Category Archives: Nonprofit Management Trends

Nonprofits Need New “Business Model”

by Leticia M. Smith, Ph.D., President, Lemars Executive Consultants LLC

Recent revelations about the compensation of the CEO of Goodwill Omaha reveal the hazards that nonprofits risk by adopting a warped version of “the business model.” The Nonprofit Quarterly article by Ruth McCambridge reports the canyon-wide gap between the compensation of the CEO Frank McGree and the sub-minimum wage paid to some 100 workers with disabilities. McGree’s compensation was at of at $933,444 in 2014 that represented salary of $250,000, incentive bonuses and compensation.

I do not believe that working for nonprofits requires a vow of poverty. At the same time, I believe in the moral obligation of a nonprofit that benefits from the subsidy from the larger society through tax exemptions to exercise that privilege in a way that ensures equity of compensation between those who are at the top and the rest of those who work for the organization. We are now just awakening to the need to reconsider the pay and benefits for nonprofit workers toward a living wage. Inequities that are persistent in many businesses are under fire as well, and that sector is experiencing pressure to increase wages due to increasing competition for talent, changing demographics and greater dissatisfaction with disparities in income between top executives and most of their workers. Nonprofits are feeling similar pressures and must respond appropriately.

Legal changes affecting wages and benefits are slow in coming, Organizations like Goodwill that serve persons with disabilities are allowed by law to pay sub-minimum wages. However, there is no reason to continue to use the lowest allowable rate as the standard, but rather find a way to make it possible for every worker to live on the wages they make. Independent research tells us of the many workers in a variety of industries in the business world who have to rely on public welfare benefits to augment their income for survival. Workers in the nonprofit sector should not be in a similar predicament; no worker should be.

It is time for a new and social justice imbued “business model” for the nonprofit sector. Nonprofit boards of directors have to always look to the social responsibilities that are implied in the mission of their organization to inform every financial decision they make. At the same time, donors must be helped to understand that the low overhead rate that used to be the golden standard for evaluating nonprofit performance has perpetuated the notion that workers in the nonprofit sector can be paid a little as the market will bear because they are motivated by the mission and not by monetary compensation. If the nonprofit sector is to benefit from the efficiency of a business model, that model needs to be a more compassionate one than what seems to have gained popularity in the past few years. It will take imagination, skill and persistence from all of us who believe in the significant role of nonprofits in a democratic society to reshape our sector to better meet the challenges of growing inequity.

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Leticia M. Smith, Ph.D. is president of Lemars Executive Consultants LLC. She offers nonprofit organizations management consultation services such as strategic planning, merger and partnership facilitation, process improvement, organizational assessment and grant writing.

Copyright ©2016 Lemars Executive Consultants LLC
Unauthorized use and/or duplication of material from this blog site without express and written permission from this blog’s author and/or owner is strictly prohibited. Excerpts and links may be used, provided that full and clear credit is given to Lemars Executive Consultants LLC with appropriate and specific direction to the original content.

 

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When Boards Lose Their Way

by Leticia M. Smith, Ph.D., President, Lemars Executive Consultants LLC

When someone agrees to serve on a nonprofit board of directors, it is mostly because of a desire to make a difference. The difference may be to the lives of individuals, of communities, and even of all living things on earth. Yet, once on the board, one commonly finds oneself groping for an appropriate role and in what sociologists a state of anomie or a sense of anxiety that comes from a lack of purpose. The new recruits are not alone in this state; even veteran members can be found still trying to hack their way through organizational complexity despite their years of board experience. Why?

Board anomie is not a total surprise when one considers some common practices in the nonprofit world. Here are some:

1. No adequate orientation to the roles and responsibilities of a board of directors as a group, and those of individual directors is provided. New directors are expected to learn “on the job.”
2. When board orientation is provided, it is primarily geared toward program information, overall budget and funding sources, board structure and staff responsibilities. The difference between board and staff responsibilities are not clarified.
3. Board governance orientation through third parties portrays staff as competitors whose interests are to protect themselves against board supervision, sowing distrust and frustration among both board and staff.
4. Board agenda is driven almost entirely by the strong executive director, especially when the executive director is the founder of the organization.
5. Board standing committees mirror staff organization, blurring lines of responsibility for outcomes.
6. Board and committee meetings are too long and too frequent for any further involvement of directors outside of meetings.

How does anomie show itself? Two seemingly opposite behaviors are telltale signs: board members micro-manage the staff, or they are disengaged and see meeting attendance as their primary role. These are attempts to create meaningful involvement. Real meaningful involvement, however, is that which leads to effective goal achievement. Unfortunately, both micromanagement and disengaged presence impede strategic thinking and waste precious organizational resources.

All is not lost. Here are some steps that the organization’s leadership can take to prevent dysfunctional behaviors and possibly correct them when they begin to appear:

1. Require board orientation that has both generic components and those specific to the needs of the organization. All candidates, even those with prior board experience, should have this orientation before they are appointed to the board. Specific topics items may include fundraising expectations, technology skills needed for communication and productive work, and the nature and amount of time that may be required in addition to attendance of regular board and committee meetings. Setting a thoughtfully laid out table of expectations allows candidates to realistically evaluate the fit between themselves and the organization.
2. Assuming that the organization has a strategic plan, incorporate plan review into the board agenda on a quarterly basis in order to remind the entire board of the direction and results that should guide its decisions. If there is no strategic plan, then develop one using a planning process and time horizons that align with rapidly changing environments. While using the strategic plan to steer the organization towards productive efforts, the board must also deliberately and sensitively scan its environment that may require change to even the most well-thought-out plans.
3. Review standing committee structure, with the view of determining whether ad hoc committees may be more appropriate than traditional standing committees to achieve time-delineated strategic objectives. Structural flexibility is a must for responding creatively and deliberately to significant changes that can affect the organization.
4. Recruit board members with sufficient technological skills or at least an interest in learning those skills that allow for effective use of board members’ time, such as virtual meetings and remote group collaboration. Offer training on software and hardware used for group activities to board members who need them.
5. Prepare board agendas jointly between board and staff leadership. Joint preparation of agendas may appear to be a small step, but is actually a strong sign of partnership between the board and staff in guiding the organization. To be better organizational tools, agendas must focus on decision items and reduce presentation of staff and board committee reports that can be distributed prior to meetings.

When the board has lost its way, who is responsible for leading it in refocusing energies toward goal attainment and sustainability of the organization? The board, by its charter, has the formal responsibility. However, both board and staff leadership have investments in the present and future of the organization. The answer at the practical level is that those in board and staff leadership positions who sense what is going on must start having a conversation and plan on how to bring the issue for discussion and resolution by the board of directors. Only through partnership between board leadership and the staff executive can an effective strategy be developed and implemented.♦

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Leticia M. Smith, Ph.D. is president of Lemars Executive Consultants LLC. She offers nonprofit organizations management consultation services such as strategic planning, merger and partnership facilitation, process improvement, organizational assessment and grant writing.

 

 

Copyright ©2015 Lemars Executive Consultants LLC
Unauthorized use and/or duplication of material from this blog site without express and written permission from this blog’s author and/or owner is strictly prohibited. Excerpts and links may be used, provided that full and clear credit is given to Lemars Executive Consultants LLC with appropriate and specific direction to the original content.

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