BOARDS SHOULD SPEND TIME LOOKING FORWARD
In today's environment, nonprofit organizations are faced with numerous challenges, be they financial, administrative, or programmatic.
Wondering how many boards of directors are up to the task, I contacted Nancy Hall, one of my "go-to” nonprofit professionals, for her opinion. Nancy teaches nonprofit management at Johns Hopkins University as well as consults to nonprofit organizations.
Nancy related this story to me:
"Since 2008, I have been watching a nonprofit die,” she said. "This youth-serving organization has been around for decades depending on a small endowment for 25 percent of its operating budget. A group of consistently generous individuals, organizations and foundations covered half of the nonprofit's expenses. The remainder of the funds came from occasional government grants and contracts.
"When the stock market lost 40 percent of its value, so did the endowment,” she added. "Endowment earnings declined, generous donors became less generous, and competition for grants and contracts grew. Revenues decreased frighteningly fast, expenses decreased more slowly. Soon the organization will be out of money.”
Nancy reflected on why this happened.
"My take is that the board forgot how to make decisions,” she said.
"For the past 20 years, they had the same executive director, a healthy endowment and a program that seemed to work. When the time came to be decisive, the board didn't know how since it had been years since any major decisions had been made. Decision-making is a skill that can be learned. It is a skill that needs to be practiced. Numerous boards, including the one above, fail to exercise their decision-making muscles.”
Nancy noted that she has attended too many board meetings and read too many sets of minutes in which the only action was the approval of the meeting minutes. She identified several reasons for this lack of decision-making.
- The organization has a strong, long-term executive director who makes all the decisions for the organization. When it is time to replace the executive director (retirement, death, resignation), the board lacks the necessary skills to make a good hiring decision.
A dominating board president who takes on the patriarchal (or matriarchal) role can lead to a lethargic board that goes along with whatever the parent wants. Organizations that have had stable sources of funding can have boards that get lazy.
- Many organizations spend 80 percent of the board meeting on history and 20 percent on the future. Once something has happened, there is no need to make a decision about it.
Consider the meeting that includes the reading of the minutes — history, the past financial performance — history, the executive director's report — history. Add to this various program reports, and the bulk of the time is spent on what has already occurred. New business is left to the end when folks are ready to leave.
- Board meetings should be 80 percent future and 20 percent past. Each year, the board should decide if the organization will be relevant in the future. Financial reports should not only report on what has happened but should have a projection of how the year will end.
The metrics on program performance should not only include what has happened but what is anticipated to happen by year end, next year, and the year after that. The trends may result in more decision-making.
Nancy concluded by noting that regular planning and decision-making contribute to a strong and committed board. As always, good advice from a seasoned professional.
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