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?

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.

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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.

Stella!

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, et.al. 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.

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” (crowdsourcing.com).

An example of crowdsourcing about which most of you have probably heard is Wikipedia.com. 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 (http://www.lapiana.org/downloads/Convergence_Report_2009.pdf), 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.

www.BeExtra.org

www.IfWeRantheWorld.com

www.AllforGood.org

www.WeAreMedia.org

www.nten.org

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.

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?” (http://www.courier-journal.com/article/20100322/OPINION02/3220308/1018/OPINION/Community%20Challenge%20%7C%20Nonprofit%20boards%20can%20do%20better?GID=8H%20pJ5C9Y1Dvd8k6dqX3xQRvXmF480JgvDDLrad%20zsU=)

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.

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.