The New Economic Agenda

During the past two years, very nonprofit that I have come in contact with has faced enormous challenges. Everyone has explored where to save money. The biggest expense for every nonprofit, regardless of size, is salary and benefits. Nonprofit employees have filled the ranks of the unemployed. Nonprofits are operating with 'bare bones' staff until new funds come in. Funds must be coming in because there are nonprofits looking for new staff. Just look at the listings in www.idealist.org. Competition ought to be fierce for the positions being listed there, and there are a lot of talented individuals looking for work. Some of them come from the corporate world, and their resumes ought to be looked at. Need an event planner/manager, there are many individuals with great experience in the hotel world. Unfortunately, they don't know how to take their resume and turn it into a functional resume so that you can get a sense of the depth of their experience and a clear idea of what their core competencies are. Individuals like myself who are doing transition coaching with unemployed senior executives see this everyday. It is so easy to reject a resume. Look carefully and explore how your organization might benefit from an employee who comes from the corporate world. They just might bring the extra benefit of understanding what it means to live within the parameters of a budget and operating with a surplus.

Founder and Board Clash

Angel Flight of New England is a nonprofit organization whose mission is to fly sick patients to medical appointments for free. The 14 year old organization flies out of a Lawrence, Massachusetts airport and has over 900 volunteers who fly patients with serious illnesses to medical facilities for treatment. The organization has made more than 32,000 trips since its founding. Some of organization's biggest benefactors are its volunteer pilots who raised more than $1.3 million since 2007. A conflict arose between the board and its founder/president Lawrence Camerlin when he gave his daughter a position in the organization. In 2007, she was paid, according to the Boston Globe, $87,840...a 50% increase from what she was paid in 2004. When a board member complained, he was let go. When the rest of the board complained about the board member being fired, Camerlin and his wife fired them. One wonders whether the Attorney General's office is reviewing the article of incorporation and by-laws of the organization. Are you thinking of joining a nonprofit board? Be sure to read the articles of incorporation, the financial reports, the by-laws, and the minutes of 12 of the most recent meetings before you do. Make sure there is a conflict of interest policy in the by-laws. One other thing, order and read Cardinal Principles of Governance before you attend your first board meeting. The book is available from Barnes and Noble as well as Amazon.

College Museum Director Forced Out

College Museums abound throughout the United States. They are an important cultural phenomenon and their focus covers a variety of topics from art to archeology and from anthropology to science. The tension between their executive directors/curators varies. (Some museums have curators who have a twofold role: curator and director. Some curator/directors handle this role well; others flounder along without help. A recent incident at the Rhode Island School of Design came to flower or rot in the New England arts community…depending how you view it and depending on how the situation gets resolved. The Rhode Island School of Design’s 106 year old museum just completed a major high profile expansion led by its director, Hope Alswang. This was her fourth year as executive director. She helped raise close to $11,000,000. RISD just hired John Maeda as its new president. His previous position was as Associate director of MIT’s Media Lab. Esquire magazine had named him as one of the 75 most influential people of the 21st century. What had provoked him to send a letter stating that he was giving Hope a final warning? Conflicts like this usually end up with the institution/organization being threatened with a lawsuit; and the situation gets resolved through negotiation. Both parties usually commit to not discussing the settlement and the employee agrees not to libel the organization under the threat of suit. Thus, chances are that we will never know what happened. Of course, the agreement doesn’t stop other employees from making comments. Some staff have indicated that John was not tolerant of descent. Others admire him stating that he is smart, insightful, and at the same time awkward. Both individuals’ photos appeared on the front page of the December 6, 2009, Boston Globe. Hope Alswang’s photo says to me that she is a gregarious, tough, project focused, action oriented, no-nonsense individual. John Maeda’s photo says to me that he is a controlling, anal retentive, non-confrontational, passive-aggressive individual. If I am correct, here are two personalities not well suited to functioning together as members of the same team. Is this conflict just about personalities? It was reported that the museum project was taking money away from other RISD needs like money for scholarships, buildings’ capital needs. Thus we might recognize that the focus of their imbroglio was not only personal temperament, but also professional mission. One might assume that since 200 of Providence’s biggest names in arts and philanthropy gathered to celebrate Hope’s short lived tenure at the museum, they would have done the same for John if he had instead spear headed a campaign within the community to raise money for scholarships and maintain the buildings on campus. I doubt it, but now that this museum is on campus, perhaps a major marketing effort can be made to focus interest in RISD as a whole. John Maeda can show his board, faculty and the community how good he is for the college and the community and by how and whom he selects as the next museum/director. At this point, Hope Alswang needs to begin work on her transition and her vision. John Maeda needs to reflect on what he has to do to move RISD forward and what kind of academic climate he wants to achieve. Both of them could profit from a good executive coach. —Arnold Clickstein

The Number of Nonprofits Continue To Grow

In my book, Cardinal Principles of Governance, published in 2007, I pointed out that the number of nonprofit organizations in the United States was growing exponentially. Nonprofit organizations in the U.S. include burial societies, farmer's Granger's and the Greenbay Packers. An article that appeared on the front page of the Sunday New York Times points out that charitable organizations, the section of the nonprofit sector that solicits donations, grew by more than 60% in the past decade. There are now 1.1 million charitable organizations in the U.S. Of those organizations seeking tax-exempt status and a 501 (C)(3) status, which allows them to accept donations, 99% of them were approved. The IRS defines public charities as organizations that are "religious, educational, charitable, scientific, literary, testing for public safety, to foster national or international amateur sports competition or prevention of cruelty to animals." Approximately $300 billion was donated to charities last year. The IRS estimates that these charities cost the government $50 billion dollars. Given the importance of the public charity sector of the nonprofit world, the question that needs to be addressed is whether the other kinds of nonprofits such as chambers of commerce, the National Rifle Association, private golf clubs, etc. as well as some of those named above should continue to be given tax exemption. Where are the state and federal regulators? Perhaps they are experiencing difficulty trying to stay on top of their case load.

Investments and Governing Boards

The current economic crisis has created for many nonprofits in the United States and untenable situation for many of our country’s small to medium size nonprofits that have some sort of endowment. Endowment funds come in all sizes and shapes. Some are created by donors who actually restrict the use of the money; others are created by an organization’s board. The ones created by donors are truly restricted. When a board sets aside money, the board is in actuality temporarily restricting the use of the money, but it can re direct its use at any time by a vote of the board. Where and how the money is invested is a fiduciary responsibility of the board. This usually falls into the purview of the finance committee, which usually appoints an investment committee. Members of the investment committee may be board members and/or individuals who are not board members. These individuals ought to be chosen based on their interest in the organization and the expertise they bring to it. The investment committee, like the entire board, has a responsibility to make prudent decisions about the investment vehicles chosen. Decisions should focus on the conservative side with a balanced package of investment tools. To avoid what I now refer to as the’ Madoff Syndrome’, a major nationally known brokerage firm should be used. Fidelity and Schwab are examples. Whatever the size of the organization, the CEO must not take responsibility for directing the investment strategy…no matter how knowledgeable the individual is. The best known example of a CEO trying to steer the investment strategy is that of Harvard University’s president, Lawrence Summers taking the investment wheel from Jack Meyer, head of the university’s endowment. Despite warnings, Summers insisted that 100% of the university’s cash be invested with the endowment. And the economic crash came, leaving Harvard with a shortfall of $1.8 billion. The investment team should be guided by certain principles. These should be laid out in a policy that the board reviews and votes on. The guidelines should be spelled out within a dated policy entitled, Investment Policy. To begin developing an investment policy, contact a variety of nonprofits and ask them to share their investment policy with your organization. Read them carefully. Sort out what is applicable to your organization. Included in the policy ought to be a provision that authorizes the board to sell gifts of stock unless the gift has a specific restriction. Begin outlining an investment policy today. Don’t put this off. Do it today!

A Few Guidelines for Board Meetings

Plan the board meeting at least a week ahead. Email the agenda no less than five days ahead. Solicit board members for items they wish to see on the agenda. Begin with the end in mind. What do you want to accomplish at the board meeting, Present everyone with a list of 'Meeting Manners'. They are: listen no 'yes, buts' focus on 'yes, and' don't wonder to a topic that's not being discussed; stay focused with the agenda what's said here, stays here...other than the meeting notes and minutes, which are open to public scrutiny, do not share what went on at the meet with anyone else other than current board members. Finally, for background information on governance, read Cardinal Principles of Governance: Strengthening The Governance of Nonprofit Organizations in America's Communities. Have any questions, email them to aclickstein@strategicwise.com.

Ethics and Management

Two situations were recently brought to my attention. The first involves a nonprofit that had to let staff go, forgo cost of living or any kind of increase in salaries, and require staff to take a furlough of 40 hours during the year. All the staff accepted the reality of the situation which included that they basically would be working for less money in the coming year than they had in the past year. For staff on the lower end of the payscale, it has been a struggle; but they knew they were better off than their former colleagues who now are looking for employment in these difficult economic times. Everything is copessedick until someone in the accounting department is asked to cut checks for three employees who put in extra time during the previous year's audit. The decison for this action had to come from senior management. These bonuses are going to senior personnel. Perhaps the senior staff at this organiztion need to read The New Agreements In The Workplace by David Dibble. It is published by The Emeritus Group, New York, 2002. The second situation involves a nonprofit organization and a member of its staff. Two years ago the executive director let a member of the staff go for inadequate job performance. A few months later the individual sued the organization claiming wrongful dismissal. The school asked the appropriate state agency to step in and review the situation. It did and said that the individual was not mistreated or discriminated against. The individual found a lawyer who was willing to work on a retainer with the hope of weinning the case. They filed suit in court and with depositions dragged the process out over a year. The individual lost the case, but the organization ran up a very large lawyer's bill--over $100,000. Unfortunately the individual and its counsel decided to pursue a more favorible judgement in federal court. Repeating the same course of events. Depositions were taken all over again. The organization's lawyer hoped that the federal court would throw the case out. Unfortunately it decided to accept the case. The organization's lawyer informer his law firm of the situation. He estimated that the cost to the client would run somewhere between $50,000 and $100,000, which the client doesn't have. What should the organization do? Send us your comments.