Nonprofit chief executives and their board members do not simply wake up one morning with the following revelations:
- The demographics of the area they serve have changed;
- Funding for a signature program is at risk; or
- High staff turnover is a dangerous threat to service delivery.
Yet, nonprofit leaders confront these realities often. When I read a story or hear about a nonprofit in extremis, I wonder if the leadership has been asleep at the wheel. Did no one see the signs? Why did they not point these things out to each other? What were they (or were they not) talking about at board meetings?
Trouble is Brewing
In each of these examples, the situation didn’t occur overnight.
- Shifting demographics of neighborhoods is real. Lack of awareness of the environment signals that those leading a nonprofit serving a particular community are inattentive to what is happening around them. One might expect that the chief executive, at minimum, would notice changes in the surrounding area going to and from work. Board members coming to meetings might see that gentrification is real. Alert leadership should know about the environment within which their organization provides services.
- Funding for a signature program, and especially from a dominant funding source, requires regular monitoring. Reliance on one source is unrealistic and risky. Experienced development staff and nonprofit leaders (paid and volunteer) are aware of the need to diversify funding streams and the importance of meaningful fundraising programs to support key programs. What does it mean not to receive a grant that an organization has come to expect? Why isn’t it a wakeup call when event attendance is down or a fundraiser doesn’t net as much revenue as it did last year?
- A pattern of staff turnover takes its toll in myriad ways. Continual disruptions have ramifications for morale within the organization, its reputation in the community, and its ability to fulfill its mission for its beneficiaries. Do there need to be focused conversations designed to determine the root cause? Are salaries so far below market rate that staff can’t afford to stay? Are the working conditions contributing in some way to turnover? Is there a problem with the chief executive that the board of directors refuses to see?
Having the Essential Conversations
Conversations at board meetings are often predominantly retrospective – reviewing reports and discussing things that have already occurred. Or, they focus on details that are better attended to at the committee level. When stuck in the past or in the weeds, they fail to address the future.
Some organizations, whether for lack of experience, financial reasons, or the desire to plan quickly, forgo engaging external stakeholders during strategic planning. In this case, they miss a unique opportunity to gain deeper understanding of the environment in which their organization does its work. They also waste an opportunity to send a positive message to their community spotlighting their ability to identify and set organizational priorities.
In some cases, a negative dynamic builds up in an organization. The chief executive may feel the board isn’t engaged sufficiently or doesn’t fully grasp its responsibilities or how to carry them out. When this happens, the committee structure may break down and, obviously, important topics go undiscussed. Conversely, a board may begin to doubt the chief executive’s abilities and shut down in order to mitigate its own frustration with how the organization is managed. Of course, this is exactly when the board needs to step in and take hold of its fiduciary responsibility.
Changing Business as Usual
Nonprofits can remedy these lapses. Here are some of the ways:
First, the chief executive and the board leaders must commit to maintaining oversight and being prepared. Without leaders willing to wrestle with difficult subjects and or having a forward-looking mindset, status quo may slip to being behind the eight ball. Leaders need to work together to determine the key strategic issues facing their organization. Then, they need to commit fully to understanding and analyzing all aspects and ramifications of these matters. And then, they must be bold enough to act, making and sticking to their decisions. Sometimes, a shift in perspective can make the difference, such as moving board conversations to strategy rather than tactics, or being open to alternative points of view.
Here are some tools to support nonprofit executives and boards in their endeavors:
- Dashboards – These tools afford leadership the ability to monitor meaningful metrics. Reviewing dashboards at each board meeting allows those in charge to see patterns and observe cycles or trends. By looking at the same data points at each meeting, changes can be identified and addressed quickly. Moreover, with a dashboard, valuable board meeting time frees up to allow strategic and generative conversations.
- Financial statements – Simply looking at a slice in time may not tell the whole story if the financial reporting is limited. Understanding the numbers compared to year-to-date in the prior year and compared to the budget (in this case it’s fine to look back), can point out important changes.
In addition, many organizations don’t make cash flow projections, which increases their understanding of money coming in and going out. This is relevant because when money is low, leaders don’t always make good decisions.
- Strategic planning – Organizations that don’t create their own goals and articulate their direction may struggle. With no direction, anything goes. Organizations may bounce from one initiative to another, diminishing their resources and/or reputation along the way.
In some organizations, senior leaders – staff and volunteer – close their eyes and avoid concentrating on issues that ultimately erode the organization. This may play out in a board’s lack of willpower to confront a situation with an ineffective chief executive. Alternatively, it may be that a board refuses to embrace its role in fundraising. It may be a chief executive not calling out a weak, “phoning it in” group of board members.
No matter the reason, it is incumbent upon nonprofit chief executives and board members to open their eyes, to be willing to name the elephant in the room, and to facilitate the conversation needed to wrestle with it. They must decide to lead courageously.