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Category: Governing Board

  • Remote Board Meetings in the Midst of COVID-19 and Beyond

    Remote Board Meetings in the Midst of COVID-19 and Beyond

    The Center for Disease Control (CDC) has published interim guidance for businesses and employers to reduce the spread of COVID-19 by managing risks of potential exposure. One measure the CDC is recommending is social distancing (remaining out of congregate settings, avoiding mass gatherings, and maintaining distance from others when possible). However, nonprofit boards must continue to govern, and meetings may be even more critical for direct service providers during these difficult times.  The Standards for Excellence: An Ethics and Accountability Code for the Nonprofits Sector encourages each nonprofit board to meet  “as frequently as needed to fully and adequately conduct the business of the organization. At a minimum, the board should meet four (4) times a year.” For all of these reasons, it is important to ensure that your bylaws provide for remote meetings, and how your state law should guide and inform your bylaws.

    To facilitate remote participation in Board meetings, the Standards for Excellence Institute’s Model Bylaws provide as follows:

    • Telephone and Electronic Participation: Directors may participate in Board meetings and vote on matters discussed therein, by means of a conference telephone or similar communications equipment by means of which all persons participating in such meeting can hear each other at the same time. Participation by such means shall constitute in person presence of the Director at the meeting. 
    • Action without Meeting:  Any action which may be properly taken by the Board assembled in a meeting may also be taken without a meeting, if unanimous consent in writing setting forth the action taken is signed by all of the Directors entitled to vote with respect to the action.  Such consent shall have the same force and effect as a vote of the Directors assembled and shall be filed with the minutes.

    You will want to consult your state’s corporate or nonprofit law to ensure that you are acting in a manner that is consistent with the state’s regulations. 

    State law may describe that meetings can take place via remote communication and may provide additional definitions about what constitutes a meeting.  In Maryland, the home of the Standards for Excellence Institute, telephone meetings are permitted as follows: “(1) Unless restricted by the charter or bylaws of the corporation, members of the board of directors or a committee of the board may participate in a meeting by means of a conference telephone or other communications equipment if all persons participating in the meeting can hear each other at the same time. (2) Participation in a meeting by these means constitutes presence in person at the meeting.” 

    Essentially, as long as it is in keeping with your state law, your board can meet remotely using telephone conferencing or other technology (Skype, zoom, etc.), as long as everyone can speak and be heard simultaneously (as if meeting in person). Additionally, the board can act without meeting as long as the vote is unanimous and recorded in writing.

    The Standards for Excellence educational resource packet, Board Member Responsibilities, contains a comprehensive set of model bylaws that can be modified and customized to meet the needs of nonprofits around the country. 

    This educational resource packet and the full series of all packets  – including sample policies, tools and model procedures to help nonprofits achieve best practices in their governance and management – can be accessed by contacting a licensed Standards for Excellence replication partner, one of the over 150 Standards for Excellence Licensed Consultants, or by becoming a member of the Standards for Excellence Institute.

  • Four Things Your Nonprofit’s Board of Directors Should Do to Start Out the New Year by Embracing Best Practices

    Four Things Your Nonprofit’s Board of Directors Should Do to Start Out the New Year by Embracing Best Practices

    This article was originally published by the National Council of Nonprofits on January 18, 2019.

    It never fails. As soon as the iconic glittery New Year’s ball makes its descent in Times Square and the calendar turns to January nonprofit boards review their list of goals for the new year and begin to tackle tasks like updating woefully out-of-date bylaws and tightening up conflict of interest policies. Boards look at ways that they can ensure legal requirements are followed by their organization and that their next audit will come back squeaky clean. But there is more to running an ethical, accountable, and transparent nonprofit than just legal and accounting requirements. Boards of directors can set the tone for the organization by conducting regular reviews of core governing and operating policies and procedures.

    In our work at the Standards for Excellence Institute, and through our parent organization, Maryland Nonprofits, we encourage nonprofits to embrace ethical and accountable management and governance in all their efforts. Our blueprint for nonprofit best practices encourages organizations to assess their own operations, governance, and management against our set of best practice standards, the Standards for Excellence: An Ethics and Accountability Code for the Nonprofit Sector. The Standards for Excellence code is supported by a wide array of educational resources and tools, plus an accreditation and recognition program carried out by partners like state associations of nonprofits as well as consultants working around the nation.

    As the Standards for Excellence: An Ethics and Accountability Code for the Nonprofit Sector states, “Nonprofits depend upon effective leadership to successfully enact their missions… Board members are in a position of trust to ensure that resources are used to carry out the mission of the organization…”

    Four Things Your Board of Directors Can Do to Embrace Ethical, Accountable, And Transparent Values

    1. Review your bylaws:
    • Do the bylaws describe standing committees or positions that no longer exist?
    • Do they address modes of communication that you rarely employ? 
    • Have you moved away from some of the statements in the bylaws in a way that encourages you to re-think the clauses in the bylaws or does the organization need to resume past practices to avoid “mission creep”?
    1. Review the position description for board members and officers:
    • Do the roles and responsibilities adequately describe what is really needed for an individual to succeed in helping to advance your organization’s mission?
    • Are the roles and responsibilities consistent (or in opposition to) the clauses of your organization’s governing documents, such as your bylaws?
    • Do you find that your list of expectations for board members is helpful in the board recruitment, selection, and orientation process? Hopefully, this document is shared with board members BEFORE they accept a nomination to serve on the board.  There is nothing worse than investing a lot of time recruiting a board member only to find out that he/she is unable or unwilling to carry out the expected responsibilities.

    1. Take care in completing your annual conflict of interest statements.

    • Each nonprofit organization should have a board-approved conflict of interest statement that, as the Standards for Excellence code states, “is applicable to board members and staff, as well as volunteers who have significant, independent decision-making authority regarding the resources of the organization.”
    • The annual conflict of interest policy should “identify the types of conduct or transactions that raise conflict of interest concerns, should set forth procedures for disclosure of actual or potential conflicts and should provide for review of individuals transactions by uninvolved members of the board of directors.” (Standards for Excellence code)
    1. ​​​Review the performance of your current board members and board as a whole.
    • Don’t wait until the board presents its slate of new members to assess the strengths and weaknesses of your current board. Undertaking an assessment now can help your nonprofit know what talent and experience should be targeted in your next round of board member recruitment.
    • Are your current board members fulfilling their responsibilities (fiduciary, fundraising, governance, attendance, etc.)?
    • Do your current board members complete an annual or bi-annual self-assessment of their service as a board member and the board’s service as a whole? 2019 would be a great year to start this practice.

    Whether we are “trusting the magic of new beginnings” (Meister Eckhart) or simply taking advantage of a lull in the frenetic pace of nonprofit organizations, the fact remains that many nonprofit boards take the opportunity to embrace improvement at the start of the calendar year.  Perhaps this appetite for stronger ethics and accountability is even more pronounced at this time after a few high-profile nonprofit organizations have found themselves in the midst of serious investigations and sanctioning in recent months.

    The board of directors in any nonprofit serves as a crucial player for demonstrating the values the nonprofit espouses and lives. We hope 2019 offers your board the opportunity to implement best practices and re-committing to doing its best at doing good.

  • Managing Difficult Board Members

    Managing Difficult Board Members

    You know who they are.

    They engage in sidebar conversations with other board members or even the members about what they think is wrong with the board or the executive director or the organization in general. They joined the board simply to promote themselves or their business and then come up with schemes to get the organization to buy their services or products. They ask for special favors such as upgraded airfare or free tickets to a fundraising event or free products from vendors. They commandeer meetings and interrupt other board members or talk incessantly. They don’t show up for meetings. They don’t have their assigned tasks ready when asked or drop the ball altogether. They never raise a single dime. They insist money be spent on projects that are not in keeping with the mission or they come up with grandiose projects for which they will bear no responsibility. The over-scrutinize everything the CEO does and never find anything worth praising. They have unreal expectations of the CEO, often calling at home or while he/she is on vacation. They are rude to volunteers or members. They have no comprehension of nonprofit governance and often make suggestions that are contrary to maintaining nonprofit status. They are willing to break the law, falsify tax documents or behave unethically. They date or have a romantic relationship with a staff member. They donate a large amount of money so they can blackmail the other board members or CEO or staff with their generosity. They go behind the CEO’s back and direct staff to perform certain tasks. They get their friends hired to the nonprofit. I could go on. These are just a few of the things I (or my colleagues) have personally experienced. The point of this article is what is a CEO or board member to do with board members who misbehave? Years ago I was speaking to a peer explaining a particular problem I was having with a board member. He gave me a piece of advice that was golden. “Put a board member between you and the problem.” In other words, it is the responsibility of the board to manage its membership and even the most talented CEO must turn to the board for assistance in dealing with bad board members. This isn’t always easy because frequently board members don’t want to be confrontational or they hope that a problem will eventually work itself out. Most often though, problems do not go away on their own and ignoring them can cause them to grow. Problems are best avoided through written policies, governance structure, and organizational culture.

    A clear set of guidelines such as a “Conflict of Interest” statement that each board member must agree to and sign, can help organizations fend off attempts at hijacking the organization for personal gain. Conflict of Interest statements can also define what board members are free to discuss with non-board members or the public at large. The Standards for Excellence Institute’s Board Excellence Handbook includes a sample Conflict of Interest statement that can be tailored to fit your organization.

    Board members who don’t attend meetings can be dealt with by establishing a policy for meeting attendance. I’ve always favored the policy that requires a board member who misses two meetings in a row be automatically removed and must affirmatively be voted back on the board. This saves the board from having to vote members off the board, which so often boards are reluctant to do. Establishing clear guidelines for fundraising expectations can also save the board headaches. After talking with CEO’s for several years, I would hazard a guess that well over eighty percent of board members do not raise money for the organization they serve. This is contrary to one of the essential responsibilities of being a board member, fundraising. How a board handles an obnoxious person is a reflection of organizational culture. Ideally the president or chair of the board should manage meetings in such a way that no one person can dominate the agenda or bully the other members. However, if board behavior is out of hand, it might be time to call in a consultant to conduct board training.

    And speaking of board training, does your organization have a board handbook and are new members provided with training? This is an area that is often overlooked or dismissed. And while organizational expectations might seem obvious, it should be remembered that people are born “board members” and many people who find their way onto board service are well-meaning volunteers, not governance experts.

    The functionality and health of the board of directors is a direct reflection of the health of the nonprofit. If a board is dysfunctional, the organization will be dysfunctional. If a board is focused, healthy and mission driven, the organization will be the same. If you are dealing with problematic board members, it’s time to take action; delaying will only cause the problems to grow. 

    Bunnie Riedel is a Standards for Excellence Licensed Consultant. Her areas of expertise are board development, strategic planning, communications and media relations and public policy advocacy. riedelcommunications.com

  • Understanding Nonprofit Obstacles: What Headwinds Do Your Clients Face?

    Understanding Nonprofit Obstacles: What Headwinds Do Your Clients Face?

    When you travel from New York to London, the shortest flight is about 6 hours and 45 minutes. When you return, the shortest flight is an hour longer. Flying east, we have tailwinds helping us along. Flying west, we’re pushing against headwinds.
    Every time we make a plan, we’re also making assumptions. Some assumptions are simple and pretty universal – we all experience headwinds and tailwinds in flight.
    But other times we are making assumptions based on our own experiences, sometimes unaware of the headwinds and tailwinds that are helping and hindering us.
    For example, if you ask me how far the nearest Target store is, I’ll answer that it’s about 10 minutes from my home. Unconsciously, I’m assuming you have a car. If my neighbor doesn’t have a car, it will typically take over an hour – walk to the bus stop, take a bus several miles in the opposite direction from Target, so he can change to the bus that will take him there.
    My tailwind is that I have a car and enough money to pay the insurance and fill the tank. His headwind is that he doesn’t have a car. Worse, he also has the headwind that he’s working two jobs, so the time it takes to get to Target is an even greater chunk out of his free time than it would be from mine. He’s flying west, while I’m flying east.

    Estimating based on our own personal experience is natural.

    It takes conscious effort to parse out the advantages and obstacles – tailwinds and headwinds – that make up our personal experience, so we can more clearly see the advantages and obstacles of others.
    When we makes plans, our first inclination is to think about what works for us. What do we like, what resources do we have – time, cash, knowledge – that we can employ. Planning based on our own experience may work if everyone is just like us – same background, same experiences, same resources.

    But our clients, patrons, staff members and visitors are not all the same.

    To successfully serve the community, we have to consciously find ways to understand our clients’, patrons’, staff members’ and visitors’ experiences. Not just what the headwinds (and tailwinds) are, but also their ramifications. I may have known that my neighbor didn’t have a car; that doesn’t mean I understood what the implications were when it came to shopping and the decisions they force you to make. If you have to go through that much trouble to shop at Target, then it may make sense to pay the higher prices at the local bodega. The ramifications of one situation affect the next, which affect the next.
    Before digging into the myriad of experiences of clients, patrons, staff and visitors, take time to consider the headwinds you’ve encountered growing up and getting to where you are in life. Then stop and consider all the tailwinds that have helped you on your way – the mentors, the education, sustenance, the visits to cultural institutions.
    Which of these are universal? Which are uniquely yours? Which make you wonder about the tailwinds and headwinds of others?
    To schedule a time to explore your board and staff headwinds and tailwinds, reach Susan Detwiler at sdetwiler@detwiler.com or www.detwiler.com.

  • Nonprofit Board Effectiveness: Making Every Board Better by Modelling and Monitoring a Culture of Integrity

    Nonprofit Board Effectiveness: Making Every Board Better by Modelling and Monitoring a Culture of Integrity

    nonprofit_consultant The following post about nonprofit board effectiveness was written by Standards for Excellence Licensed Consultant Bill Musick and is part of our “Ten Years of Advancing Excellence” blog series, celebrating ten years of the Standards for Excellence Licensed Consultant program. Bill is certified in Healthcare Compliance and Healthcare Privacy Compliance, and certified as a Governance Trainer by BoardSource.  He has presented nationally, and is a contributing author to: YOU and Your Nonprofit Board: Advice and Tips from the Field’s Top Practitioners, Researchers, and Provocateurs (Charity Channel Press, June 2013). Bill Musick became a Standards for Excellence Licensed Consultant in 2007. 

    While Mars Nutrition claims that its M&M’S® “Make Every Occasion Better,” I would say that a key way to Make Every Board Better is to focus on a different set of M&M’s – those that create and sustain a robust culture of integrity. A key goal of the Standards for Excellence Institute is to promote the highest standards of ethics, effectiveness, and accountability in nonprofit organizations.  What better way to express this goal than to create a culture where ethical behavior embodies and reinforces the standards espoused by the Institute.  The board’s role in developing such a culture falls at the intersection of its responsibility to be effective and its duty of obedience to legal norms of both the corporation and to external law.

    Standards for Excellence Guiding Principle II: Leadership, Board, Staff and Volunteers

    Nonprofits enjoy the public’s trust, and therefore must comply with a diverse array of legal and regulatory requirements. Organizations should conduct periodic reviews to address regulatory and fiduciary concerns. One of leadership’s fundamental responsibilities is to ensure that the organization governs and operates in an ethical and legal manner. Fostering exemplary conduct is one of the most effective means of developing internal and external trust as well as preventing misconduct.  Moreover, to honor the trust that the public has given them, nonprofits have an obligation to go beyond legal requirements and embrace the highest ethical practices.

    A Robust Culture of Integrity

    One of the basic tenets of behavioral ethics is that it’s rarely the bad apple, but rather situational factors that lead to lapses in ethical behavior.  So environment matters.  What does a culture look like that reduces the number of risky situations that arise and prepares its staff and managers for those cases where ethical guidance may be gray? Work by the Ethics & Compliance Initiative points to several key traits of organizations with cultures that effectively support ethical practices:

    • Culture that encourages speaking up

    • Employee confidence that peers and supervisors will encourage and support speaking up and taking the ethical path

    • A belief by employees that the organization is fair in its dealings with all stakeholders

    • The formal and informal communication of standards from executive leadership and the board (often referred to as the “Tone at the Top).

    We also know that ethical behavior falls on a continuum from more to less ethical; it’s not usually a case of ethical versus unethical.  The traits listed above help ensure that an organization operates in the upper end of this continuum.

    So what are these magic M&M’s?

    The board’s opportunity to develop and support a robust culture of integrity fall into three major categories:

    • Modelling

    • Monitoring

    • Selection

    (ok, only two of them begin with M, but in the right order, they do spell MM’S)

    Selection

    A board has an important opportunity to create the “tone at the top” by recruiting for integrity when it selects a Chief Executive and new board members.  If you don’t already include questions similar to the following in your recruitment process, then add them:

    • How would you describe a person of integrity?

    • How can a person in a board or chief executive role convey to staff that ethical behavior is a high priority?

    • What would you do if you observed or heard about something that you thought might cross the line of appropriate ethical behavior?

    And don’t stop at recruiting….think about how you can incorporate elements of ethical behavior into your onboarding process, and incorporate indicators of ethical behavior in the board’s assessment of the Chief Executive and in its own self-assessment as well.

    Modelling

    “If each level in an organization’s hierarchy emulates the one above it, then an organization can never be better than its board.” 

    Modelling impeccable ethics is the second way that a board helps to build a robust culture of integrity.  A few ways to model ethical behavior in the board room include:

    • Acknowledge ethics lapses, and look for situational factors that contributed to them, rather than individuals to blame

    • Strive for transparency and fairness, and rate yourself on whether your decisions and the process for making those decisions would be considered “fair” by various stakeholders

    • Set aside a moment on the board’s agenda to identify examples of moral courage within and outside the organization, and celebrate those – especially the internal examples

    • Demonstrate priority of ethics by participating in ethics and compliance training or by the placement of ethics and compliance on agendas, organizational chart and in corporate communications

    Monitoring

    We don’t want to believe that there may be ethical lapses occurring in our organizations, and that denial can lead boards to overlook signs and symptoms.  Boards that take ethics seriously should ensure that some sort of organizational assessment takes place.  It may consist of a regular survey of employees, volunteers and board members that includes the following types of questions:

    • Have you felt pressure to compromise your standards?

    • Have you observed what you perceived as misconduct?

    • If so, did you report the perceived misconduct? If not, what contributed to that decision?

    • Have you observed retaliation for speaking up regarding perceived misconduct?

    In Closing….Be Intentional

    All of the elements described above require a conscious effort by a board.  One way to start the conversation in a board room is to simply ask do we want to be a board that helps to build a robust culture of integrity?  Discuss one of the elements above, or ask the board to rate itself in some of these areas, or review a positive or negative example from the organization’s own experience.  The intention to make a positive contribution towards enhancing a culture of integrity can be the start of an ongoing journey by a board to examine itself and the organization in order to meet the guiding principle that boards should “ensure that the organization governs and operates in an ethical and legal manner.”

  • NANOE: New Guidelines for Tomorrow’s Nonprofit – A Review

    NANOE: New Guidelines for Tomorrow’s Nonprofit – A Review

    This NANOE review originally appeared on Maryland Nonprofits blog. Read the original post at www.marylandnonprofits.org. 

    Nonprofit leaders who haven’t found the time to make their way through the 111-page nonprofit manifesto released by the National Association of Nonprofit Organizations & Executives (NANOE) will be forgiven. No worries, I am here for you. I present to you a high-level overview and a short review.

    There has been some puzzlement and a lot of questions about emails that started showing up in the inboxes of thousands of nonprofit leaders across the country in July 2016, nominating them to be part of a Board of Governors whose sole task is to review and ratify a new set of guidelines for nonprofit practices. The full text of the Guidelines can be downloaded and reviewed here.

    For the past several decades, there has been general concurrence among nonprofit leaders on best practice standards, including Maryland Nonprofits and the Standards for Excellence Institute (where I serve as the Director of Accreditation and Education), the BBB Wise Giving Alliance, the Principles and Practices for Nonprofit Excellence (Minnesota Council of Nonprofits), the Principles for Good Governance and Ethical Practice (Independent Sector), the Council of Foundation’s National Standards for U.S. Community Foundations, BoardSource, and other industry specific accrediting bodies such as the Council on Accreditation and CARF. For example, generally accepted best practices call for boards to be diverse and represent the communities they serve, to be all-volunteer, and to be responsible for financial and program oversight, and for setting the direction and policy for the organization. While there is some level of competition among standards-setters, there is general agreement about what the best practices are, with different approaches to measuring and articulating them.1

    We believe that best practices call for boards to be more engaged, not less. Boards should be more diverse, not less. Boards should represent their communities as a whole, not just the elite…

     

    Enter NANOE with a new set of guidelines for the nonprofit sector, designed, at least in part, to address the chronic under-resourcing of nonprofit organizations. Our assessment is that these guidelines are a mix of old news, ill-supported propositions, or suggestions downright contrary to best practices that could carry significant risks. They are written in an unwieldy, repetitive fashion that may make them impractical for use by nonprofit leaders and consultants that NANOE intends to certify, and also lack credible sourcing. I’ve provided an overview below that outlines the Guidelines based on three categories.

    1. This is not news: Guidelines in this category are statements about good practices in the nonprofit sector that we can all agree with.  For example, NANOE suggests that relationship building is critical.

    2. Not enough info: Guidelines in this category may have some merit, but the detail contained in this text is not sufficient to fully vet them or, it is unclear whether a nonprofit would have the means or authority to implement these practices. For example, NANOE offers that donors should be a nonprofit’s primary customers.

    3. Cause for concern: These practices directly contradict best practice and/or there is no practicable way to implement these practices sector-wide. For example, NANOE suggests that boards should have only four members and that board members be paid for their service.

     

     

    This is Not News

    If you’ve been around in the sector long enough, you have definitely run across a board of directors (or two, or ten…) that is running at less that optimum effectiveness. We’ve seen instances in which the board has too much authority and control, and we’ve seen instances in which the CEO has too much authority and control. This relationship is key to nonprofit success, but we often see it go wrong. Other statements used as the basis for the new Guidelines are not altogether wrong. Anyone who works in and with the nonprofit sector knows that relationships are key, that strong CEOs are needed, that nonprofits must work to diversify their sources of funding, and that the surest way to success is to commit some level of resources to building organizational capacity. Donors should be cultivated and engaged; programs should be evaluated for outcomes. We should be speaking out on behalf of the sector to lobby governments and funders to provide funding for indirect costs like infrastructure and administrative or fundraising overhead. These are basic points on which we can all agree. (NANOE Guidelines 1, 3, 9, 10, and 11, and parts of Guidelines 5 and 7).

     

     

    Not Enough Info

    Though we sometimes argue over what to call our sector, we have strong opinions about our purpose. We are here to make the world a better place through our efforts. We have always thought of our core mission and our primary customer as the people or causes to which we direct our resources. NANOE’s Guideline 4 recommends that we rethink this paradigm by adding donors and for-profit businesses as additional primary customers. I had to read very closely to find that the authors suggest them as an addition, rather than as a replacement for our mission. On page 56, the suggestion is that we rewrite our missions as such:

    “Faith & Hope Food Bank provides donors, business partners, advocates & volunteers the organization they require to care for our community’s hurting, hungry & homeless.” , p. 56, Guidelines

    I’m still thinking through the implications of this and weighing the pros and cons – as we all should consider what the result of this might be. I’d love to hear your thoughts, Tweet us @s4excel. One thought that immediately comes to mind is that it would fly in the face of the community empowerment movement whereby those being served play a stronger role in the governance and strategy of nonprofits that are active in their communities. (For some great examples of this, see the Building Movement Project.) Other guidelines I include in this category are things that nonprofits have little or no control over. Although there is a nugget of good thought here, these are not necessarily “guidelines” that nonprofits can implement. However, a nonprofit may be able to advocate for these ideas with their partners if it fits with their own mission and structure.

    • NANOE suggests that there should be directives to funders and for-profit partners to be actively engaged in decision-making at the organizations they fund. (NANOE Guideline 5) On one hand, this would give more power to the already powerful, but on the other hand, perhaps it could lead to more resources. This guideline is not fleshed out enough to get sense of the depth and breadth of engagement the authors suggest.

    • NANOE also offers directives to university faculty to exchange services with nonprofits: namely, assistance in securing large grants in return for using their clients as research. (NANOE Guideline 6). The faculty that I know already have a tough enough time raising funds for their research; it’s hard to imagine this truly scaling up. Not only that, but I’d like a whole lot more information about the research standards and funding rules that would accompany such a proposition.

    Finally, in this category, I would add NANOE Guideline 9. (Build more social enterprises and consider whether your organization would be better off as a for-profit or benefit/L3C corporation.) I’ve seen very successful social enterprises, and I have seen social enterprises that have fizzled out within a few years. The same can be said of other resource development opportunities – fundraising from individuals, funds from foundations, government contracts, and fundraising from events. Social enterprise is no panacea, and it should be entered into with the same caution that any leader undertakes any significant change in strategic direction.

     

     

    Cause for Concern

    I’ve saved NANOE Guideline 2 for last. In my opinion, this is the crux of the suggestions that have the most capacity to do harm to our sector. Guideline 2 calls for repurposing the relationships between the CEO and boards of directors (and with donors and for-profit organizations, which I addressed above). There are two directives in this section which bring the greatest cause for concern. 

    The first directive is to restructure the board. NANOE suggest that we disband every board and reconvene it to include only four board members – an “enterprise development” specialist, a mission specialist, a CPA, and a lawyer. (Someone show me the queue where entrepreneurs, lawyers, and CPAs are waiting in line to serve on my board!) It is also suggested that most monitoring and planning activities, including regular financial and program oversight, should be stripped from the board. Fundraising is also dropped from the list of board responsibilities. 

    The NANOE Guidelines suggest that boards are to be used primarily in an advisory function, with a strong focus on ethics, legal compliance, and managing the CEO. In return, all board members are to receive compensation for their service. In a surprise addition, all board meeting minutes, including those not already subject to sunshine laws, are to be public documents. 

    The second directive is to give more authority to the CEO. NANOE suggests that the CEO act as the Chair of the board, set board agendas, and vote on board matters. Further, NANOE suggests that the CEO should have full authority to act on all organization matters and that the CEO is solely responsible for building relationships with stakeholders. 

    When it comes to organizational monitoring and oversight, the NANOE guidelines suggest that all nonprofits should be subject to an annual audit by an independent CPA. This replaces regular financial monitoring by the CEO and board. Additionally, all nonprofits should contract with outside bodies to complete program/organizational audits. This replaces regular program oversight by the CEO and board. 

    We believe that best practices call for boards to be more engaged, not less. Boards should be more diverse, not less. Boards should represent their communities as a whole, not just the elite, who, according to these guidelines, are to be provided an avenue to do good AND to do good for themselves AND to have an important seat at the decision making table. Further disconnecting nonprofits from the communities they serve will not lead to greater success. 

    Additionally, paying board members creates a self-serving interest on the part of the board member, and thus decreases their independence and objectivity. How will a paid board, essentially selected by the CEO, effectively and impartially provide the oversight to assure that basic governance standards of the IRS, and public service missions, be met?  How would this group impartially review CEO performance and compensation? Granting the CEO authority to set agendas and vote on board matters could lead to a situation where these small, professional, and elite boards simply rubber stamp everything the CEO suggests. This has the potential to lead to a dangerously unbalanced relationship. 

    Suggesting the CEO hand over responsibility to manage the organization and the board hand over their oversight duties –  to paid contractors – is not the solution that the nonprofit sector needs. Small nonprofits do not have the resources to meet this guideline, and nonprofits who could afford it should think carefully before passing these key responsibilities to outsiders. 

    Furthermore, the idea of having outside organizational consultants conduct regular audits to replace reporting is not practical and not good practice. A high quality organizational assessment can cost tens-of-thousands of dollars and is time consuming, with a time lag between assessment date and report-delivery. It is a good tool for periodic, strategic reviews by the board and CEO, but it is exceedingly expensive and could lack consistency, accuracy and timeliness for regular reporting that the board and CEO need to govern and manage the organization. One observer called these guidelines the “consultant full employment act!” We would rather see those resources going into the mission and infrastructure of the organization – and the individuals/community served. 

    The case for this NANOE’s Guideline 2, at least in this document, appears be built on anecdotal evidence from very large nonprofits. (Small nonprofits, which make up 2/3 of the nonprofit sector in this country, would be costed-out by many of these guidelines…perhaps NANOE is suggesting that these groups should scale up or give up?!) While we share the frustration that leads the initial argument (many board/CEO relationships are not working), we cannot sign-on to the solution suggested here.

     

     

    Conclusion

    If you’ve paid your $100 to be on the Board of Governors to review and ratify this document, we suggest that you carefully read these guidelines and make your own decisions about the veracity of their claims and conclusions. There are solutions out there, offered by the many standard-setting bodies mentioned above. Our own Standards for Excellence accreditation program has been supported by independent academic research. There is no shortcut to success – organizational capacity building, strong relationships, resource strategies, and board service are HARD WORK, and there’s no getting around it. Maryland Nonprofits and the Standards for Excellence Institute are here to help you with that hard work!

    1 One exception to this consensus on best practices has been Charity Navigator and its highly popular website for donors to see ratings on charities based largely on the percentage they spend on overhead. We disagreed with the Charity Navigator rating approach because exceedingly low overhead undermines an organization’s ability to have sound management systems to ensure full ethics and accountability. The Charity Navigator star seems to be fading a bit as they finally signed on to a letter a couple of years ago stating overhead is not the most important thing, impact is, but they, like everyone else, have failed to find an easy way to measure a nonprofit’s impact.

    Maryland Nonprofits and the Standards for Excellence Institute’s President & CEO, Heather Iliff, reached out to NANOE’s leadership to inform them of our intent to publish this post and invite a response. Read NANOE’s response here. 

     

     

    NANOE Guidelines Summary

    Key: “Not news” in blue. “More info needed” in purple. “Cause for concern” in red.

    1. Relationship building is critical: egalitarian, networked, engaged, reciprocal, and trusting relationships are the keys to success.

    2. Re-Purpose Relationships between CEO, board, donors, and for-profit businesses

      • Restructure the board: Four board members only, to be used as “counsel” to the CEO (not as community members/owners of organization assets) – enterprise development specialist, mission specialist, CPA, and a lawyer. Strip most monitoring and planning activities, including regular financial and program oversight. Boards are not involved in fundraising. Emphasis on ethics, legal compliance, managing the CEO, and holding the CEO accountable for strategy and outcomes. All board meeting minutes are public. Board members are paid “at least” an honorarium.

      • Give more authority to the CEO (do NOT call them an Executive Director): They serve as Chair of the board set board agendas, and vote on board matters. CEO is granted full authority to act on all organization matters. CEOs should be freed to concentrate on building relationships, fundraising, and building the capacity of the organization, while program managers have broader authority andresponsibility over their program areas and strong development support is provided through a development office.

        • All nonprofits should be subject to an annual audit by an independent CPA (not the CPA on the board). This replaces regular financial monitoring by the board.

        • All nonprofits should contract with outside bodies (not named?) to complete program/organizational audits. This replaces regular program oversight by the board.

        • Donors and for-profit businesses are seen to be primary customers (See below, Guideline 4).

    3. Strong CEOs build and maintain effective organizational and operational capacity, including strong external relations and strong human capital practices.

    4. Re-define the mission statement to include two primary customers – donors and for-profit partners AND the community served. Rewrite mission statements such as, “Organization X provides a means for donors, advocates, volunteers to support a specific cause.”

    5. For funders and for-profit partners: Be partners with nonprofit CEOs to build high performing organizations. CEO should spend considerable amount of time on building networks and partnerships and bringing funders into organizational decision-making processes. 

    6. Diversify fundraising sources, including social enterprise and capital investments. Also, apply for governments to fund indirect costs and partner with university faculty to grow revenue (faculty has access to clients and data for research, faculty assists in securing large dollar grants). (See also guidelines 7 and 9 below).

    7. Raise capital for capacity building and grow and sustain change through the use of capital investments. Grow strategically based on a strong business plan. Report investment income separately from other revenue sources.

    8. Identify and communicate infrastructure costs as necessary to accomplish mission. This guideline is about changing the public and donor perception of overhead.

    9. Build social enterprises and consider re-incorporating (for instance, as a B-corp or L3C). (See Guideline 6 above).

    10. CEO leads all fundraising efforts and is an effective fundraiser. Cultivation and stewardship of donors is a key function of the CEO (see Guideline 2 above). CEO may engage consultants, but must maintain accountability.

    11. Engage in evaluation of the organization, its outcomes, and the effect of growing capacity on service delivery.