 16b.

Example: An organization has a total of ten board members. Husband and Wife both serve on the board. Wife and another board member are the sole shareholders in a for-profit corporation. In addition, Wife and Husband are partners in a for-profit organization. For 16a, the answer would be yes. For 16b, the total number relationships would be two. For 16c, the answer would be one business relationship (the relationship between Wife and the other board member) and one for both (since Husband and Wife have both a family relationship and business relationship.

17. Select Yes or No depending on whether effective control of the organization rests with a single or select few individuals. For example, is there a single individual or small group of individuals to whom the board typically defers?

18. a. Enter Yes or No depending on whether the organization has a written conflict of interest policy.
b. If you responded Yes to question 18a, select Yes or No depending on whether the conflict of interest policy addresses recusals. If you responded No to 18a, select Not Applicable.
c. If you respond Yes to 18a, select Yes or No depending on whether the conflict of interest policy requires annual written disclosures of conflicts of interest. If you responded No to 18a, select Not Applicable.
d. Select Never adhered to, Sometimes adhered to, Always adhered to, or Not
Applicable depending on whether the organization’s conflict of interest policy was adhered to. For example, did those with a conflict of interest on a particular matter recuse themselves from the corresponding decision making process? If you responded No to 18a, select Not Applicable. If no actual or potential conflicts of interest were disclosed during the primary year under examination, select Not Applicable.

19. Select Yes or No depending on whether the organization has systems or procedures in place intended to ensure that assets are used properly and consistently with the organization’s mission.

20. a. Select Never, Once per year, Twice per year, Quarterly, Once per month, Twice per month, or Other depending on how often the organization provided board members with written reports of the organization’s financial activities. The board includes members with voting rights as well as those without voting rights.
b. Select Never, Once per year, Twice per year, Quarterly, Once per month, Twice per month, or Other depending on how often the board discussed/considered reports of the organization’s financial activities. For example, look at whether the organization maintained complete, current, and accurate financial records, and whether the board had and exercised the opportunity to discuss/consider those reports and records. The board includes members with voting rights as well as those without voting rights.

21. Select Yes or No based on whether, prior to filing, the organization’s Form 990 was reviewed by either the full board or a designated committee. Please note that the question addresses a review of the Form 990 prior to filing, not merely receipt of the Form 990 prior to filing. If the organization was not required to file a Form 990,Form 990-EZ, or Form 990-N then select Not Applicable.

22. a. Select Yes or No depending on whether an independent accountant’s report was prepared during the primary year under examination.
b. If you responded Yes to 22a, select Yes or No depending on whether the
accountant’s report was discussed/considered by either the full board or a designated committee. If you responded No to 22a, select Not Applicable.

23. a. Select Yes or No depending on whether a management letter was prepared by an independent accountant during the primary year under examination.
b. If you responded Yes to 23a, select Yes or No depending on whether the
management letter was reviewed by either the full board or a designated committee. If you responded No to 23a, select Not Applicable.
c. If you responded Yes to 23a, select the appropriate response (Yes - adopted some, Yes – adopted all, or No – adopted none) based on whether the organization adopted any of the recommendations contained in the management letter. If you responded No to 23a, select Not Applicable.

24. a. Select Yes or No depending on whether the organization has a written policy for document retention and destruction.
b. If you responded Yes to 24a, select the appropriate response (Yes – all of the
time, Yes – some of the time, or No – none of the time) depending on whether the organization adhered to its written document retention and destruction policies during the primary year under examination. If you responded No to 24a, select Not Applicable.

25. Select the appropriate response (Yes – all of the time, Yes – some of the time, or No – none of the time) depending on how often the board of the organization contemporaneously documents its meetings and retains this documentation.

26. Select the appropriate response depending on whether your examination was hindered by a lack of necessary documentation. Consider whether documents that should have been available were never produced, prematurely destroyed, or otherwise unaccounted for.

27. Select the examination disposal code for the primary return from the drop down menu.

28. Select the principal issue codes for the primary return from the drop down menus.

Monday, December 7, 2009

How Can I Get My Board to Evaluate Me?

Q: Could you refer me to an appropriate form or format for executive director evaluation? I am the executive director. While the board says it appreciates the work I have accomplished, I can’t seem to get anyone to formalize this feedback or talk about the raise I was promised as inducement for my accepting the position originally. I submitted a detailed progress report on my first anniversary, enumerating all that I had achieved. This included cutting costs equal to my annual salary, creating procedures where none existed previously and building our brand. I find myself, seven months later, still waiting for my first evaluation. The board recently asked me to find an evaluation form that it can use to facilitate the process. I’m hoping that if I give the directors one, they will finally sit down with me. In doing my research I came across your article, “Evaluating the Top Administrator: A New Approach,” and I thought you might be able to point me in the right direction. Thank you.

A: I can feel your frustration. It’s hard putting your heart and soul into a job, not knowing whether your bosses think you are on the right track, let alone whether or when you’ll get that promised raise. All of us deserve an evaluation. It’s the opportunity to get some pats on the back and learn where we need to grow.

However, I’m not surprised that your board keeps putting off your evaluation. As you read in the article to which you refer above, most people are very uncomfortable judging others. And, in today’s economy, where uncertainty reigns, you can understand why the directors might be less than anxious to provide any evaluation, let alone one they tied to a raise.

Let me start by saying congratulations for all that you have accomplished in a relatively short time. It is impressive and I’m sure the directors that verbally express appreciation are sincere. I must ask, though, whether these goals were the board’s priorities or yours. The fact that the board as a whole has not rushed to praise you leads me to suspect that these were your priorities and the board doesn’t know how to say it wishes you had done other things instead. I further suspect that the directors are hoping you will present them with an evaluation form that lists a plethora of typical tasks that they can then say you ignored as you forged ahead following the beat of your own drummer.

I hope I am wrong. The only way to avoid this in the future is to sit down together with your board and create a list of specific goals that are tied directly to the organization’s vision and for which you will be responsible. Each goal should be measurable and have a deadline for achievement. Each should specify whether the accomplishment is expected or whether it would be seen as exceeding expectations. Any promises of a raise should be in writing and tied to these goals. (Note – in these times do not be surprised or upset if the board doesn’t wish to commit to any sort of raise or bonus. Most likely, it is just being prudent with the organization’s funds.) I would also suggest that you put dates on the calendar right now for a quarterly or six-month review. The dates are more likely to be honored if they are already scheduled. If you wait until the evaluations are due it is too easy to let day to day crises prevent you from making the necessary time.

Of course none of this addresses the specific concerns you raised. I would go to your board chair and ask for a date within the next two weeks that you can put on your calendar for an evaluation. I would remind him or her that evaluations are a “best practice.” They are more critical today than ever before because they will ensure that you and the board are of a single mind moving forward in these chaotic times. You are holding your staff accountable for meeting the needs of the community and you expect to be held accountable as well. You are always looking to grow and you know that you can benefit from the board’s observations. You count on the board’s ability to share the community’s perceptions of you and the organization, and an evaluation provides the perfect opportunity to get these perceptions out on the table…. I could go on, but I’m sure you get the idea. The one thing I would not mention is that you are looking forward to discussing money. Get the evaluation first. You can always speak about money later.

When you approach the board chair I would acknowledge that you were asked to find an evaluation form that the board can use. I would say, however, that the more you researched the more you heard that off-the-shelf evaluation tools prove inadequate because no two executive director/CEO jobs are the same and check boxes or Likert scales fail to adequately reflect either the job that is being done or that needs to be done in the future. You can refer him or her to the article you found and referenced in your question. Suggest that you are willing to sit down with a small group of directors to help them determine the skills and characteristics that they see as important for the executive director of your organization to have at this time in history and at this point in the organization’s march toward vision accomplishment. You might also say that you have given the subject some thought and are prepared to help the board committee come up with something mutually satisfactory in a single meeting. (Remember, you don’t want this process to drag on any longer.) Of course, that means you must do your homework and be prepared to come with your ideas fully formed!

Good luck.

Friday, October 30, 2009

Saying Goodbye to Tucson

We completed our fifth day of the Community Driven Institute immersion class. We have worked through the three phases of community impact planning, starting with the vision, followed by the conditions that need to be present to achieve the vision, the values that will guide actions, and finally how to create organizational wellness for “thrivability.” We have discussed in depth how we can do a better job as consultants to facilitate our clients’ reaching their greatest potential.

As a reward for all our hard work, over lunch on this final day of class we celebrated all we have learned from our extraordinary teachers Hildy and Dimitri and then we celebrated what we learned from and about each other. We ended our day, and this week that has enriched our lives so very much, at the Sonora Desert together watching the sun set behind the mountains. As we drove away from the beautiful red/orange sky, we knew this was not an end but the beginning of our work “off campus,” with our own clients, our partners in making the world a better place.

Thursday, October 29, 2009

Thursday’s Musings from Tucson

It was another stimulating day at the Community Driven Institute. One lesson that stuck in my head – maybe because I was a communication major in college – is that our choice of language can keep us from achieving our vision. “Barriers,” “blocks,” “obstacles,” “threats,” “weaknesses,” “challenges” and “if only” are just of few of the terms that we commonly use, even intentionally invoke, when planning for our futures. The rationale is that by identifying such factors we will know how best to proceed. However, these terms are insidious in that they strip us of power. They plant the seed that our vision is unrealistic if not impossible to achieve.

In truth, what we typically identify as items standing in the way of our success are merely conditions that exist. Conditions we can expect to come across on our journey toward creating an amazing community. Conditions devoid of connotation – negative or positive. Conditions we are fully capable of successfully confronting head-on or avoiding altogether.

When we slip and start talking about impediments to our moving forward we need to stop ourselves and ask, “So, we would want to see what?” This will keep us from becoming mired in the mud and refocus us on the firm path before us.

Wednesday, October 28, 2009

More news from Tucson

As Terrie wrote in her blog yesterday, we are taking part in an incredible five-day immersion class taught by the brilliant Hildy Gottlieb and Dimitri Petropolis of the Community Driven Institute. Today was day three. Each day is building so naturally upon the one before, it is easy to lose track of the huge amount of information we are packing into our little brains. Until, that is, we take a few minutes to reflect at the end of the day about what has stood out for us. Then, we begin to understand the depth of the concepts we are processing and the changes we are seeing in ourselves.

Today, we took the vision and values exercises we did yesterday and applied them. We learned how to better help organizations use these vision/value discussions to anchor them as they move toward creating their best potential, their dream community. Among the many things I learned today is the "means" to better guide these discussions to the highest "ends," and in so doing to always Trust the Process, and Trust the [people in the] Room.

It continues to astound all of us how Hildy has distilled a lifetime of work into this amazing Community Driven Institute. This immersion course is taking us as consultants to the next level so we can better do our part to create the healthy, compassionate, vibrant world we seek. I for one am thrilled to be on the journey and can't wait to see what I will be packing into my head tomorrow. Stay tuned!

Tuesday, October 27, 2009

Random Thoughts from Tucson – Tuesday

Gail Meltzer and I are In Tucson this week, taking part in the Community Driven Institute. The brainchild of Hildy Gottlieb and Dimitri Petropolis, the Institute evolved out of Hildy’s book, The Pollyanna Principles, and focuses on governing for what matters, instilling a “culture of can” and engaging the community in creating amazing futures where organizations actually achieve their visions.

The class is small – there are only five participants – so we are able to explore issues in depth. It is also incredibly intense. We are meeting from 8:30am to 5:15pm everyday for a full week. We walk out of the Institute each evening with our brains overflowing with new ideas for helping our clients dramatically move their organizations forward. While you will be hearing more from us about the concepts we are exploring as time goes by, Gail and I want to share some of our excitement with you now. Therefore, we’ll be blogging the rest of the week.

The focus today was on vision and values. If you have ever worked with me, you know that I am a firm believer in the power of vision and values and that they should guide every decision you make. However, in the future, be assured that these two elements will take an even more hallowed position in the work that we do. There is a saying that when you reach for the stars you may not quite get one but you won't come up with a handful of mud either. By embracing vision and values you can change the community in ways you never thought possible. In today’s environment, where violence, pollution, hunger, poverty, drugs, illness and other issues cloud our future, it is incumbent upon us to fulfill our promises to the community. And, it is doable merely by keeping our eyes on what is important and working backwards from there!

Wednesday, October 7, 2009


Q: We are looking for a grant writer. A few people on the board suggested different individuals they knew from other organizations, but they seem expensive and only one said she’d be willing to work on a contingency basis. While most of us wanted to go with her, someone on the board said we can’t. The rest of us don’t really understand why not. And, if that’s true, we definitely don’t have the money to make a mistake. How do we know who to choose? We agreed to write you and go along with what you said.

A: While I can’t promise to help you make the “right” choice, I can help ensure that you make a better choice.

Let’s start with the easy part of your question – the contingency fee. Whoever on your board said you should steer clear of this person was offering good advice. On the surface, such a “guarantee” of success seems like the most prudent approach to take. The grant writer appears confident enough of her ability to obtain the grant on your behalf that she is willing to risk her time and energy on the chance of a return. That seems to imply that this person is more competent than the others. On top of that, you don’t have to put any money out until you have money in your pocket. However, there are several reasons why the seemingly smart move is the wrong move in this case. Let me share just two here.

First, every professional organization to which a fund raiser in general and a grant writer in specific might belong forbids contingency fees in their codes of ethics. While we could debate the validity of the reasons for this, that is not at the heart of your question. I think it is enough to say that if this person is going against what is deemed standard ethical behavior in the field, either she is not as familiar with the field as she thinks, she’s new and feels that this is a good way to break in, or she is knowingly ignoring the standard and then you have to question what other ethical standards she might ignore while representing your organization.

Second, most grant guidelines clearly state that any costs associated with writing the grant proposal cannot come out of the grant. This means that she is going to have to hide her payment in the proposal. It also means that you will have to play with the books in order to maintain the charade when, if you get the grant, you report back to the funder – as required – on the use of the funds. I trust you don’t want to take that road. If you do and your antics are discovered, you may not only have to pay back the money, but you stand a chance of never getting another grant.

So, if you’re going to bite the bullet and pay for your grant writing services upfront, how do you make the best choice? You took a good first step by asking board members who they have successfully worked with in the past. A strong track record is an excellent indicator. Ask for the percentage of grants each person has gotten funded. You might also want to find out the average size of each grant. Someone might have a great success rate, but only have experience, for instance, with grants under $35,000 when you are looking to go after a several million dollar grant.

I would ask each of these individuals about the mission areas in which they specialize. Most grant writers tend to focus on one or two. Someone who already works in your mission area will know who the funders are, what they are looking for and how they like their proposals written. In addition, they will know where to find many of the relevant demographics and other statistics to be included.

I would see what each requires of your organization. Grant writing is a partnership. The grant writer cannot do the job on his/her own. An experienced grant writer will be able to tell you exactly what the organization’s role in the process will be and what materials the organization will have to produce.

Assess the chemistry. Again, this is a partnership. You will be working closely together and often on short deadlines that can test the best relationships. You need to feel comfortable with this person.

Ask to see writing samples. While the person should not be giving you another organization’s grant proposal without having previously obtained permission, or at least redacting all identifying information, you can look at almost any writing sample to determine if the person writes coherently and is attentive to spelling, grammar and basic layout.

Finally, there is now national certification for professional grant writers. The lack of such certification does not mean that someone is a bad grant writer. This certification has only been available for a relatively short while, so few have had the opportunity to work through the process. And, some grant writers who have been working successfully for a long time and have a loyal clientele may never feel the need to go through the process. Besides, the possession of certification does not guarantee someone is a star. However, the rigorous process does rightly grant you some assurance that the person has had several years of experience in the field and has demonstrated a high level of knowledge about it. You can find the names of those who have obtained certification by going to

Just remember, you can find the best grant writer in the world but you should still not expect grants to be the primary source of your funding. You need a diversified funding stream – especially today when grants funding is down significantly.

Saturday, September 12, 2009

Your Annual Report Should Rock!

If you are not yet creating an annual report that shares with donors and other supporters what you have achieved in the past year through their generosity and commitment to your important work....WHY NOT? If you are already producing an annual report but are not using it to help raise awareness and funds, WHY NOT? Your annual report gives you a unique opportunity to do so much more than disclose your financials for the year. It can also be a compelling marketing piece to be used all year long. Here are 10 things to think about to take your annual report to the next level.

1. Select a theme for the report, something that runs through your organization's past 12 months. Have you had unprecedented growth in challenging times? Have your exhibits drawn huge crowds? Have you begun to attract a whole new demographic/age group/type of student? You may even want to have the whole report written from the point of view of one of your clients, students, visitors.

2. Tell stories that illustrate how you have changed someone's life or made a dramatic difference in your community. Focus on people. Even if your organization is an animal or environmental protection group, talk about how people are affected by what you do.

3. Use dramatic photos. Make them big, perhaps even an entire page. Avoid small, group photos that are ordinary and boring. If you have some in your file that are appropriate, all the better, but if you have to take new ones, don't pinch pennies in this regard. Have them professionally done. You may also want to think about what "cut lines" you want to have BEFORE you decide what photos to use. Then you can take the photo you need.

4. Write for the reader. Use a conversational tone. Picture your typical reader as you are writing. Avoid jargon, long sentences and paragraphs, boring statistics. This isn't about YOU, this is about your donors and supporters. Think about what they want to hear, not just about what you want to say.

5. Use simplified financials, a pie chart, a brief financial statement. While this is vital to the report, it is only a part of your story and should not dominate the piece.

6. List your donors and meticulously check for accuracy and typos. Celebrate them and acknolwedge their critical role in what you were able to accomplish in the last year.

7. Have the report professionally designed and printed. Don't prepare it in-house and run it off on your copy machine. Because you are going to use it all year long (see number 8), spend the money to make it look crisp, clean and graphically beautiful.

8. Print enough copies to be able to do the following:
  • mail to all your donors, supporters, key stakeholders
  • provide copies to your vendors and board members to put in their waiting rooms as appropriate
  • include in your media kit
  • send to new donors
  • send/give to prospects and those who visit your facilities
  • provide at your events
  • send to your collaborative partners

9. Have it translated into another language if that is appropriate for your organization. You may not need to print hard copies in a second or even a third language; it may be sufficient to have them available for download from your website. And of course you will have the English version available on the website also.

10. Begin now and continue all year long to make notes about what to consider including in next year's annual report to make it even better.

Tuesday, September 1, 2009

Make the Founder a Permanent Board Member at Your Peril

Q: Our current executive director is the founder of our organization. While she has accomplished much over the years, the board feels it is time to find someone with a different skill set to move the organization to the next level. We expect this will be a difficult transition. The board chair suggested we make the founder a permanent board member in recognition of her vision and commitment. While I think the chair envisioned this as an honorary or advisory position, some of us know the founder well and suspect that she will expect that not only she but her family members serve as voting members on the board for generations to come. Our guts tell us this wouldn’t be wise. What are our options and how do you suggest approaching this?

A: Listen to your gut! While I appreciate what you perceive to be the founder’s desire to remain intimately connected, the organization belongs to the community, not to her. And, your responsibility as board members is to the community, not to her. Allowing her and her family to serve as permanent voting members of the board would not be wise on several levels.

As long as the founder remains on the board, the rest of the board will tend to defer to her. This will make the position of the new executive director untenable, and the entire reason you went with this change in the first place will become moot because she will remain the de facto executive director.

A clean cut would be better. To make such a cut easier, before the founder is asked to step down I would make sure that the board takes the time to review with her the mission, vision and organizational values. If she feels confident that everyone understands her vision and is committed to taking it, and the values on which the organization was founded, forward, she may be more amenable to letting her “baby” operate independent of her, knowing it won’t stray too far from “home.”

There may be arguments for allowing her family members to serve on the board, but having multiple members serve at one time is wrought with potential problems. It’s not that there aren’t some definite pros, as I enumerated in a 2000 column entitled, “Should Husbands and Wives Serve Together,” but the cons are powerful. Among them: her presence will always loom large, dictating the direction of the organization. In addition, you will be limiting your reach into the community. Families tend to share many of the same contacts. Today, when board size is shrinking, it becomes particularly important to insist on greater diversity to increase the probability of widening your organization’s circles of influence as much as possible. Of course, then there are the flip sides of the same coin where group dynamics can become dysfunctional if the family either votes as a block or is constantly fighting. In the first instance the family forgoes the critical thinking so essential to the best decision-making. In the second, others may disengage to avoid being thrust in the middle of a public argument. Of course, the founder’s desire to have family members serve in perpetuity amplifies the potential problems. What happens down the road when a grandchild or great-grandchild lacks an affinity for the organization, yet is expected to serve?

One way you might handle this challenge is to be totally honest. Play on the woman’s love for the organization and her desire to see it flourish over the long term. Suggest that you would like to add “emeritus” to her title and invite her to serve as the face of the organization as well as an honorary board member throughout her lifetime. You may further recognize her by assuring her that her name and emeritus title will remain on the organization’s collaterals in perpetuity by codifying such instructions in organizational policy documents. However, I’d think long and hard about having her come to board meetings even without a vote. If she has a voice, she may still hold sway – at least until all board members who served with her when she was executive director are gone. Understand that she may not find these terms acceptable and you will have to make some very difficult decisions.

Of course, I’d start with going back to your bylaws and articles of incorporation. There are founders that insist on some sort of perpetuity clause when drafting these documents (something with which I am very uncomfortable). If she did, unless you change the bylaws and/or articles and re-file them with the Internal Revenue Service, you are pretty much stuck by the language contained in those documents.

Thursday, August 27, 2009

10 Fundamental Pillars for Organizational Success

Very kindly, I have been invited to contribute to this site by the management of CoreStrategies for Nonprofits where I have agreed to be a part-time Senior Consultant. After 46 years of successful professional experience, 29 in the For-Profit (FP) world and 17 years in the Not-for-Profit (NFP) world, I retired in June 2009. In the last 26 years, I was at the Senior Level or the President & CEO of seven organizations; In those 26 years, we successfully turned around 20 (fifteen FP and five NFP) organizations, from “ready to close” to complete financial and programmatic stability.

There are many fundamental pillars on which the management, quality, and growth of an organization, regardless of the size and sector [NFP vs. FP] in which it operates that are essential for the organization’s success. In these challenging times, I urge that you consider changing or dismantling these key aspects of your organization only after careful consideration and forethought.

For-Profit and Not-for-Profit -- For me there never was a distinction between the NFP and FP worlds. In one, I operated a “Business for Shareholders”; in the other, I operated a “Business with a Heart” but I operated under the fundamental principle that I was running a business.

Fundamental Pillars - The keys that permitted us to succeed in each organization, regardless of the industry or country are simple. Each key has been carefully developed and tested over time.

1. Three to Five-Year Business Plan: Vision and Implementation – Ensure that a three to five-year plan is always in place, casting the vision and intentions out in front of us to guide our day-to-day work.

2. Philosophy and Methodology – Ensure the creation of a common organizational culture marked by:
• Commitment to the children and families that you serve and the staff that
serves them;
• Vision of the future that you are creating, grounded in reality;
• Planning that creates a map for the realization of your vision;
• Team Work that is guided by partnership and accountability, and
• An Empowering Environment that recognizes the power of an environment to shape outcomes and empower people to succeed.

3. Finance and Accounting – Create a Finance and Accounting Department that will ensure that all aspects of the organization’s finances will comply with all applicable procedures and legal requirements, including: a balanced budget; 100% accuracy; and financial reports that are produced accurately and on time, and will be distributed to everyone who has accountability and interest for the financial results.

4. Human Resources – Create a Human Resources Department that supports the hiring of excellent people, ensures that the organization provides an environment in which motivated people can thrive, and vigilantly monitors your compliance with all HR-related legal, administrative and procedural requirements.

5. Programmatic Components: Fully Funded and at Capacity -- Ensure that all your programs are: Fully funded; At capacity or nearly so; Are excellent in both concept and delivery; Always seeking to take that excellence to new levels; Provided the resources – in terms of facilities, technology, staffing, etc. – that they need to succeed; and the most important part, Monitored for program results, and those results shared with funders and with the community, as appropriate, both to comply with grant and contract reporting requirements and to inspire continued funding of programs that make a difference.

6. Fund Development -- Create a Fund Development Department that prepares an Annual Fund Raising Plan; Make prospect identification, qualification and cultivation a regular part of the work; Generate partnership and broad-based participation (by staff members, Board of Directors, volunteers, etc.) in fund-development efforts; Establish and meet interim (pledge and revenue) targets; Be accountable by insuring that results are the Driver; and Thank Generosity -- Acknowledge donors and involve them with your organization, to foster long-term participation and support.

7. Information Technology – Ensure that the hardware and software required to operate the organization is in place; Ensure that it is maintained and upgraded as needed.

8. Internal Audit and Compliance – Engage this “Internal Conscience” that is accountable for ensuring that your organization develops and maintains internal controls to (a) foster accountability, (b) maximize effectiveness of operations, and (c) ensure that the organization complies with all applicable laws and ethical standards

9. Everyone Must Comply -- Ensure that the Board of Directors, the President and CEO, the Executive Management Team, and the Staff comply with all legal, administrative and ethical requirements for the integrity of the organization.

10. Facilities -- Take steps to ensure that all properties owned by the organization are used strategically, or to sell those properties and use the realized gain to further your mission.

Wednesday, August 5, 2009

Why is Cumulative Giving So Neglected?

I've been contributing annually to not one, not two, but at least a half dozen environmental groups for over 35 years. Granted, my gifts have not been huge -- mostly in the $25-50 range -- but they have been consistent. I don't believe I have ever missed a year in all this time. I'm sorry to report that NONE of these organizations has acknowledged my cumulative giving over so many years, or contacted me outside of direct mail. What a shame.

It seems I am invisible to them, just another of the tens of thousands of donors who cycle through their organizations, usually introduced through a direct mail appeal. The difference about me is that I have never stopped giving, while I'm sure many tens of thousands of others have moved on to other charities. After all these years, they know absolutely nothing about me. Here's just a small sampling of what they don't know or what they have ignored:
1. I've moved dozens of times over these years, and every time I made sure to give them my change of address.
2. I'm incredibly loyal. Even after all these years of being treated like someone they've never heard of every time I give, I still keep giving.
3. I'm older now! I'm a member of the cohort of excellent planned giving prospects. I'm low hanging fruit!
4. I live in a major metropolitan area where I'm sure many other donors to these organizations live. They could get us together and bring us much closer to the organization. They are probably ignoring all those donors too.
5. I've been giving unrestricted gifts all these years. Maybe I could be persuaded to support specific projects at a higher level if I were made aware of those opportunities.

I'm re-evaluating my giving to these groups this year for the first time. Frankly, if I wanted to be ignored and under-valued for 35 years I could have stayed married to my first husband!

I deserve better, and this is the year I make my move. I've been giving to a few other groups that show appreciation, keep me informed and make me feel like my gifts matter. I'm going to reward them for knowing how to treat a gal right.

Tuesday, August 4, 2009

Being Publicly-Funded, How Much Must We Disclose?

Q: I was re-reading something you wrote previously on confidentiality versus transparency in the boardroom. You peaked my curiosity. When an organization is operating with "public funds," what degree of "disclosure" is REALLY is required?

A: Can I consider your word “REALLY” to be lower case as I craft my response? In all seriousness, this is a tough question because there are no black and white answers.

The Panel on the Nonprofit Sector, convened by Independent Sector, stated in its final report to Congress in June 2005, “Comprehensive and accurate information about the charitable sector must be available to the public.” They went on to clarify this:

To encourage participation and confidence in the nonprofit sector, the public must have access to accurate, clear, timely and adequate information about the programs, activities, and finances of all charitable organizations. Government regulation should promote such transparency while providing sufficient flexibility to accommodate the wide range of resources and capabilities of nonprofit organizations, particularly of small organizations. (Report to Congress and the Nonprofit Sector on Governance, Transparency and Accountability, p. 21)

Unfortunately, this isn’t very instructive. It doesn’t even give us an idea of what constitutes “small organizations.”

The Internal Revenue Service is a bit more clear. Since 1999, public charities have had to make immediately available to whomever asked copies of their three most recent Form 990's, with all schedules and attachments, along with their exemption application. The only thing that can be redacted is the names and addresses of donors.

With the latest version 990’s, more information than ever before must be shared. This includes new reporting of the organization’s level of public support, any endowment and/or special funds, including donor advised funds, and non-cash contributions. It also requires that a summary of the organization’s mission and activities, as well as its governance structure, policies and practices be shared – including its disclosure practices. Transactions with interested persons, such as board members, must be revealed, as must relationships with professional fund raisers. Even its accounting methods must be spelled out and copies of audited financials or their equivalents provided. (For more information, go to

While many organizations rely on GuideStar’s posting of their 990’s to satisfy the disclosure requirements, you might want to consider additional methodologies to communicate to the public how you operate, how you are using its money and the impact you are having in the community as a result. I suggest you work with your PR specialist and your accountant to help you in the presentation of this information. After all, you want people to actually read and understand what you are providing them.

All this having been said, my guess is that you are less concerned about the regulartory issues above and more concerned about how much you should disclose about those issues that come before the board, such as personnel problems, potential lawsuits or pending mergers. I am unaware of any “official” guidelines on this. What I would say, is that your board should have policies in place that spell out how to proceed if – or more likely, “when” – the organization is faced wtih such situations. The policies should indicate if you will disclose information proactively or reactively, the types of trigger points that would cause you to disclose, the manner in which you prefer to disclose – e.g., press conference, news release, email blast – and who shall serve as the spokesperson(s). Here again, working with a PR person, especially one who understands crisis management, is critical. He or she can help you design messages and dissemination strategies that keep the organization in the best light.

In today’s environment, where transparency and trust are paramount and people are re-evaluating the organizations they choose to support, the more information you can provide, even if it is not required, the better.

Sunday, July 19, 2009

Thinking like your Donor

I'm closing in on a big birthday. While I look forward to celebrating this milestone, the last thing I want is gifts (more stuff!), so I have been alerting people who know me who might be tempted to give me something to make a donation instead. Because I am a consultant who has been working with nonprofit organizations for decades, there are many worthy nonprofits that I could suggest to them. My challenge was to choose the handful I wanted to offer to friends and family so as not to overwhelm them with options. Let me tell you what it came down to:

1. Which mission(s) I was the most passionate about
2. Which had websites I wouldn't be embarrassed to refer them to

Frankly, as I began visiting the websites of my "favorite charities," I was really dismayed at what I saw. Here are the reasons I rejected suggesting some of the websites to my friends and family:

1. Many were visually unappealing and some were downright annoying, both from a graphic standpoint and the copy itself.
2. In many cases, I had to search around to find a purpose or mission statement that clearly indicated what the organization was all about.
3. Figuring out how to make a donation was too time-consuming, and, in some cases, you couldn't even make a donation online!
4. There was no clear information about how the organization would notify someone that a gift had been made in their honor. I knew this would be important to the prospective donors I would send to the website.
5. Too much required too much effort to slog through the narratives to see how lives were being changed through the gifts of donors. I wanted my friends and family to be as inspired by the work as I am.
6. Overall, the websites that didn't make the cut were all about the organization and not about the donor or the visitor.

I think you get the picture. You may want to take a look at your website through the eyes of a donor like me who would like nothing better than to refer potential givers to your organization through your site. Would your donors be proud to offer this option to a friend? Would you?

Wednesday, July 1, 2009

I Want to Raffle My House for Charity

Q: I have prime property that is facing foreclosure and I need to sell it – fast. I just heard of a nonprofit organization that recently held a $50 house raffle for a couple facing the loss of their home. The raffle was successful. The couple paid off their loans, the organization received a percentage of the money to benefit its charitable work and someone won a million-dollar home for $50.

I thought it was a great idea and would like to do the same thing, I was hoping you might be able to tell me what you know about doing this sort of thing. Is it legal? Can I do it myself without a nonprofit organization? I assume I cannot profit from it, but that’s okay. I would just like to pay off the loan on my home – and maybe cover the cost of improvements – before foreclosure. Any information, advice, web-sites, or companies that offer this type of raffle service legally, would be greatly appreciated.

A: As the real estate market has failed to bounce back as quickly as most would like, many are turning to creative ways of disposing of their property. Like you, I have read about successful raffles. Such publicity has generated a fair number of calls and emails from both individuals and nonprofits exploring this option. While I would begin by suggesting you consult an attorney with expertise in this area, I will share some initial thoughts.

Raffles are a form of gambling and gambling is highly regulated throughout the nation. To my knowledge, there are no states in which an individual can legally engage in running such a game of chance. The reason you have seen nonprofits linked to these home raffles is that in many states they are allowed to run “small” games of chance, usually including raffles, to raise funds to support their mission.

If I were advising the nonprofit, I would advise it NOT to participate in such an enterprise. Most importantly, if anything goes wrong – and there is often “fine print” in the state statutes even where such gaming is legal – the nonprofit could lose its tax-exempt status. However, even if that were not the case, I question whether the organization can make enough money to make the time and effort involved worth it.

Let’s look at some of the practical issues. Together, you and the nonprofit have to sell a LOT of tickets – especially at $50 – to bring in enough money just to cover the mortgage, let alone the real costs such as printing, promotion and accounting fees, and a return on investment for the nonprofit. And, your selling window is finite. You must let everyone know upfront the date of the drawing. This can’t get pushed back if you haven’t sold your minimum number of tickets. Some states require you specify the maximum number of tickets that will be sold. Many require that prior to the start of ticket sales the nonprofit have possession of the property or at least be able to guarantee that the winner will get the house. This puts the nonprofit at great financial risk.

Few organizations have databases that are large enough to generate sufficient ticket sales, considering that not everyone will be interested in buying a chance. Raffles are not tax deductible and only a relatively small portion of the total proceeds are likely to go toward the organization’s mission. So, unless the buyer actually wants your property, there is minimal incentive to purchase a ticket. And why would someone want to take a chance on an unknown entity – even for $50, plus sales and property taxes? That goes for speculators, too. (Realistically, how many of those are out there – especially today when the property could take a long time to flip?) Are you going to allow anyone who wants to, to traipse through your house? At a minimum you should consider setting up a virtual tour if you move forward.

Often those most willing to purchase the tickets are those closest to the project – the organization’s volunteers working to sell tickets. However, as the Cystic Fibrosis Gold Coast Guild in Florida found out when one of its volunteers won a home raffle it sponsored in the ‘90s, that can potentially result in a public relations nightmare. An accounting firm conducted the raffle for Cystic Fibrosis and certified its results, but that didn’t satisfy some ticket buyers who felt the organization’s volunteers should have been excluded from participating.

So how can you sell sufficient tickets? On the Internet? That raises a whole series of other issues. (See “A Raffle and the Internet,” July 2006) Even old fashioned friend-to-friend or snail-mail ticket sales can raise problems. Some communities do not allow raffles, even if the state and neighboring communities do. Some postmasters will allow raffle tickets to go through the mail and others won’t. (See “Should You Hold a Raffle?,” Nonprofit World, January/February 1995)

I’m sorry to put a damper on your idea, but again, my concern is for the nonprofits, and I do not think this is a good deal for them. Still, if you wish to pursue this further, you might want to look to websites like or, which match property owners with nonprofits and facilitate the raffle process. (Note: the mention of these websites should not be seen as an endorsement.)

I wish you luck in dealing with this very difficult situation.