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

Wednesday, December 22, 2010

What Everyman Can Learn from Student Philanthropists

I’m an avid NPR listener. For awhile, now, I’ve regularly been hearing a message from the Community Foundation of Broward (Florida) on my local station that goes something like this: Bill Gates and Warren Buffet are encouraging their fellow billionaires to pledge half their fortunes to charity. But why let them have all the fun. You can participate in the joy of giving by making a gift through the Community Foundation.

I don’t know how well people are responding to this proposition. While I think it’s extremely clever and I hope it’s successful, I’m sure a large number dismiss it, believing that the Gates and Buffets of the world can afford to give half their money away to charity and never even miss it. After all, Gates’ 2010 estimated net worth is $54 billion and most of us assume that one can still live pretty nicely on $27 billion. But for Main Street USA, where, according to the Federal Reserve Board’s 2010 survey, half of Americans have a net worth of less than $84,000, giving away a significant portion of your money to charity doesn’t seem very realistic.

Yet, three graduate students at Rutgers University think it’s doable. Philosophy majors Nick Beckstead, Tim Campbell and Mark Lee have made their own significant pledge to give away a set percentage of their annual income to causes that they feel will do the most good in the world – not just over the next few years, but for life.

The three say they were influenced by Australian applied ethics philosopher Peter Singer, who holds dual appointments as the Ira W. DeCamp Professor of Bioethics at Princeton University and Laureate Professor at the Centre for Applied Philosophy and Public Ethics at the University of Melbourne. In 1972 Singer published an essay entitled “Famine, Affluence and Morality,” in response to the mass starvation found in Bangladesh. In that article Singer argues that it is a moral imperative for persons of affluence to give more to humanitarian causes than they typically do: "People do not feel in any way ashamed or guilty about spending money on new clothes or a new car instead of giving it to famine relief. (Indeed, the alternative does not occur to them.) This way of looking at the matter cannot be justified. When we buy new clothes not to keep ourselves warm but to look 'well-dressed' we are not providing for any important need."

Few would classify graduate students as affluent and therefore individuals to be held to Singer’s standard. But in a December 11, 2010 Wall Street Journal article by Shelly Banjo, “Pledging to Give What They Can,” Beckstead says. "Someone who makes $25,000 is in the top 3% of the world's wage earners." Campbell adds, "It puts things into perspective and makes you realize you're on a much higher ladder than you think."

When I read the Wall Street Journal article I was incredibly impressed and began sharing the story with friends, family and colleagues. The responses I got all credited the three for pledging something so admirable. But, almost to a person added that they’d like to follow the three over the next 10 years as they graduate, start to have families and take on obligations for feeding, sheltering, educating and paying health care costs for those families – especially in America, where the costs for such basics are far more than in many other parts of the world.

The three have obviously been told this to their face. Beckstead is again quoted in the Wall Street Journal article as saying, "When people see us pledging to give away their income, some are critical and say this is an idealistic idea that they'll realize is unworkable in the real world. We think otherwise; this is a long-term decision."

I believe that a clear vision and commitment to that vision are the first steps in actually creating the world we all want to live in. Beckstead, Campbell and Lee have that vision and commitment. Whether or not they move away over the years from the level of financial commitment to which they’ve recently pledged, they undoubtedly will continue to give. And,right now they serve as extraordinary role models. Obviously, they are role models for other young people, who might be influenced to give more of their discretionary funds to charity or even join or start a chapter of Giving What We Can – an organization pioneered in Oxford, England that the three are bringing to Rutgers. But they, probably more than Gates and Buffet, are role models for the rest of us too. After all, if they can make this commitment on a 20-something’s salary, the rest of us should be able to pledge at least a bit more.

There is beautiful saying by Leo Burnett, “If you reach for the stars, you may not quite get one, but you won’t come up with a handful of mud either.” Keep reaching Nick Beckstead, Tim Campbell and Mark Lee.

Tuesday, November 23, 2010

All the More Reason for Nonprofits to Collaborate…

I recently returned from the BoardSource Leadership Forum in San Francisco. BoardSource President and CEO Linda Crompton opened the convening. One of her comments was that innovation is not necessarily an event or a singular killer idea. It tends to be emergent – the result of group interaction.

I was not home more than a day before my business partner, Gail Meltzer, send me a YouTube video featuring Steven Johnson who wrote Where Good Ideas Come From. In it, Johnson suggests that true innovation comes from a series of “slow hunches” that build on one another and require time to truly incubate. Most often, he says, it is the collision of idea from others that makes the hunch lurking at the back of one person’s mind actually develop into something worthwhile. He states, therefore, that we must find spaces that will allow people with different ideas to come together and bounce those ideas off one another. He offers the analogy of the coffee houses and salons of the early 20th Century that resulted in such great art and literature.

If Crompton and Johnson are correct, then the leadership of organizations that focus internally – that is, determining how they can become better funded, attract the strongest board or gain a reputation as the ‘premier organization’ in their field – are actually working counter-productively to that end. Their organizations will never be recognized as exceptional if they don’t innovate. And, as long as they choose to avoid the interactions with the larger environment that lead to the cross-fertilization of ideas, they are doomed to merely doing more of the ‘same old, same old.’

In my mind this means that leaders must create opportunities to meet frequently with their counterparts in a wide variety of organizational entities to dialog about and to piggy-back off of ideas. The entities they choose to meet with must not only be those that are doing similar work, or that share similar visions for the future, but organizational entities that bring very different viewpoints to the table.

Obviously, this requires a certain level of trust. Therefore, the convening groups will want some rules of engagement. The guidelines for brainstorming are appropriate here – e.g., to generate as many ideas as possible, to avoid judgment, to allow time for clarification, etc. The most important guideline, however, is adopting an attitude that, once thrown out, an idea belongs to the group as a whole. Any modifications of that idea are for the benefit of the community as a whole.

Just think what we could accomplish in our communities if we all took this approach!

Tuesday, November 16, 2010

Study on Women Donors Presents Lessons for Board Recruitment

A study(1) released this week by the Women’s Philanthropy Institute at Indiana University’s Center on Philanthropy showed that women are the largest donors. They give more in actual dollars and they give more frequently than men. This is a reality that holds true regardless of the women’s own economic status; and, the disparity of giving increases with the individuals’ income. For instance, 35.2 percent of women who earn $23,509 or less annually make charitable contributions, opposed to 27.5 percent of men who earn at that same level. When income rises to at least $103,000, 96 percent of women give to charity, while only 75 percent of men of similar means give. The results, culled from a sample of 8,000 American households, also revealed that women typically give because they care about the work that is being done. Men tend to give because they are asked.

This study is already shaking up many who have traditionally turned to powerful men in the community for large financial commitments. However, it should also shake up those who are recruiting for boards of directors. According to the Urban Institute study, “Nonprofit Governance in the United States: Findings on performance and accountability from the first national representative study,”(2) while women make up almost half of all boards in the US (46 percent), they tend to be found on the boards of smaller organizations – typically organizations with budgets under $100,000. The percentage of women serving on the largest (budgets of $40 million plus), most prestigious boards is only 29 percent.

One reason for the above may be that, according to Ostrower’s findings, women often do not make the cut when organizations use financial skills and reputation in the community (“affluence and influence”) as recruiting criteria. If board members are expected to be among the biggest and most committed givers, the Women’s Philanthropy Institute’s study should cause us to question whether organizations are shooting themselves in the foot when they actively solicit more men than women.

Perhaps of even more import is the difference the study found in why people give. Will Brown’s work (3) shows that belief in the mission is the most important factor related to board performance. Conversely, Candace Widmer (4), in a now classic study, found that joining a board because a friend asks is a temporary incentive and provides neither ongoing rewards nor participation. So, unless the organization is quickly able to provide these board members with other, more meaningful incentives, they will not stay involved. Does it not make more sense, therefore, to recruit those who are already motivated by what the organization is doing? We now know empirically, this means recruiting more women with a demonstrated interest in our organization’s mission.

1) Mesch, Debra. “Women Give 2010.” The Center on Philanthropy at Indiana University, 2010
2) Ostrower, Francie. “Nonprofit Governance in the United States: Findings on performance and accountability from the first national representative study.” The Urban Institute, 2007
3) Brown, Will. Presentation at the Midwest Center for Nonprofit Leadership Conference, “Boards in Uncertain Times: Exploring the implications of financial, technological and generational change for nonprofit governance.” April 2009.
4) Widmer, Candace. “Why Board Members Participate.” Journal of Voluntary Action, 1985

Thursday, September 30, 2010


Q: Our CEO was recently arrested for a hit and run that resulted in some property damage. The situation made the newspapers. While the incident itself has been both legally resolved and handled internally in executive session, the board is divided about how to record this in our minutes. Some feel the issue should be dealt with head on. Others would prefer to merely indicate that a personnel issue was discussed and so noted in the individual's file. There is a concern that we may be exposing ourselves to a charge of libel by naming the CEO as the person discussed. How private are such personnel issues?

A: I’m sure a lot of people out there are breathing a sigh of relief that they don’t have to deal with your situation. But, the reality is that this could happen in any organization at any time. CEOs are people and people can get into messy situations. What you’ve shared happens more often than you might think.

The privacy issue you raise actually varies from state to state, so you should definitely consult a lawyer in your community. Assuming, though, that this is not a concern where you live, let me offer some other important issues for your consideration.

Normally, I subscribe to the “less is more” school of minutes. However, in this particular instance, where there was a serious offense, an arrest, it made the papers and led to some sort of restitution, I think you have to be more explicit than “a personnel issue was discussed and so noted in the individual’s file” – unless, the board opted to do nothing about it. In that case, as a colleague of mine suggests, you want to bury the subject by making any notation in the minutes as weak as possible.

A critical question that should play a role in your decision-making is, “Did the hit and run occur while the CEO was on organizational business?” If so, your response must be stronger than if it did not. But, in either case, my concern is that donors and other supporters undoubtedly read about the incident – especially if your organization is a prominent one and/or your CEO is a fairly public figure. They will question whether and how the board acted on this. If they can’t be confident that you took this seriously and acted in a responsible manner, they may doubt the board’s ability to steward the organization during challenging times. This could lead them to jump ship.

There should be no exposure to a libel charge as long as you stay with the facts and avoid anything that is supposition, since libel requires misrepresentation. (Just a reminder for other organizations that may find themselves in a similar situation, an arrest is not a conviction.) Actually, according to Steve Nill, a lawyer I consulted on this matter, the more public a figure your CEO is, the less you have to worry because that person would have to prove you acted maliciously – that is, that you knowingly included false information in the minutes.

To protect both the board and the organization, though, I would also call your insurance company. Tell your claims representative about the situation. Often insurance companies require that they be notified so that they are not surprised if someone decides to sue. But even if your company doesn’t require such notification, the representative may have some excellent suggestions for proceeding forward at this time. Some insurance companies will even provide you with legal counsel to help you avoid potential pitfalls.

One last thought… If you don’t have crisis management policies already in place, your board should run, not walk, to grab its collective pen! It is especially essential to have a plan for dealing with personnel issues like this that have the potential for becoming public, because unfortunately, as I indicated at the beginning, incidents like this or embezzlement of organizational funds, sexual harassment, and child pornography – to name just a few – tend to crop up more often then we’d care to admit. And they can leave the organization with serious egg on its face.

The plan might be to sweep any such incidents under the rug (Not my recommendation, by the way!), wait for the media to find you and pray that they don’t, or get out in front of the incidents with the media. If you decide to speak out, the plan should indicate who will serve as the voice of the organization. The plan is a good place to consider consequences for wayward individuals, as well. It’s always easier to decide these things in the abstract, when the emotions tied in with any specific individual are not at play.

A special thank you to Stephen Nill, J.D., GPC. and the founder/CEO of, for his added insights to this response.

Note should be made that even though an attorney was consulted in the construction of this answer, the above should not be construed as legal advice. Questions such as these are sent with minimal information and the answers are necessarily broad.

Thursday, August 26, 2010

Who Should Facilitate the Exit Interview?

The other day a respected colleague and good friend, Carol Weisman, sent a copy of her latest blog post entitled, “Don’t Just Whack’em and Plaque’em: Exit Interviews for Retiring Board Members.” As all of Carol’s writings, it dealt with an important subject, was informative and had me in stitches – Carol is one of the smartest and funniest people I know. She spoke to the value of doing an exit interview and shared five excellent questions to use in such a situation. My only quarrel was that she put the responsibility for doing the exit interview on the executive director. I have always believed an exit interview should be conducted by the board, in the person of the chair or a member of the governance/board development committee.

She and I went back and forth with our arguments. She felt that the executive director is the constant – the one who will be there after the entire board turns over. I reasoned that there is no guarantee that the executive director will be there tomorrow, let alone years down the road. I know too many organizations that make that position a revolving door. But even in the most stable organizations, a lot of long-time executive directors are reaching the point where retirement is starting to look pretty good. We’re also starting to see a number of less fortunate dying with their boots on.

Carol asked me to honestly examine how many boards step up to the plate and take on this responsibility. While I concede that the job often defaults to the executive director, by accepting that role, the executive director makes it that much easier for the board to abdicate its responsibility in the future. It is the board that benefits most from learning what it could/should be doing differently to maximize, or at least improve, its directors’ experiences. The interviewer should be taking notes that can be kept in a board book for easy referral by future boards. Carol argued that future boards won’t bother to look back. I of the “you get what you expect school” retorted that debriefing should be an expected part of the job. After heating up cyber-space for a couple of days, we agreed to disagree.

However, I was like the store clerk who gets in an argument with a customer. Long after the customer leaves, the clerk is whining about that customer to everyone else she comes in contact with that day. I ran the arguments by another colleague, Jane Garthson. Jane said definitively that it was the board’s job to conduct exit interviews. However – sneaky devil! – she said she understood if an executive director wanted to conduct his or her own exit interview to learn what he or she might do differently in the future. So, this brings me to the question of the day. What, if any, are the arguments that we are all missing? If you even agree that exit interviews for departing board members are valuable, who do you want to see facilitating them? Why?

Monday, July 26, 2010

Should Board Members’ Contributions Be Designated To Pay For Their Education?

I was speaking with a couple of colleagues the other day and the subject of board contributions came up. Later in the conversation we transitioned into the importance of ongoing board education and organizations building a sufficiently-large line item into their budgets for this. And then the idea bubbled up: What if one of the expectations of board service was that a portion of each board member’s personal contribution to the organization went to pay specifically for board education?

Such an expectation would do several things. It would communicate to the world that the organization believes an educated board is important. It would provide necessary dollars for such board education, without cutting into dollars dedicated to programming. And, it would help board members value the education the organization provides, because research affirms that people ascribe more value to something for which they pay rather than get for free.

There are some issues to consider. When my colleagues and I were talking, someone arbitrarily threw out $500 as the portion of each board member’s contribution that would go into this board education fund. While a substantial amount, with an average-sized board of 16, that only puts $8000 into the education coffer. True, $8000 is more than most boards currently devote to board education. But, $8000 won’t go far if the money is to be used for a true retreat, conference expenses or coaching, for instance. Asking for a number larger than $500 might be a non-starter for most boards – at least at this stage in the game. And, what happens in those organizations that ask for a personally meaningful gift from each board member instead of a contribution of a specific dollar amount? Yes, the leadership could opt to allot the entire board member contribution to its education fund, or designate a percentage, but how can any organization create an education budget if the ultimate total is an unknown? Perhaps the answer is that the board would still have to assign to the board education line a dollar amount from its general operating funds and use the contributions just to enhance its educational opportunities.

The biggest issue may be that some people will resent this set-aside, either out of principle or the belief that they do not need education – perhaps they’ve sat on many boards over the years and believe they have the job down pat. My guess is, though, this reality may be off-set by those that clamor to join a board that devotes so much attention to its board members and provides leadership training that they can then take back to their jobs or on to other organizations.

As someone who firmly believes in ongoing board education at every meeting, I love what this concept could “buy.” But I recognize it would require a major culture shift in most organizations. What do you see as the pros and cons? Is this an idea with sufficient value to push?

Thursday, July 15, 2010

Should US Nonprofits Adopt a Patron System?

I worked recently in Singapore. While I found many similarities in the ways nonprofits do business both there and here in the United States, I found differences as well. One of the biggest was their use of a patron system. Besides having what we would consider the familiar board structure with a chairman or president at the helm, a large number of organizations there also have a patron. Some even have a patron and a patron in chief. These are powerful individuals who wield tremendous influence. For instance, the patron in chief of Singapore’s Lyric Opera is the President of the Republic of Singapore. Its patron is the Minister for Education and Second Minister for Defense. The intent is that these individuals will provide support – including, in many cases, political clout – and encourage others to support the organization as well.

In the United States, our honorary boards could be considered the closest equivalent to the patron system of Singapore. Some organizations here are able to engage major players, such as the Gerald R. Ford Presidential Foundation which counts among its trustees James Baker, Dick Cheney, Alan Greenspan, Henry Kissinger and Donald Rumsfeld. But the number of organizations with the capability of attracting names of this caliber are far and few between. Would it be easier for nonprofits to attract a single patron? Would a patron help nonprofits that feel they lack sufficient access to affluence and influence?

I do believe that it would be easier to find a single patron than an honorary board. However, I do not believe that it would necessarily be easy. Think of all the nonprofits that have tried unsuccessfully to find a celebrity spokesperson. And, we certainly know how quickly a good name can become a liability. Tiger Woods, anyone? Singapore has experienced this with the patron system as well. The patron of their National Kidney Foundation, the wife of Goh Chok Tong, former Prime Minister of Singapore and current Chairman of the Central Bank, was forced to step down after defending the pay of the CEO, saying that his $600,000 (S) salary was “peanuts.” At least with an honorary board, one would hope there will be others whose reputations remain sterling, even if one of the names on that board turns bad.

As to whether having a patron would be helpful to organizations lacking affluence and influence...I'm not so sure. Singapore is a very small country. People tend to know one another and a patron's name alone carries clout. Here, the individual would have to be willing to actively use his/her influence on behalf of the organization to bring others along. Research done by Herman and Renz suggests that this does not happen as often as nonprofits hope. Besides, the reach of a single individual versus a larger group is necessarily limited, especially in a country the size of the United States.

So, even though I believe nonprofits in the United States can learn much from their counterparts in other countries, I'm not so sure I'd suggest our turning to a patron system here. But, I’m curious as to what others think. Is such a system an answer for us, especially in these difficult times?

Friday, July 2, 2010

So You Think Your Communications Officer Isn't Important . . .

Just this year an illustrious professional career ends abruptly; a world-wide brand that spent millions of dollars over the years to build a sterling reputation, out in front of every one of its competitors, watches its status unravel; and an international conglomerate faces an industrial disaster and its iconic acronym stands to represent its biggest nightmare.

General Mc Crystal within a week – retired; Toyota within a month massively discounting cars and invigorating the US auto industry; and BP within a few days becoming the company formerly known as British Petroleum now known as BP -- Biggest Polluter.

Companies that have allocated enormous dollars to building a public face . . . the military and multinationals. And yet with their considerable resources, both financial and professional, they did not understand how quickly their reputation could unravel. How quickly their public profile could be tarnished and how extensive the damage could be.

Are you ready for this? Do you have the resilience to survive? It begs the question that as nonprofits perhaps we need to reconsider how we court the press. How important we think it is to be on TV or in print. Can we control our message more effectively using social media and web based outreach.

So you’re thinking of promoting your organization in the press anyway. Then be prepared. When you’re pitching a story, an interview or sending out a release do you know enough about the background of the reporter and the media outlet. Have you read enough of their prior stories or seen enough of their broadcast reporting to have an understanding of the nature and tone of their coverage? What is their writing style, do they have a personal agenda and does your message fit into that agenda. If not, beware – their agenda may take precedence over yours!

Are you prepared for a crisis? Do you have a communication’s plan that specifically addresses the conversation that you must have with your constituents the moment something considerable happens that impacts the community you serve.

Have you designated a spokesperson and is that person media trained. As a nonprofit whose financial health depends on donor participation public relations must be moved to the top of your agenda. Today, let’s ask ourselves could our organization survive a media hit. Then take a critical scan of your communications efforts and the persons responsible for this most important yet very delicate task.

Robyn Fern Perlman
Founding Principal
CoreStrategies For Nonprofits, Inc.

Wednesday, May 26, 2010


Q: In our organization the Program and Development Departments work in silos. What is disconcerting is that they have no desire to work together. Development constantly complains that Program doesn’t share “its” list of donors or turn in required reports. Program complains that Development siphons needed resources from the mission and that its requests and grant proposals unnecessarily add to Program’s work load. A number of us feel this is not the way to do business, but we haven’t been able to convince everyone to play together nicely in the same sandbox. Do you have any suggestions to change the culture here?

A: If it makes you feel any better, the situation you describe is, unfortunately, not that uncommon. However, you are smart to want to change it. People invest in impact and impact comes through effective programming. But, effective programming costs money. The greater divide between Program and Development, the less successful Development can be in bringing in the dollars that will support the program.

While there is no single or easy answer, there are a few things I suggest trying. All start with the organization’s vision for the community. I would bring the entire staff together to affirm both the picture of how the community will be different – better – as a result of the organization’s efforts, and the staff’s commitment to achieving that vision. Sometimes, merely reminding people of what they are working toward and that everyone shares the same goal will be sufficient to get them to work more cooperatively.

If it is not, I might ask each department to consider its role in turning the vision into reality. Specifically, for what steps must it be responsible if the vision is to be actualized? What conditions will it have to meet? What resources – monetary, human, physical, etc. – will the department require to accomplish each step? Once these questions are answered, each department will have a better idea of what it can do on its own and what it needs help to accomplish. Usually people realize rather quickly that they have to go outside their department in order to achieve their goals, again making them more willing to work together.

Of course, you can always acknowledge the divide you see, bring the bickering departments together and have them take turns asking each other why given procedures are in place or why certain information is requested. Insist that the group that asks the question really listen to the response! Allow people the opportunity to clarify the answers they heard. Only at that point, give members of that group a chance to share why they find the requirement unnecessary or onerous. Let them offer alternative approaches. Then, open the floor for discussion.

If you still face resistance after all this, ask the departments to take this next step. Give them pads of Post-It notes in two colors. Designate one color to represent the resources – both tangible and intangible – the department needs. Designate the other color to represent the resources the department has. Have each department begin jotting down resources – one per page. With the resources the department has available it is important to list all the assets, not just those it has that it has determined it will need to accomplish its own goals. Post these on a wall gallery-style, where representatives from each department can come by and see if any other department has the resources it needs. Be sure to note in some way which asset came from which department – e.g., by writing the department’s name on each page or by placing the pages on the wall under an identifying banner. In most cases, the needed resources will be available in-house. This opens yet one more avenue for collaboration between departments.

There may still be some additional resources required by one or more of the departments. You can have representatives from each department sit down and discuss who they know in the community that might have the needed resources. Based on the answers, they can then discuss who from within your organization might have an established relationship with that individual or organization and could make the ask. Such an approach emphasizes the “we’re all in this together” attitude that is so important.

These simple exercises remind everyone that they are each a part of something larger than just their own department and that they owe it to the community to cooperate with anyone – internally or externally – that can help them meet that commitment to the community. The discussion of who or what organization(s) outside their own institution might be able and willing to contribute resources acts as a not-so-subtle reminder that if others outside their organization are willing to work selflessly with them, there is no room for department-centric feelings within the institution.

The culture in your organization will not change overnight. Departments will have to be encouraged to share the results of their efforts with the other departments so everyone can recognize the impacts being made. The organization’s leadership will have to share organization-wide outcomes with all the departments and recognize and reward the sharing of resources. But, over time, the silos will begin coming down.

Saturday, May 15, 2010

I'm Not Moving, I'm Stuck

So we're stuck. Why does it seem that "stuck" although not unique to the nonprofit sector seems intractable in many nonprofit organizations. Why is it that we artfully craft mission and vision statements that reflect our desire to change communities, change outcomes and change the world yet we refuse time and again to change the business of our organization.

Neale Donald Walsch known for his "Conversations With God," series discusses change in his most recent book, "When Everything Changes Change Everything." Walsh writes, "If when everything changes, you wish to change everything, the first thing you may wish to change is your idea about why change occurs." He continues by suggesting that, "change occurs because of who you are and why you are here." Is it not appropriate for us as leaders, donors and beneficiaries of the programs and ideas pushed out through our nonprofit organizations to ask the same question from a business perspective. Who are we and why are we here ... now ... today and into the future.

"Change occurs because you want it to occur," says Walsh. "Everything that changes, changes at your direction." His also suggests that until we become conscious of this change it may manifest itself through a silent shift. This shift, as a response to circumstances, instinctly begins to set change in motion so that, hopefully, we become aware and can successfully grow and adapt. How many times have we squashed the incubation of silent shifts in our organizations rather than picking up the mantel of change. How often are we given an opportunity to change, at our own direction, but we remain stuck.

Walsh describes life as being functional. When life moves too far off functionality it "puts in place an adaptaton . . . which assures that life remains sustainable." But not just as it was but rather "through it's new changed form . . . "

So I ask how will nonprofits remain sustainable and fullfull their promises if the calls to action are merely drowned out by, "I'm not moving, I'm stuck!

Wednesday, April 28, 2010

Should We Be Considering Professional Board Chairs?

I recently returned from Australia where I facilitated a series of master classes in governance. While the US and Australian systems are similar, there are some distinct differences. One, to which I was introduced this trip, is a trend toward hiring professional board chairs. Though not wide-spread, it is prevalent enough that there are actually companies there that provide such individuals to organizations as required.

Clearly, there are advantages to such a concept. You ostensibly get a board chair that is unbiased, skilled and willing to give the time to the job since he or she is getting paid to do it. One would expect that such a person keeps up with the latest governance trends and has a broad perspective from working with different groups – both conditions that can lead to increased board effectiveness.

Some of the drawbacks are obvious, but not necessarily insurmountable. One board member complained to me that the professional board chair working in his organization was working with twenty other boards and often came to meetings unsure of which organization’s meeting she was actually at! I would think that far fewer than twenty boards may still be too many for a board chair to handle well. Of course, this is a relatively easy problem to circumvent. The board has an obligation to do its due diligence. A single question would have determined that this woman was over-committed. Still, in an emerging field where there may not be that many qualified individuals available for hire, organizations desperate for leadership may opt to move forward anyway and take their chances.

I would be concerned that any board chair for hire actually has the facilitation skills necessary to do the job effectively and is familiar with today’s proven governance practices. I meet a lot of people who tell me that they have chaired many boards over the years and know what they are doing. Unfortunately, I have observed that far too many of these individuals are mired in how things were done back in the days when they began their board service and are totally unaware of practices common throughout the sector now.

I also see the potential for conflict of interest. A professional board chair might work for several organizations with similar missions. While it could be advantageous to hire someone who has a depth of experience in your organization’s mission area, how can you be sure that your ideas, deliberations and decisions will remain in-house until they are ready to be shared with the community? Of course, this could prove an issue with anyone in the boardroom and if you deal with a true professional, this should not be a problem. More critically, the board chair is privy to discussions that can personally impact him or her, for instance whether the contract should be renewed and at what rate. If the organization has policies for dealing with such situations, this also can be handled in a transparent and judicious manner. Australia has the same duty of loyalty requirement we do in the US and conflict of interest has not been a sticking point for the nonprofits in that country.

The culture in the US may be the biggest barrier to such an idea taking hold here. I can foresee donors reacting negatively to the idea of having their money go to pay a professional board chair. So many already resent money being spent on even the most critical administrative fees. Link this to the expectation that has taken hold here – but not in Australia – that all board members must make a personal contribution and we have yet another potential obstacle. This expectation would imply the professional must “pay to play,” something that is unethical if not illegal. Yet, if the organization excludes the chair from the requirement, resentment is sure to build in the other board members who are held to the giving standard. They may already be upset, wondering why they shouldn’t get paid for their time.

Then, who wants to be the first to test the IRS response? Surely, as paying for a professional board chair is not accepted practice in the US, the board and organization may be liable for a hefty excise tax on that fee if it is deemed excess benefit.

Yet, I can’t help thinking about the potential benefit – boards running more efficiently and effectively. Acceptance of such a practice might even stimulate new jobs as individuals with the appropriate skills move into this arena and programs crop up to certify these professional board chairs!

Is this a bad idea if no organization is required to move in this direction or consider itself locked into a paid chair if it has used such a service in the past but now has the appropriate leadership in-house? What do you think?

Tuesday, April 27, 2010

Should We Insure the Founder?

Q: I’m on the board of an all volunteer organization. The founder plays the role of a full-time – albeit uncompensated – executive director. Lately, as more and more has fallen on this individual’s shoulders, some of the board members have brought up the idea of taking out life insurance and disability policies on her. The rationale being expressed is two-fold. First, there is a desire to provide the organization with a financial cushion if she can no longer shepherd the organization forward and we have to go with no or greatly reduced funding during the period required to find and train someone new. Second, there are some who wish to compensate this person for all she has done thus far, and feel that taking out an insurance policy to benefit either her or her beneficiaries is an inexpensive way to accomplish this. I’ve never heard of this before and feel uncomfortable about it. Am I out of touch or are the members of this sub-group?

A: There are a number of issues inherent in your question. We have to look at each individually if you are to have an idea of how best to proceed. But, let me start by answering your direct question. Providing life insurance and disability policies to management-level employees is fairly common. These are usually relatively small policies that are included as part of an overall benefits package and negotiated or provided at the time of hire. The benefit generally equals a percentage of the annual salary and is paid out to the employees and/or their beneficiaries, not the organization.1

The provision of “key person” life insurance, to which I believe your board colleagues are referring, is less common in the nonprofit sector, but not unheard of. In this case, where the founder is, I assume, the face of the organization, the chief fund raiser, the administrator, and more, key person life insurance is appropriate because you are seeking to cover the organization for the loss of such critical skills over the period of time that it takes to get back on track. In fact, the situation you describe is a textbook example of when to purchase such insurance.

However, to me, more important than whether this sort of action is typical or appropriate, is the potential impact of these options. You indicate that the founder is doing all the work. Where is the board? The direct service volunteers? Succession planning is all about having the infrastructure in place whereby the organization can keep running smoothly even without the key player(s). (Read or listen to the 2010 CoreStrategies’ Consultants’ Roundtable on Succession Planning.) Your organization seemingly does not have such an infrastructure. My fear is that with your organization so reliant on a single individual, it will be hard to find someone with the desire or capability to take over the organization under such conditions. And, unless you do so in a timely manner, the organization will be forced to dissolve. This means that the insurance money that you collect will end up being turned over to another organization, since all assets of a nonprofit must go to another nonprofit with a similar mission upon its dissolution. I might suggest that you consider whether the premium money would be better spent on board training and/or the hiring of staff to provide some redundancy of skills so that the organization is not so dependent on the founder going forward.

If, as you indicate in your question, the board is concerned about recognizing the efforts of the founder/de facto executive director, it might choose to use the funds it intended to use to pay these premiums to provide her with an annual salary, even if it is a small one. That way the individual is guaranteed some compensation for her efforts at a time when she can personally benefit from it.

1 About a year ago it was learned that a number of Fortune 500 companies had taken out life insurance policies on staff level employees, as opposed to management personnel as is typical. This was unbeknownst to the employees. The named beneficiary was the corporation. This created a public relations nightmare because the corporations were seen to be betting on and benefiting from their employees’ deaths – especially in those cases where the families of the deceased were unable to pay medical bills that had amassed or even burial costs and the corporations walked away with tens of thousands of dollars.

Monday, April 12, 2010


With the new social media, many, especially those of us of the baby boomer generation, experience nothing short of paralyzing fear when we think about meshing our public and private lives. We ask ourselves questions such as, “What if my students access my Facebook (FB) page? What if my boss catches a compromising tweet?” More appositely for nonprofit organizations, “What if a client or volunteer starts to trash the organization?” No longer can organizations control outgoing public messages. The official spokesperson becomes whomever decides to tweet, text or FB.

Is the new social media a paradigm shift? Must we have fear? Have we lost control of the who, what, where, when, why and how a message becomes public? I thought so. Then I began to think about Robert Putman and his piece entitled, Bowling Alone. In it, he hypothesizes and presents some analytical data that attempts to explain why baby boomers (and some include generation Xers) became a society of non-joiners. Reflecting on his writings and the one element I found missing from his analysis led me to the conclusion that we are not experiencing a paradigm shift. We are again becoming joiners, just in new and different ways. We are returning to the historical era of pre air-conditioning (AC) and pre urban sprawl (US).

Before AC and US, folks lived side-by-side with windows wide open during the hot summer months. Conversations, arguments, meetings and trysts were nearly impossible to conceal. People were unable to hide behind closed up car windows shaded with a dark tint. We heard everyone’s dog bark and everyone’s toilet flush. As Dr. Terrie Temkin described it--everyone knew everyone else’s dirty little secrets. Public and private lives were impossible to separate. As much as we may try to remain isolated in our own homes, cars and offices, and as much as we try to separate our professional and personal lives, our conversations once heard only by our neighbors pre AC and US are now amplified throughout cyberspace by those unseen and perhaps unknown. As Margaret J. Wheatley writes in Leadership and the New Science, “The invisible is more of an active player in our lives than ever before” (2006, p. 53). Privacy and communication control for nonprofit organizations is a thing of the past. Whereas in the 40s and 50s chatter and gossip was limited to neighbors, friends and co-workers, today its reach is limited only by the speed and sophistication of the technology employed.

As Heather Gowdy, write in Convergence (see previous blog), successful nonprofits, among other things, will, “Expand their reach and deepen their impact through networks and coalitions...” and they will strategically use new technology as part of an overall communication plan. The key to overcoming the new social media fear is to remember that it is a conversation and not a monologue. Engage wisely, listen sincerely and attentively, and ensure your responses are in line with the vision and values of your organization.

Monday, March 29, 2010

Should your organization use crowdsourcing and other forms of social media?

Crowdsourcing is just one of the many forms of Web 2.0 or what is being referred to as the new social media. It is a combination of the two words crowd and outsourcing. According to Jeff Howe, “Crowdsourcing is the act of taking a job traditionally performed by a designated agent (usually an employee) and outsourcing it to an undefined, generally large group of people in the form of an open call.” Howe includes a second definition he calls the Soundbyte Version, “the application of Open Source principles to fields outside of software” (

An example of crowdsourcing about which most of you have probably heard is Anyone with an internet connection can add or subtract information onto the website. Another example is the fundraising practice employed by the Red Cross in its effort to amass donations for earthquake recovery efforts in Haiti. Through its texting campaign the organization has raised over $5 million. Yet, this is just the tip of the open source iceberg and nonprofit organizations must take the time to educate themselves on these new trends (this process can be accomplished and propelled forward by the recruitment of members of the newer generations for board and staff positions).

When I started my nonprofit management master’s program in 2008, one of the first things taught was the need to control and manage a nonprofit’s outgoing public messages and to have a designated spokesperson. However, I do not believe that is going to be an effective posture to take if nonprofits want to survive over the next 10 years. In a research article written by Heather Gowdy, et. al., of La Piana Consulting and entitled, Convergence: How Five Trends will Reshape the Social Sector (, the authors found that today people want sincere and authentic information, not prewritten and well-edited messages, and they want it from multiple sources. The authors write, “To have a credible voice in this environment, nonprofits need to empower everyone in their organization to be a spokesperson” (ibid, p. 10).

Crowdsourcing is only one way to use social media. More and more sites are being developed to garner merely minutes of social engagement in hundreds of people’s days through various forms of Web 2.0 and the network connections that accompany all those who participate. Tasks may include last minute event notifications, rallies, and many other forms of volunteerism. For more information, take a look at the following sites and see for yourself what is happening in the virtual nonprofit world. Maybe it is time to get onboard and stretch your communication reach. The new social media is not going away and it will never be static.

Saturday, March 27, 2010

Use Your Vision to Find Untapped Resources

The March 22 edition of Philanthropy Journal featured an article with the headline, Business partnerships seen boosting nonprofit causes. But, how do nonprofits identify the most appropriate partnerships? They can start by turning to their vision statements.

A well-written vision statement will have a community focus, that is, instead of speaking to how the organization will be seen – e.g., as the best, most successful, well recognized, etc. – it points to the impact it promises to make in the community. Most organizations have vision statements that actually reflect several such strategic impacts. For instance, a senior care facility might have a vision that commits to providing a warm, caring and safe environment where seniors requiring some level of outside support are able to spend their days living with dignity and respect at their full potential. In this case, the strategic impacts are 1) providing a warm, caring and safe environment for seniors; 2) helping seniors that require some level of outside support; and, 3) ensuring that these seniors have the opportunity to live to their fullest potential with dignity and respect.

Begin by identifying the strategic impacts in your vision statement. Then, for each, brainstorm those businesses or institutions that might also be interested in, or would benefit from, having a similar impact. In our example, those that might be interested in warm, caring and safe environments could include the police, security companies, other senior care facilities, real estate developers, families facing the need to find somewhere to place a loved one, families that had a bad experience when placing a loved one and who don’t want anyone else to go through something similar, doctors that know that their older patients do better – live longer and healthier – in such environments, nurses, home health companies, those that run training programs for nurses aides, and so on. Stretch. Get creative when listing possibilities.

After you have identified as many broad categories as possible for each strategic impact, determine which have the greatest capability to serve as a good strategic partner and/or to provide resources to your organization. Plug each of these types of businesses into a search engine such as Google, along with “vision” or “vision statement” and the words that make up your strategic intent. What will return are the specific businesses that share your beliefs, concerns and commitment. You now have several entities to approach and a common bond from which to start a conversation.

Avoid going in with hand outstretched. Research what their needs are and ask for an appointment to discuss how you might help each other accomplish your shared vision. Focus on advice – not money – at least at the beginning. People are almost always willing to offer intellectual capital. That often leads to money or gifts in kind however once they get to know your organization and become invested in it. In any case, your organization has successfully begun the important process of community engagement. That will bring its own rewards (the subject of another blog!).

Thanks to my colleague Steve Bowman of Conscious Governance in Australia for generously sharing this concept.

Friday, March 26, 2010

Do your bylaws include board member term limits?

I would like to continue sharing some of the things I learned at the Boards in Action (BIA) Leadership Academy workshop I mentioned in my previous blog. As a newbie to the workings of nonprofit boards and organizations I am finding that many longtime board members are unaware of vital and helpful information available or where to find it. Indeed, as Eric Schmall Director of Consultation for the Center for Nonprofit Excellence writes, “Without having any exposure to ideal board practices, what chance does any well-intentioned board member have of knowing and advocating a better way?” (

One ideal board practice is to implement term limits to your bylaws. CoreStrategies has advocated extensively on the subject, however at the risk of redundancy, let me try to illustrate it as Chuck Loring did to the crowd at the BIA Leadership Academy.

Loring said, “Fundraising is the best case example for term limits.” Let’s look at why. But first, let’s assume that all board members are responsible for fundraising—another best practice and more accurately described as an imperative!

Take a moment and think about where you meet and know people and we will call that your sphere of influence. For instance, friends and acquaintances are made at church, one’s children’s school, neighbors, work, etc. So board member A has a sphere of influence, as does B and C. Over time, those spheres will begin to overlap, however with founder led organizations the spheres probably overlapped considerably from the organization’s inception. Over time, board member A, B, & C end up occupying the same spheres of influence and the people in those spheres are repeatedly solicited for donations, year after year. The donor base becomes stagnant and do the donations.

Now consider a board with term limits. Each board member (not the ED/CEO) year around must actively look for potential new members. With term limits, the board is required to actively recruit new members. What happens is every 3 to 5 years more and more spheres of influence (X, Y and Z) begin to develop and the organization’s donor base widens (see my very crude and technology challenged drawing below, taken from Mr. Loring’s flip chart).

I am not saying that former board members should be put to pasture. Good board members conduct exit interviews of outgoing members and ask questions such as, “What would you like to do now?” Your board must have a plan that keeps former board members engaged. Creating an honorary council (not board) is one idea, however do not make it in name only, include with that designation some duties!

If your bylaws do not include term limits, please implement them soon. Do not take my word for it however. Engage your board in some research and as always, please respond with your thoughts.

Thursday, March 25, 2010

Is Your Organization Ready for the Next Five Years?

In March of this year I had the privilege to attend the Community Foundation of Broward County’s Boards in Action Leadership Academy. The two-day workshop I attended was only part of an extensive 18-month program designed to assist area nonprofits in reaching their highest potential. Chuck Loring of Loring, Sternberg & Associates, an Indianapolis & Fort Lauderdale based nonprofit fund raising and management consulting firm, lead the informative and thought provoking program.

In a room full of board members and ED/CEOs representing 16 different organizations, Mr. Loring opened the first morning’s session with a statement and an example of how important it is for board members and staff to be connected and connected on the same page. In the aftermath of 9/11, local nonprofit organizations went into survival mode. Emphatically, Loring described the difference between organizations that survived the crisis and organizations that did not—simply, if the board and staff were connected and working towards the same goals via the vision and values of the organization, the organization survived.

Statistics taken from the Nonprofit Times report that fundraising is down for the first time in 20 years. Using this evidence, Loring emphasized why boards and staff must connect by describing the salient needs of nonprofits in the next five years—more money, more volunteers, more staff, more board members, and branding and marketing awareness. With the exponential increase of nonprofits in the past 20 years, each one must articulate what sets it apart from all the others. Furthermore, Bridgespan estimates that 75% of the current ED/CEOs will be gone in the next five years. Unquestionably, consideration and action on all of these needs are vital to the survival of an organization.

The following are questions your board should ask of itself: Does your board participate in fundraising? Do your board and staff have a recruitment and training program for volunteers? Do your board and staff keep a pulse on the new social media and recruit and employ members of the younger generation to keep up with such trends? Does your board recruit potential board members year around? Does your organization occupy a unique place in the community? Finally, does your organization incorporate leadership planning into its overall board governance?

The podcasts on the CoreStratagies website offer insight into many of these issues. Please peruse them and comment with your thoughts and questions.

Tuesday, February 23, 2010

Back to School

Q: I would like to do a masters degree in nonprofit management online. I have over ten years of experience volunteering and working in this sector and have a great passion for it. But, I can’t seem to find any information on such a program and would appreciate any ideas you can provide.

A: A couple times a year I get a question about schools of nonprofit management. While a relatively new course of study – such programs have only been around approximately 20 years, which is a drop in the bucket compared to something like philosophy, which dates back to the time of ancient Greece – a wide variety of options are available. The best source is the list maintained on the Seton Hall University website, based on research originally done a number of years ago by Roseanne Mirabella and Naomi Wish and kept up to date. There are currently close to 300 schools listed that are searchable by level (non-degree, undergraduate, masters or doctoral), state, region or whether the program is available online (47 are!). To access the list go to

But finding a school requires more than going down a list. You will obviously have to do some due diligence to determine the one that will best meet your needs.

One of the first questions you should ask is whether the program is a standalone, where your degree would be in nonprofit management, or a concentration in a larger school. That will impact the number and content of the courses you take in nonprofit management specifically. If it is a concentration, you should check out what department the program is being offered through. Typically nonprofit management programs will be located in business, public administration or social work, but I taught in one program that was located in the education department. Each discipline has its own focus, advantages, disadvantages and politics. The Seton Hall website can walk you through some of these, but again you need to know what you are going back to school to learn.

Check out the core courses you will be required to take and the availability, type and variety of elective courses. You’ve been working in the field. Are there enough courses in your particular area of interest? Will those courses give you the range of knowledge you are looking for? What about when they are offered? Just because they are online doesn’t mean that you can necessarily take them on your schedule.

Look at the faculty. Review their curriculum vitae. Have they worked in nonprofits or sat on boards? Do they publish? Present at conferences? Does that matter to you?

If you are doing an online program, will you have to spend some time in residency? If so, how long and how often will you be expected to attend? Can you get the time off from your job? Can you afford to travel to the school to meet this requirement?

Will you have to do a thesis? Would you rather have an extra class or two instead? Can you do a thesis even if it’s not required if you feel that will give you critical experience?

What is the cost? Is there any financial aid available if you require it? Will you be required to take the Graduate Record Exam (GRE) or an equivalent?

This is not a decision to be taken lightly. I commend you for wanting to go back and get an advanced degree. Just be sure that the choice you make is the best one possible because you will be making a big investment in both time and money.

Monday, February 22, 2010

Providing Value

Andrew Kakabadse, Professor of International Management Development in the School of Management at Cranfield University in the United Kingdom, recently conducted a study of over 1200 boards from around the world. Fully 75% of those boards reported not knowing how they contribute value to their organizations. While sad, I am not surprised by this finding. The culture of most boards precludes engagement. And, if there is no engagement how can we expect anyone to have even a sense of belonging, let alone of providing import to the organization?

For instance, when was the last time your board was engaged in a substantive discussion? I don’t mean that the directors were asked to vote on a recommendation or to discuss the merits of the two companies submitting bids to fix the roof. Rather, they were expected to ask “What if…,” to explore working in tandem with a group that has always been seen as the competition or to consider how to turn a risk into a unique opportunity to move the organization forward?

I routinely ask boards with which I’m going to work to share with me their typical agenda. Most follow a format that is strong on reports. How much value can board members bring if all they are doing is listening to reports? What’s worse: reports focus on the past. Nobody can change the past. If you want board members to feel they are bringing value to your organization, you must engage them – their excitement, commitment and unique talents – around issues that they can impact. This requires providing them with the information they need or request, turning them loose to grapple with the issues and supporting their conclusions. If you have grounded your board around your organizational vision and values you have nothing to fear and much to gain.

There’s an old adage that, “If two people in business think alike, one of them is unnecessary.” We need the diversity of thought that our boards bring to the table. Our decisions become better. Best, the process cuts both ways. People who have had the opportunity to offer input feel valued.

But, all of this is for naught if we don’t share with our boards the results of their efforts. Otherwise, for all they know, they wasted their time in merely a mental exercise. If we want our boards to feel valued, we have to demonstrate that their product – their intellectual capital and their efforts – made a difference. And, it doesn’t hurt to thank them for that, either!

Thursday, February 11, 2010

There's a New Normal in Town

I’ve been hearing it for awhile, now… we cannot hope to hang on until things return to “normal.” “Normal” has gone for good. There’s a new “normal” in town and it only promises to keep morphing. Regulations will become tighter. Technologies will continue to change the way we do business. Upcoming generations will want to mold projects and processes in their image. The community will demand increasing levels of participation, accountability and impact. Collaboration will emerge as something necessary, something real, something more than a “front” to satisfy funders. Creativity will rule. The sharing of knowledge will become the norm. And, so the list grows.

How can we deal with these shifting sands? People a lot smarter than I have failed to come up with a definitive answer. However, I do have some thoughts. We cannot look backwards with longing. We, like Lot’s wife, will be buried in that sand.
We must realize, as my friend and colleague Hildy Gottlieb says, that we are creating the future now, whether consciously or not, with everything we do or say. So, we need to define our desired future, claim responsibility for our actions, see the elements dropped in our laps as constructive and utilize them, moving quite deliberatively in the direction that will take us where we want to go.

We must have faith in the community – the combined intelligence and experience sets of diverse individuals, all with skin in the game – and embrace what it has to offer. This might mean flattening our organizations’ hierarchies, or at least encouraging people to build the networks they feel would be most effective without attention to reporting lines.

We need to stop viewing our organizations as turf that must be protected from trespassers and poachers at all cost. Thinking about the value easements on personal property offer to the owners of the property, as well as to the greater community, might help here. As a first step to breaking down the walls between “us” and “them” we could encourage that those in our organizations start talking to and working with individuals at all levels in other organizations, even other communities. And, we should start looking at how to leverage resources between organizations, as well.

We must encourage out-of-the-box thinking. In fact, we should be encouraging people to burn that damn box for once and for all! This might mean that we take a lesson from some Fortune 100 companies and give people time each week to work on projects unrelated to their jobs that are of personal interest to them. Incredible ideas have come out of such policies in the for-profit sector. Why aren’t we encouraging people to dream, then share what they are developing? My guess is that we’ll find things in these projects that will move organizations closer to not only their own visions, but to healthier, more vibrant communities.

It won’t be easy. Real change rarely is. However, there is a saying that “change is inevitable, only the struggle is optional.” Let’s embrace the new “normal” and together clean up Dodge.

It's Time to Judge on the Basis of Impact

The end of the year is approaching and people are hastening to make their 2009 gifts. Some generous souls will respond to any organization that makes an ask. For most, however, the process involves either going through the stack of envelopes received from organizations to which they’ve given in the past, merely to decide how much to give this year, or logging on to a charity watchdog site, such as those run by Guidestar and BBB Wise Giving Alliance, to see which organizations serving a personal passion get high marks. But, are any of these means the best way to approach this important task?

A small but increasingly vocal number of people are suggesting we should be looking at impact when we make our giving decisions. Has the organization to which we’ve given loyally over the years really lived up to its promise to the community? I can hear the contingent that turns to watchdog groups saying, “But that’s why I check these groups out!” The problem with the watchdog groups is that the criteria upon which they’ve been rating organizations are criteria that are easy to measure. They are not necessarily criteria that speak to impact.

One of the key factors upon which high ratings have been given in the past is the maintenance of low administrative costs. However, nonprofits have rightly complained for years that it takes people, facilities and equipment to provide services and achieve impact. People, facilities and equipment cost. Other key factors that result in a strong ranking include the number of dollars that are spent to raise money and the period of time the organization could maintain itself without any further fund raising. While clearly related to good business practices, neither of these criteria speak to results. Frankly, even factors such as numbers of programs, numbers served or satisfaction levels speak more to busyness than they do to impact.

Ken Berger, the CEO of Charity Navigator – one of the foremost watchdog groups – bravely came out this month to say that Charity Navigator will be redesigning its rating system to focus on impact. He admits that it won’t be easy, but believes it is necessary and doable.

Until all the watchdog organizations do our work for us, I propose that we put aside emotion and analysis based on easy but less-than-meaningful numbers to do our own assessment of impact. Is, for instance, our favorite homeless shelter merely serving more people or is it putting the people it does serve into their own homes and providing them with the skills to pay the rent and take care of the maintenance?

We can also look at how well the organizations we identify play well with others. Does that homeless shelter insist on hiring its own case managers, building out and staffing its own kitchen, or collecting its own clothing to provide to clients when it could reach out to other organizations in the community who already have case managers, a kitchen capable of feeding those in the shelter or sufficient clothing to share?

Doing this sort of research will take time, but the rewards go beyond knowing that you answered the call to ensure the status quo. It will draw you closer to the organizations you ultimately select. It will intensify the feeling you get inside when you give. It will force organizations to make a difference or leave the marketplace. And, it will allow you to live in a healthier, more robust community.

Thursday, February 4, 2010

Asking for Donations? Be Sure You are Properly Registered

Q: Can you address what nonprofits must and should do about registering in their own and other states when they solicit donations? I am employed by a management support organization. Many of the nonprofits with which we work are not aware of the requirements and I would like to provide them with current information. I appreciate anything you can share with me on this matter.

A: You raise an issue that is getting a lot of attention today, especially from the states themselves and the IRS. The short answer is that organizations must be registered in the states in which they solicit funds. And, that might as well be every state if they have a “donate now” button on their website. While each state has different laws on the books – for instance, some allow for exemptions for such things as religious organizations, organizations receiving money from only a handful of individuals within the state or organizations receiving an insignificant amount of money from within the state – they are all looking for full compliance.

The registration requirements are not new. Organizations have long been obligated to register in those states in which they conduct a solicitation by any means – e.g., direct mail, email, raffle sales, telemarketing, personal visit and so on. This has been true whether or not the organizations have a physical presence in the state. Even the ubiquitous “donate now” buttons on websites can trigger registration requirements in states that argue that one of their residents could conceivably come upon one of these sites, see the button as a solicitation and be motivated to give.

Throughout the years, a number of organizations have received calls from states that proactively identified them as scofflaws, threatening fines and demanding immediate registration. In the grand scheme of things, it was not a large number. But, just because one of your organizations may have knowingly or unknowingly ignored these laws with impunity in the past, they do so now at their own peril.

Three situations have emerged to make this so. The first is the public’s growing unease over the scandals that have rocked both for-profit and nonprofit corporations, and the states’ corresponding desire to protect their citizens by, at the very least, keeping track of who is asking those citizens for money. Second, the poor economy has motivated states to look for every source of revenue they can find. Registration fees and fines for the failure to register contribute to states’ coffers. And third, the IRS did a major rewrite of the Form 990, which now requires nonprofits to report the states in which they must file a copy of their Form 990 and the states in which they are registered or have received an exemption from registering. These two questions allow the IRS to determine the states from which an organization has raised funds. Failing to answer is not an option. Answering falsely opens the leadership to charges of perjury. In either case, the leadership may be personally liable for civil and in some cases criminal penalties, which can bring fines up to $25,000 and potential jail time.

Ensuring one’s compliance to the filing requirements is not easy because each state has its own stipulations for registration. Some grant registration automatically if an organization files a copy of its IRS determination letter, along with a cover sheet that includes basic identifying information and any required filing fee. Thirty-six states, plus the District of Columbia, accept the Unified Registration Statement, version 3.20, which is available – with supplemental forms for 13 states – at But, organizations still have to file this form separately in each state, along with the applicable filing fee. Still other states require completion of a unique registration form, plus any filing fee. The filing fees can range from $25 to $400. On top of this, registration is an annual requirement, with different filing deadlines in each state.

There are companies that will process all of an organization’s registration materials each year. They tend to run around $7500 in professional fees (exclusive of filing fees), with some a little less and some a little more. If an organization goes this route, it should be sure to ask what the fee covers and what level of accountability the company assumes if they miss a filing deadline or makes some other mistake.

Obviously, an organization can file its own registrations. It is my understanding that this takes an average of two weeks of dedicated attention, though not all at one time and each organization’s unique situation will impact the actual number of hours. Contact the states’ Attorney General or Secretary of State (the Department of Agriculture and Consumer Affairs in Florida and the Department of Consumer and Regulatory Affairs and the Office of Tax and Revenue in the District of Columbia) for specific requirements and to learn of any exemptions and penalties that might apply in the organization’s case.

While complex, registration is a task that cannot be put off. Get going today. Good luck.

Tuesday, January 19, 2010

Are You Prepared for When Disaster Strikes?

This past week news has centered on little other than the devastating impact of the earthquake in Haiti. The challenges of responding to this crisis are immense. More than one newscaster has claimed the task impossible, despite the outpouring of help from around the world, the hundreds of millions of dollars in donations and the fact that Haiti has over 10,000 NGOs of its own to mobilize – the highest number of NGOs per capita of anywhere in the world. True, this is an extraordinary situation. But, it should serve as a lesson to all organizations in our sector. We must be prepared for the unexpected, whatever form that might take. After all, experience teaches us it is not a question of “if” something untoward will occur, but “when.”

No area in the world is immune to natural disasters. Therefore, your organization is susceptible. Is your data protected and retrievable even if your computers are smashed, looted or swept out to sea? Do you have a staffing plan where people know who is to report, under what circumstances, and where to report if your physical space can’t be reached, is uninhabitable or otherwise compromised? Do you have a means of checking up on staff who don’t immediately report to be sure that they are okay? What about a plan for providing service when your normal operations are disrupted? How will you access critical supplies? How will you determine which programs have priority if you cannot, for some reason, provide them all? Do you have a process in place for communicating with your clients if basic telecommunications are disrupted? How will you triage their needs? Do you have agreements with other organizations to work together or even take over for you in times like these?

Then there are man-made disasters, which are even more likely to occur. Pick up a newspaper almost any day and there is a story about someone in the public eye who said something politically incorrect when out with “friends” or in front of a live microphone that was assumed to be off. It can happen to your executive administrator or a visible member of your board. What about a trusted staff member or volunteer who absconds with organizational funds? Or, a program that gets bad publicity? Perhaps someone associated with your organization is accused of sexual harassment. Or, your property is burglarized or significantly vandalized. The possibilities are endless. Are you prepared to handle them quickly and intelligently? Have you identified an organizational spokesperson who will serve as the (only) voice of the organization in these circumstances? Do you have a policy for whether you will be proactive or reactive in dealing with the press? A script by which you control the spin? What about procedures for staying in the public’s good graces?

While it is never possible to cover all contingencies, having risk and crisis management plans in place that deal with the most likely will serve you in good stead. Not only will you be able to quickly respond to the situations you’ve previously identified, you will have a plan from which to start – one you can adapt – when faced with the unexpected.

Few people like thinking about worst case scenarios – it’s why so many die without wills, despite the knowledge that we all will die. However, your organization made a commitment to the community when it opened its doors. You cannot afford to be ill prepared to meet that commitment. As such, you need plans that are updated as new situations reveal missing elements. Bring key stakeholders in today and start them brainstorming. Tomorrow may be too late.

Thursday, January 14, 2010

Giving to help Haiti

The devastation in Haiti is agonizing to see. Most of us want to contribute in some way to help. Please be sure that your donation goes to a legitimate charitable organization and gets to Haiti to help those who need it most. If you are unsure which organizations are worthy of your support, take a look at this article "How to Spot Dubious Haiti Charity Pleas" on

Thursday, January 7, 2010

We, and many of our fellow consultants, are often asked to help people create new nonprofit organizations. One of our esteemed colleagues, Don Greisman, has written a splendid article on why in most cases this is NOT a good idea, and suggests alternatives. If you or someone you know is toying with this idea, reading this thoughtful article is a must.

Tuesday, January 5, 2010

Secret Ballot or a Show of Hands

Q: We have an election coming up and a number of us would like to know the most common practice of nonprofit boards: To elect board members by public vote or secret ballot?

A: Given your question, it appears your vote is not proforma. Good. I give extra points to any organization that questions how to move forward and with whom. I trust it means that you have sufficient depth of leadership to require a serious vote and that you are looking for the most effective means of achieving that.

Both voting procedures are commonly used. I am unaware of one being used significantly more than the other. The approach a specific organization takes is often spelled out in that organization’s bylaws.

If your bylaws do not specify the technique to use, consider the advantages and disadvantages of each. The public vote is faster and everyone sees the will of the people. However, the results of a voice vote may be determined on the basis of the group that projects the loudest. And, if the first candidate gets a particularly hearty response, those intending to vote for the second candidate may feel the majority has spoken and opt not to vote rather than be associated with what they perceive will be the losing side. Even a show of hands can be inaccurate unless several people are counting and all arrive at the same number. However, a secret ballot has its own problems. It takes longer. And, if the nominations were contentious, there may be a question about the validity of the vote and/or the subsequent count. Of course, this can be mitigated if ballots are numbered and accounted for, and there are representatives from “both sides” counting the ballots.

What is far more important than the type of vote is that you have a thoughtfully-considered list of criteria for board service. That makes it easier for your governance or nominating committee to vet the nominees and assure the voting body of the capability of each person up for election to the board. As long as each candidate meets the defined criteria, the format you ultimately choose shouldn’t matter. Everyone can feel comfortable that any of the people on the ballot will represent the community well if elected.