Nonprofit Organization Starvation

Organizations need to be fed to be healthy and sustainable. If organizations are not fed, they will starve.  Authors Ann Gregory and Don Howard,  in their article The Nonprofit Starvation Cycle, state that organizations must have proper care and feeding if they are to be successful in making their mission come alive in the community.

While Gregory and Howard point out that funding restrictions and/or reductions can lead to organizational starvation, they rightfully point out that there is a shared responsibility that goes beyond funders. Organizational leaders often do not make the appropriate investments in infrastructure. Governance leaders often unaware of these lack of investments. They focus instead on the bottom-line.  Funders often times are not aware of the organizational challenges until the organization performance begins to diminish. A lack of transparency and accurate reporting leads to the downward spiral called the Nonprofit Starvation Cycle.

The authors suggest that one of the most important solutions avoiding or getting out of this  downward spiral begins with the question: What does this organization really need to succeed?

When governance and organizational leaders as well as funders begin to answer that question with a shared voice they will breath new life into the organization. The organization will avoid its public  obituary.

The governance partnership model offers two fundamental suggestions to those leaders that are seeking an answer to that important question:

1. Develop a shared commitment about mission. Define that shared commitment in the form of mission outcomes.

2. Develop a shared commitment about organizational performance. Define what organizational success means in the form of organizational results.

Organizations with good leadership need not starve to death.

Governance Committee

The Governance Committee maybe the most important committee of the board of directors. The effectiveness of the Board depends on the Governance Committee. Let me explain. The scope of the Governance Committee is the board. Its role is to design, build, enhance, educate, shape and sustain the Board of Directors. When a board is malfunctioning, it is likely that the Governance Committee has failed in its steward responsibility — to ensure that the board of tomorrow is better than the board of yesterday.

Let me outline  core responsibilities of the Governance Committee:

  1. Board Roles and Responsibilities — ensuring that the members and officers understand their responsibilities as individuals serving on the board as well as the board’s collective responsibility to govern;
  2. Board Composition — ensuring not only that the right people are elected to the board but also the right mix of people are on the board;
  3. Board Knowledge — ensuring that the members of the board have the knowledge and information needed to govern and oversee the nonprofit organization by providing education, coaching, and experiential learning opportunities;
  4. Board Effectiveness –  ensuring that the members of the board have regular opportunities for self-assessment and/or external evaluation where recommendations are made for improvement; and
  5. Board Leadership — ensuring that board officers are nominated on the basis of leadership skills and commitment to the mission and not on the solely on the basis of popularity or availability.

To fulfill these five responsibilities effectively, the  Governance Committee must be full engaged through the board year. In other words, the work of the Governance Committee should not be seen as an event or the fulfillment of a group of tasks. Instead, the Governance Committee must take a systematic approach and be engaged throughout the board operating year.

The  Governance Committee is the steward of the board of directors. Effective stewardship will positive impact the culture of the board of directors and its ability to ensure that the mission of the nonprofit organization is effectively and efficiently making a difference in the community.

Leadership Dialogues

Peter Drucker created the  Leader to Leader Institute with the mission to help people achieve their greatest leadership potential. One of the programs of the Institute is the Leadership Dialogues which provide free access to video insights and inspiring stories from the best thought leaders in every nation around the world.

Some of the featured speakers that I have enjoyed include:

Your can sign-up and receive a new 2 minute online video featuring a new leadership topic each week for free. I have signed up and find them encouraging and helpful.

Governance Architecture

Architecture is concerned with the practice of designing and building structures that are unified and coherent. Since the nonprofit organization could be seen as a structure just as a building is a structure, the specific practice of designing and building organizations could be seen to as governance architecture.  And the organization leaders could be referred to as governance architects.

Governance architecture describes and organizes the context in which the organization leaders serve as architects to make decisions needed to advance the mission and meet organization performance expectations.

The basic governance architecture of an organization includes three interrelated and interdependent building blocks:

  1. Governance leadership — all organizations have an elected chair that leads the governing authority and is responsible for the governance culture. Governing authorities generally employ a chief executive who is the organizational leader and is responsible for organization performance. While the roles, responsibilities and authority of each leader are different, the governance design and structure in the organization require that they work together. Research supports the theory that if they are able to construct an effective governance partnership, the board will be more effective and the performance of the organization will improve.
  2. Governing Authority — all nonprofit organizations are required by law to have a board of directors who serve as the governing authority. The board serves in the public trust and has the fiduciary responsibility to ensure effective governance and organizational performance. The baord chair is elected by the governing authority in accordance with its bylaws.
  3. Organization – all nonprofit organizations are responsible and accountable to achieve mission and organization performance expectations set by the governing authority. The chief executive is employed by the governing authority to lead the day-to-day operations in a manner that meets those expectations.

These three building blocks  serve as the foundation,  framework, and infrastructure of the organization just as they are essential to the structure of a building.

Governance malpractice

When I was in Orlando in December attending the Board Source Governance Forum, the Orlando Sentinel featured an exclusive front page story entitled Blood-bank shake-up.

The article began by saying, “With a state Senate investigation of its practices heating up, Metro Orlando’s largest blood center said Friday that it will no longer do business with its board members, who now will be subject to term limits. The sweeping changes at Florida’s Blood Centers affect millions of dollars in contracts. They also will result in the resignation of longtime Chairman Leighton Yates and a quarter or more of the 40-person board of the nonprofit organization“.

It is quite ironic that while national nonprofit leaders were gathering in Orlando for a two day conference to talk about best practices in nonprofit governance,  the Florida Blood Center was being investigated for poor governance practices.  A probe by the Florida State Senate identified a number of governance practices which were in conflict with best practices promoted by Board Source, and  Independent Sector, and the Nonprofit panel.

Several governance practices identified in the article that seem to be at the heart of the scandal include :

  • The setting of executive compensation for the CEO and senior leaders.
  • Contracts with board members.
  • Tenure of some board members including the  board chair.

Boards of directors must serve in the public interest. When nonprofit organizations such as the Florida Blood Centers are the subject of news paper exclusives and probes by public officials, all nonprofit organizations are devalued and become subject to suspicion. Our role as governance leaders and partners require us to follow our fiduciary duties — the duty of care, loyalty and obedience.

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Board Secretary as Chief Governance Officer

One of the interesting trends in governance identified at the 2009 Board Source Leadership Forum was the Board Secretary as Chief Governance Officer. As the Chief Governance Officer, the Board Secretary would help the Board Chair manage the Board and  serve as the Chair of the Governance Committee.

Michael Daigneault, a Senior Governance Consultant with BoardSource, pointed out the the historical role of the Board Secretary was to oversee and manage the official organizational records such as the articles of incorporation, bylaws, and minutes and perform other internal governance functions. Since many of the record-keeping  functions have been assumed by staff, the new role of the Board Secretary could be to take a much larger role in managing the internal functions of the governing authority.  In this new role the Board Secretary would work closely with the Board Chair as well as the Chief Executive.

I think this new trend is a great idea.  Governance leaders should consider re-activating or recommissioning the Board Secretary to take on a larger and active role as the Chief Governance Officer. With this shift in focus, the Board will have a key officer that will focus at improving the overall functioning of the Board of Directors. Now you know what I think….what about you?  What do you think about this new trend?

Governance Partnership — What is it?

Governance Partnership — what is it?

Nonprofit governance literature increasingly is using the term partnership to describe the relationships between the board of directors, the board chair, and the chief executive.

It is the relationship between the board chair and the chief executive that is core to effective governance. This relationship as it is constructed and nurtured between two key organizational leaders is, what I call, the governance partnership.

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I have always been interested in architecture. I think that the work of an architect in designing structures is a noble and honorable profession. Architecture is concerned with the practice of designing and building structures that are unifying and coherent. Recently I had the opportunity to witness the architecture of Frank Lloyd Wright. Visiting Fallingwater was an amazing experience. But that is another story.

I think that organizations are alot like buildings. If they are well designed and constructed, they feel unified and coherent. Poorly designed organizations, on the other hand feel disjointed and painful.  I once heard someone describe an organization that was having growing pains as a as “10 story building that was sitting on a  foundation designed for a four story  building”. The organization was crumbling under its own weight. It needed to take some time to rethink the organization’s architecture and design.

The byline of this blog is The Architecture of Organizations. The term architecture was purposefully chosen. It reflects the growing trend in the literature on nonprofit and corporate organizations to use terms that can be traced back to the discipline of architecture or construction. Examples include:

All of these books focus on the art of creating, designing, constructing, reframing organizations. I think the term architecture is a wonderful umbrella term the encompasses this trend. It also reflects my stance as I approach governance partnership.

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