Things To Ponder: Who Is Your CEO?

Gene Takagi at the always enlightening Nonprofit Law Blog links to a two part entry on why the title of the senior leader of a non-profit should transition from Executive Director to President/CEO. The argument made in the pieces is that the person in that position gains credibility within and without of the organization.

Takagi only touches upon this very briefly because his greater concern is who is legally the CEO of the organization, the executive director or board chair. I voraciously consumed the post because I have dealt with organizations where the dynamics were such that one was clearly in a dominant position. I often wondered to whom people would look for leadership in a crisis–versus who was ultimately responsible for the decisions that were made during that time.

Takagi’s advice is-

“However, if the organization has a paid executive director who is tasked with operational leadership and the board chair is a volunteer who is not active in management of the organization’s operations, the CEO designation should be given to the executive director. Nonprofit boards should (1) review their bylaws to understand how their management structures have been established, and (2) amend them, as necessary.”

Acknowledging that the board chair may not want to give up the CEO title in this case, especially if said person is the organization’s founder or the board is very active, Takagi suggests the board seriously think about what is in the best interests of the organization. There are legal repercussions the nominal CEO may face.

It must not be overlooked that whoever has the CEO title may face increased exposure to liability for failure to meet his or her duties. Any CEO should be very familiar with the organization’s current financial position, programs, legal compliance issues, and overall strengths and weaknesses. Imagine a judge’s or jury’s reaction to a CEO who claims not to have reviewed the financials for several months or failed to take any steps to help ensure that the operations of the organization were compliant. Such reaction may be very different if it were the volunteer board chair’s liability that was being considered and the organization had a separate executive director designated as the CEO.

I did a quick read of other sources to see if Directors and Officers Insurance and Errors and Omissions Insurance would cover this sort of negligence and my results were inconclusive. Different insurance companies offer different coverages which contain different exclusions. Some seemed to imply this was the sort of thing you buy the insurance to guard against. Others said the insurance companies will look for any blatant omissions to use as a pretext to deny a claim.

Effectively Merging Non-Profits

I apologize for missing my postings on Monday and Tuesday, I was away at a retreat to examine and discuss how to effectively merge the booking consortium to which I belong with the consortium that it spun off from. The meetings occurred in another part of the state and I didn’t have ready access to a computer and the time to write entries.

I use the phrase “effectively merge,” the same words we used throughout most of our discussions, because the truth is that an actual merger of two non-profits is a lengthy, involved and expensive process. What will happen in reality is that the one organization will be dissolved and its assets and members will be transferred to the other as is allowed by its founding documents. But in effect, it is a merger.

A good portion of the first day seemed to be spent composing the correct syntax for the required motions that would be made the next day at the annual meetings of both organizations to start this process. Since we already intended to rewrite our bylaws per the suggestions of an attorney we consulted, we were resolved to dedicate the next year to working on the rewrite. We also were determined to examine the organization and what we wanted it to be. As a consequence, both groups will remain in existence as separate entities for another year laboring jointly to define the bylaws and purpose of the combined organization.

Even though it is likely to be the most dry and boring, I joined the Governance and Membership Committee just for the experience of redefining the nuts and bolts of the organization. I figured it would make good material for blog posts if nothing else.

I also joined the Artistic Selection Committee. The other committees are Marketing/Sponsorship/Grants and Education. Among the things the committees are going to explore are what does it mean to be a member? What are the benefits of participation? Should membership be tiered to both allow casual partnerships with non-member groups and provide greater benefits to those who are more extensively involved.

We are going to examine how we go about selecting artists to present in the context of many different factors. Since we would like to pursue gaining sponsorships as a group and offer companies the opportunity to have exposure across the state, we will have to decide how the program is designed and the sponsored show is chosen. There is also the big issue of whether such arrangements will endanger relationships individual members had with these companies previously. Why sponsor shows at a single venue when you can do so across the entire state? On the other hand, perhaps your brand is diminished by having your name associated with theatres that serve a less elite clientele and you don’t want your ads appearing in their programs.

There are similar questions for the education area. A recent partnership resulted in an experience between schools, audiences and artists that could have yielded a more extensive interaction had the time and resources been available to exploit the situation. If these are the opportunities we want to pursue, where do the staff hours and other resources come from?

That brings us back to the work of the other committees exploring what it means to be a member and what sort of investment in the organization is needed to benefit from its efforts, including any packages put together to offer potential sponsors.

One of the desires stated this week was to expand the membership to include other arts organizations around the state. By redesigning the purpose of the organization a little, we hope to increase our relevance to other groups. They may only do a show once or twice a year, but they can find the process greatly facilitated by our expertise. I think there could be a reciprocal benefit. Perhaps connections the new groups have open up more churches and schools to chamber concerts and outreaches. (Or local artists and churches/schools became more aware of each other.)

So my question here at the end of the entry is this—has anyone had any experiences similar to this? I have to help generate bylaws and policies to guide this organization and it would be nice not to reinvent the wheel. Are you a member of a consortium or partnership between different arts organizations which works together to achieve certain goals?

I am looking more for an arrangement where all decisions and initiatives are generated and executed by the members rather than a situation like an arts council where the council works to advance the interests of the members. We operate as a board organization rather than a membership organization. Though I would be interested in learning about any multi-organizational partnership arrangement that diverges from everyone else does.

Board Stories (Plus Board Development Scholarship Info)

I don’t often see blog entries on someone’s practical experience solving board related problems so I was pleased to follow a link on a Non Profit Law blog Tweets of the Week Entry to BoardSource’s Board Life Matters blog. There Melissa Sines talks about her experience on a board experiencing Battered Board Syndrome in the wake of the Executive Director’s unexpected departure.

She relates some very common problems her board faced:

“The relationship between board and staff had always been a rocky one in our organization. It was hard to ignore the finger-pointing taking place on both sides of the table. It was a classic case of management saying, “The board doesn’t fundraise enough, what good are they?” and the board saying, “The staff doesn’t listen to anything we say, anyway, what use are we?”

She credits a grant that allowed her board to engage in a year long training process covering myriad issues with saving the organization.

I haven’t had the opportunity to read the rest of the blog to see how useful it might be, but I couldn’t help but notice the most recent entry offering 20 scholarships to allow “emerging nonprofit leaders to participate in the annual BoardSource Leadership Forum to deepen their governance knowledge.”

This is the first scholarship I have heard with the aim of improving board governance so it bears attention. The criteria are:

* Are either
o nonprofit board members with less than three years of experience serving on a nonprofit board
o nonprofit executives or staff members with less than three years of experience working with a nonprofit board
* Have demonstrated leadership ability and potential for their organization and the nonprofit community
* Are affiliated with a nonprofit organization that has an annual budget less than $5 million
* Will enrich the diversity of the sector. Diversity includes but is not limited to age, race/ethnicity, sexual orientation, and disability.
* Would not otherwise be able to attend the BoardSource Leadership Forum and have not attended a previous Forum

Boards seem to be a real hot topic recently. Thanks to a massive blogroll listing on the Clyde Fitch Report, I became aware of a ArtPride NJ blog post pondering why Gen X/Y is not well represented on non-profit boards. Leonard Jacobs of the Clyde Fitch report also weighed in on the subject of boards yesterday. (Busy day over at CFR, one hopes they didn’t spend all their time with the blog on Valentine’s Day.)

Hat Tip to Nonprofit Law Blog for pointing out a tweet to a Fast Company article about how for profit companies looking to provide their employees with a positive experience serving on non-profit boards can start a coaching/match making service.

I like the idea of taking the time to perform a diligent examination of your options, expectations of membership, mission and other details to assure your interest in the cause. I don’t see too many companies investing the resources to create such an office, especially in these economic times. I am wondering if this might be a task better suited to chambers of commerce or local chapters of the United Way. A centralized resource like this would be a benefit to a wider range of people and organizations than one limited to a few companies who are able to support the activities. And perhaps the central office could make an effort in concert with its members to encourage the Gen X/Y set to explore joining boards.

And if that works, maybe someone will work up a questionnaire and algorithm and make it an online service. Maybe I should go off and register right now!

Bonus Link- Hat Tip again to Non-Profit Law blog who linked to the document the IRS uses to evaluate your non-profit during an audit.

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