Boards

Info You Can Use: So You Wanna Join A Board?

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I believe I have covered the subject of considerations to make when joining a non-profit board before, but Emily Chan did a terrific entry on the topic on Non-Profit Law Blog this week. She links to the BoardSource page on this topic at the end, but she reminds us of additional things to think about.

Among her suggestions are to research on the organization you have been asked to join by reviewing the financials, bylaws, ensuring they have board liability and evaluating the personality dynamics on the board and their work process. Chan also mentions one of the areas I think is often overlooked–education. People who are familiar with boards on a basic level will know there are fiduciary and legal responsibilities to attend but may not really push to receive a thorough education in these areas and about the organization in general.

Education: Will you have the tools necessary to succeed at this organization?

Incoming directors at an organization may have different educational needs for creating the right environment to thrive on the board. Factors such as past board experience or work experience in the nonprofit sector can be useful in quickly adapting to a director role and executing those responsibilities. Likewise, an organization’s investment in or opportunity for board development and mentorship may be an important factor of an ideal work environment for individuals who are first-time directors or new to the nonprofit sector. For those seeking board education, a few topics to consider are:

* Orientation: What information will be covered? What are you expected to take away? What type of resources will be provided? Will you need more help or information after this?
* Training programs: Are they offered? If so, do they address the skills and areas you need the most help with? Are they pre-scheduled or provided as needed? Will you need more training and education down the road?
* Job description: What is being asked of you? Are your responsibilities and duties understandable and realistic? Can you fulfill this role?

I also really like Chan’s comments on how to evaluate the personality dynamics of the board, but I didn’t feel I could copy that much of her entry and offer so little original insight of my own. Obviously, the article can also serve as a guide for the materials, information and education non profits should be prepared to present to a potential board member so that a well informed decision is made.

Duelling Boards

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A nod to Non-Profit Law Blog for their link to a very extreme situation addressing the question of who owns a non-profit. In a story that appeared in the Star-Tribune (MN) and Non-Profit Quarterly. The founder of a non-profit that works with former inmates was frustrated with what he saw as a lack of responsiveness from his board. He formed a second board with a former member of the first board. This second board voted to dissolve the first board and install themselves as the governing body. According to both articles, the founder ended up fired and being lead away by police in the presence of both board presidents, each claiming they were in charge.

The short answer about who is in charge is always the board. They bear the responsibility of the governance of the organization. But given that organizational founders are generally the ones who institute the formation of a board asking the initial members to serve, does a founder have an ability to choose his/her own board? There is a point where the ability to select board members passes from the founder’s hands. My suspicion is that absent a provision giving the founder or executive director the power to make appointments, this occurs once bylaws have been completed and properly filed.

The next logical question is, when a board is not living up to its responsibilities, what recourse do people have in replacing them? Presumably the board can be sued for not meeting their responsibilities and a court could dissolve the board and order the formation of a new one. I have never heard of this happening, though I am sure it has, so I can’t be certain. It may not be the board as a whole which is dissolved and only those whom have been proven to be remiss in their duties who are removed from the board. But basis of this would be whether members attended the required meetings and were diligent in their review and handling of organizational matters. If it were not essential or required that the members return calls or attend the organizational events, it might be difficult to have the board dismissed. If they were moving forward with the strategic plan and operating budget at a rate a court found reasonable, again it could be difficult to unseat them.

If the allegations of mismanagement originate from within the organization, as it did in this case, then there is also the stress of having the board and staff in a confrontational stance complicating the situation as well. As I mentioned, I am sure there have been times when boards have been dissolved because they failed in their duties, but I wonder how many of those instigated by staff. If anyone on staff is going to do it, it would be the founder given how much they have invested in the organization. Staff members may have provided materials to support the case against the board, but it has to take a lot of moxie for a staff to declare a company is ill-served by its board and initiate legal proceedings.

More On Mergers And Alliances

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I have had non-profit mergers on the mind of late due to some personal experience so it is no wonder that two entries on the subject from different blogs caught my attention today.

The first was a book review by Gene Takagi at Non-Profit Law blog. He recommends Nonprofit Mergers & Alliances by Thomas A. McLaughlin. Takagi starts out referencing a quote from the book supporting the old truism that it is best to enter a negotiation in a position of strength.

“Indeed, the book had me at “hello” or, rather, its first sentence: ‘The best time to consider a merger or an alliance is before it is necessary, when coming together with another organization will mean combining strength with strength, and when the collective energies and the creativity of the two or more entities can be used proactively instead of being sapped by the demands of crisis management.’ “

This concept is actually central to the commentary made in the second blog post I saw today, Drew McManus talking about Philadelphia Orchestra and Philly Pops decision not to merge. The former would have absorbed the latter. Drew cites the troubles the Utah Symphony and Utah Opera had with their merger. The orchestra and pops adopted a gradual approach to the merger and that revealed some of the potential difficulties they might face as a single entity. Both organizations will work in close partnership, but retain separate governance structures.

As you might imagine from the title of the book he reviews, Takagi notes that there are different stages to both mergers and alliances and lists them out. According to Takagi, the book outlines the pros and cons to both approaches and provides some good advice about very complex undertakings.

The book may be a good resource for the next generation of non-profit leaders. Apparently McLaughlin feels that “nonprofit services are fragmented and how consolidation is part of a nonprofit’s life cycle.” Given all the talk about mergers of late, I believe there is more behind that statement than just an attempt to sell a book about how to accomplish such things.

Info You Can Use: Considerations Before Forming A Non-Profit

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Last month, as many non-profits were faced with losing their status due to a change in the tax filing laws, Board Source President/CEO Linda Crompton suggested the situation might be good for the non-profit world by removing duplicative and ineffective/inactive non-profits. Because non-profits really aren’t required to generate a business plan or survey the need and competition before filing for status, she feels there may be too many non-profits in existence.

No for-profit company would start up without doing a thorough analysis of the competitive landscape; that analysis would be baked into the business plan and would inform all other decisions — one of which might be “not here, not now.” It’s incumbent upon our sector to school itself on this point: just because we have an idea, and a mission, and a great, good heart, does not mean that we need to start our own, brand-spanking new organization to fulfill that mission. The same truth applies to organizations in all stages of their lifecycle. Boards should be asking themselves: are we still relevant? Are we fulfilling our mission effectively and sustainably? Is there another organization across town doing the same thing, only better? Should we be discussing merger, or even dissolution?

I have mentioned a number of times over the years that I have often many arts organizations have been started that could have easily been part of an existing group or that could have merged with other groups when it was clear that their service area couldn’t support both groups very well. I will admit that I have seen many more groups in merger talks over the last few years since the economy has gotten worse than I had during previous economic down turns. It was good to see people considering this route. But I have also seen new groups peel off because of personality differences or a desire to perform a slightly different genre. Admittedly there is a difference between classical and modern realism, but Shakespeare festivals manage to produce both without compromising their souls.

To be honest though, I don’t know if the IRS would be in a position to evaluate whether there was or wasn’t a need for any type of non-profit, be it an arts organization or social service agency. Imagine the work involved in developing criteria to measure if there was a sufficient support base for the organization in a community. Imagine the bad press the IRS would get for denying someone non-profit status for a social service organization serving a very emotionally charged cause.

Which doesn’t mean due diligence shouldn’t be done. In a comment to Linda Crompton’s entry, Don Griesmann links to an entry on his blog in which he enumerates all the considerations that should be made before creating a non-profit. He also footnotes his arguments with the largest number of stories on the difficulties faced by non-profit organizations I have ever seen.

His entry came at the end of 2009 and he proposed that no new non-profits should be allowed to be created in 2010 unless a whole multitude of conditions were met. A brief sampling:

•Unless you understand the nonprofit will not be “your nonprofit” and you have enlisted an incorporating board that is interested in the concept and capable of performing the necessary tasks of incorporating and operating the organization and

•Unless you understand there is no “free money” from the federal or state governments. The federal government distributes funds through scholarships, fellowships, contracts, grants and loans. Each requires an application, meeting eligibility requirements, demonstration of a task to be undertaken, proof that the task was performed and the money used appropriately and in many instances a report evaluating the use of their funds…

….•Unless you have a concept of what it costs to develop and operate a nonprofit in terms of shared leadership, time, thought, study, serious planning, hard work, evaluation and annual reporting as well as money and
•Unless you have no intention of attempting to raise more than $5,000 a year for the next 5 years…

…•Unless you have performed due diligence and created a board of mixed talents, diversity, shared passion and vision concerning a truly unserved issue or need supported by some empirical evidence. If the need is an underserved need, why not join with the current providers and increase the service or product? And
•Unless you understand that there simply are not grants available to pay for the incorporation process. If you and others cannot raise the first $1,000 or so to incorporate, then where do you think you will get the money to run the organization? When someone asks, as many do, does anyone know where I can get a grant to start my nonprofit, we should either not respond or tell the truth – you are not ready to start a nonprofit. Go volunteer at a local nonprofit….

One of his next “unless” includes having a business plan that answer 19 different questions. One of his other conditions might be that you shouldn’t form a non-profit if you don’t have the patience to read his whole entry. While it is very long, it asks many pertinent questions and raises many points that ought to be considered. It is good to see people starting to advocate for this level of consideration prior to forming a non-profit.

Of course, non-profit status covers a lot of situations, including block associations and other purposes that wouldn’t necessarily be competing for grants from a shrinking pool of resources. These will certainly benefit from being well planned, but aren’t likely to struggle to stay in existence or become a drain on their community if they don’t meet every criteria.