Ruined by Success? The Danger of Windfalls

The Young Parent’s Group won a grant of $50,000 to launch their program. It was a great step forward and, at the same time, almost did them in.

Senior Services received a bequest, from an elderly woman no one knew, for $250,000. It nearly ruined them.

Almost every nonprofit over time will receive one or more windfalls. At successful nonprofits, these windfalls create great celebrations. But after celebrating and investing the funds to better their mission and often to buy that new roof that caused so much anxiety, successful nonprofits return to their tried–and-true fundraising and income development plan.

For others, the windfall creates challenges. Like their successful counterparts they celebrate and often make similar mission investments. However, instead of returning to consistent fundraising and income development work, they fixate on obtaining more windfalls. At Senior Services, five hundred people visit them a year. How can they find the next person who will leave a bequest—when the last bequest was from a one-time visitor? The Young Parent’s grant came from the community foundation as it was launching a new initiative in the area. Which, they wonder, of the other 100,000 or so other grant sources available will give them $50,000 to operate next year?

How can you avoid a windfall from placing your nonprofit at-risk? First, be joyous and grateful. After the celebrations, return to a realistic income and fundraising plan that is based on consistent disciplined-work, proven outcomes and fit with your organization’s temperament. Follow the paths that successful nonprofits like you follow. When your nonprofit has lucky breaks—and you will, recognize them for what they are. Celebrate. Then, return to the tried-and- true.

How does your nonprofit handle windfalls? Have you developed a board policy about how to handle them? Has your nonprofit ever been “hurt” by success?

An Open Question to Board Chairs: Do You Dare to Lead?

Executive directors have thrown down the gauntlet. In “Daring to Lead 2011: A National Study of Nonprofit Executive Leadership” conducted by CompassPoint and the Meyer Foundation, only 20 percent of those surveyed reported being satisfied with their board’s performance. While a few of these executive directors might have a personality conflict with their current chair or have felt particularly frustrated with their board the day they responded, there must be something more significant going on to account for 80 percent of chief administrators indicating dissatisfaction with their boards.

Determining the underlying factor(s) is particularly important in today’s rapidly changing environment where boards must be strong, strategic and steadfast so that their organizations can be responsive and achieve relevant results. Research by the likes of Herman, Renz and Heimovics, Nobbie and Brudney and others have made very clear that there is a relationship between the effectiveness of a board and the effectiveness of the organization for which the board works. While none could prove causality, each found that highly effective organizations have highly effective boards.

I don’t believe that an organization’s effectiveness can be laid at the feet of just one person. Yet, I do believe that you, as board chair, have opportunity and influence that can be brought to bear in ways that you perhaps have not tested. Be honest with yourself. What more could you do to ensure a stronger board, and ultimately a stronger organization?

For instance, research again tells us that highly effective boards use more proven practices than less effective boards. There are a lot of accepted practices out there that are actually based on myth. Are you just propagating these or are you analyzing their effectiveness? Are you making the effort to regularly read or participate in workshops and webinars to learn about governance practices rooted in science? Are you implementing what you’ve learned? If not, why not?

As an unknown sage once said, “Hope is not a method.” You cannot afford to merely come in once a month to chair a meeting, check in occasionally with your executive director and write your column for the newsletter and expect an exceptional board to emerge. Nor can you rely on years of experience with a multitude of boards. The world has changed too much. If you dare to lead, tell us what you are doing differently and what impact it has made.

Better than Genetics: Family Philanthropy Traditions

Seventy percent of high wealth families have traditions that teach family values about the importance of philanthropy to their offspring. This fact presents nonprofits a wonderful set of opportunities. How so? As part of your strategy to create long-term donors, you can offer intentional programming to support this effort. This programming will offer high wealth families, who want to act on this tradition, an opportunity to create a deeper relationship with your organization.

Roxy Jerde, the Executive Director of the Community Foundation of Sarasota recently shared this piece of data at the Funder’s Forum. As an example, she also shared that she brought children from her family to a Ronald McDonald house to meet the residents.

Being open to young visitors, like the Ronald McDonald house, in one example of a way to support this tradition. How else might you support it? If your efforts are minimal but you would like to expand them, check out The Volunteer Family a nonprofit that supports family volunteering for ideas. If you want to be even more proactive offer specific events for young relatives. Some groups offer a volunteer or educational activity for families during school breaks and the summer. Others provide family tours on school holidays. Others offer opportunities one Saturday per month.

If part of your strategy to increase your nonprofit income is to reach new donors, consider helping families to continue or start this tradition in ways that feature your nonprofit. Choose your favorite idea, adapt it to create a signature family event and then share it here to inspire others. Or, if you already have one please share what have you already found to be successful.

Succession Planning: Is Your Board Prepared for Transition?

Everyone is talking about succession planning today. Much of the conversation is motivated by the large numbers of baby boomer executives expected to retire in the next few years. While this is a real concern deserving of our strategic attention, I have to wonder why so little attention is paid to succession on our boards of directors. After all, turnover is virtually an everyday occurrence on boards. Term limits and life’s challenges move people out of office or off the board altogether on a regular basis; and fewer and fewer individuals are stepping up and into the vacated leadership positions. The result is that boards are often forced to choose creative approaches to filling the empty chairs, such as allowing people to share the leadership responsibilities or conferring key positions on inexperienced talent. Unfortunately, experience tells us that such solutions typically result in a loss of organizational momentum or effectiveness. But, this needn’t be the case if we will commit to adequately preparing our boards for transition.

I doubt there is anything we can do to bring back the days where people will spend a decade or more working their way up to a coveted leadership position. But a strong succession plan is within reach of every organization. To see how, we must first consider what a succession plan really is, and what it isn’t. It isn’t about knowing who the next three board chairs will be. It is ensuring that you have a strong board with clear procedures in place, where everyone understands the big picture, is engaged and knows his or her role. In other words, the best succession plan is having a board that regularly operates under proven practices because a board like that will be able to continue to perform effectively regardless of what position may turn up empty tomorrow or the next day.

To determine if your board is prepared for the inevitable expected – to say nothing of sudden – transitions, answer the questions below.
 Does your board have criteria for membership?
 Does your board maintain a current pool of good prospects for board membership by continuously identifying and cultivating potential members?
 Does your board “test out” potential board members by encouraging committee or other participation first?
 Does each individual on your board have a job description?
 Does your board chair have a job description?
 Has each individual on your board gone through an orientation?
 Does your board share a collective vision for the community?
 Does your board share a passion for the mission of the organization?
 Does each individual on your board have ready access to a copy of the bylaws?
 Do the bylaws indicate how the transfer of power will operate under both normal and extenuating circumstances?
 Does your organization operate according to its bylaws?
 Are the expectations of your board members clear?
 Are board members that fail to live up to their expectations asked off the board? (Is this a given, regardless of the person’s affluence or influence?)
 Are your board members provided board education at every meeting?
 Does each individual on your board understand the issues critical to the organization’s mission?
 Do your board agendas encourage participation around substantive issues?
 Are decisions consistently made on the basis of your organization’s mission, vision, guiding principles as well as defined criteria for success?
 Is every individual on your board offered opportunities for leadership?
 Do your board members know each other well enough to look forward to working with one another?
 Does your board take time at most meetings to evaluate what it is doing well and what it could do better?
 Does your board do an annual self-evaluation?
 Does your board make changes in its behavior on the basis of its evaluations?
 Does each committee have a purpose?
 Does each committee have goals?
 Are your committees held accountable for achieving their goals?
 Does your board have a crisis management plan in place?

If you answered “no” or “only sometimes” to most of these questions, you may be left wondering if there is a future for your organization when one or more of your key leaders leave. Don’t let that happen. Make a commitment today to begin working on those conditions to which you were not able to answer a resounding “yes” and soon you’ll realize that succession is no longer an issue because your board is functioning efficiently and effectively no matter who is in the driver’s seat.

The Cause and Corporate Funding

The most misunderstood nonprofit income source is corporate funding. Why? Many nonprofit leaders only vaguely understand the reasons why businesses provide nonprofits money. Yet, most nonprofit leaders would like this income. To obtain it, one must understand the reasons why such partnerships form. Last month’s Added Value article listed five reasons:

· Business Opportunities. Businesses seek to increase their customer base and goodwill among current customers. Nonprofits that reach their customers or potential customers provide an opportunity.

· Employee Support. By maintaining loyal employees, businesses reduce recruitment expenses and improve employee morale. Supporting nonprofits demonstrates that the company has a heart.

· Repayment. The funds represent a concrete expression of business’ gratitude for the community support that made success possible.

· The Cause. A business leader has a passion for your mission. Business income provides him or her with a vehicle to act on their passion.

· Strategic. The business recognizes that working with a nonprofit is a chance to meet these or similar objectives with one check.

Are there additional reasons you would add to this list? Has your nonprofit been funded by a business for a different reason? Are you a business that funds a nonprofit? If so, why?

Read the article, How to Succeed In Business, What Your Leaders Need to Know About Corporate Funding here.

Serving on a Nonprofit Board is Good Business

This summer several blog contributors are presenting a series of audio conferences entitled Serving on a Nonprofit Board is Good Business. The series prepares individuals to serve on boards of nonprofit associations. While aimed at board members, executive directors can also learn from them. A recent session, Engage! Provide Oversight, lead by Dr. Terrie Temkin provided these helpful tips:

1. Terrie suggested developing a checklist to help complete all board essentials quickly. She shared that most boards spend ALL their time on these essential but routine items, which leaves little time for thoughtful strategic conversations. Do you have a checklist for routine items? When can you develop one?

2. While you might already have one or more skeptics on your board, Terrie suggested you make this role available to everyone by creating a “skeptic of the day.” This person asks dig-deeper questions to stop automatic group consensus and encourages thoughtful questioning. By sharing the role you will hear a new voices and new questions.

3. You can’t be everywhere. Terrie recommended dedicating a few minutes at each meeting for a “By the Way Conversation.” During this time people share what they have heard about your organization and key community events that impact it. What can you discover if you regularly ask your board members what is new? What events did they attend since you last met? What did they learn? “By the Way Conversations” help you to learn all over the community.

In a few weeks the group presenting this series will meet for a planning session. Do you have any interest in a series like this for your board members? (The current series is for members of the Society for the Advancement of Consulting only.) Would you be interested in a similar series for executive directors? Let us know your thoughts so we can include them in our plans. Thanks!

The (Anxiety Causing) Panel Review

The room is dark except for a projection screen that displays a slide outlining your proposal. Fourteen people sit at a conference table: eleven panel members and three staff. The name of your organization is called. You stand and move forward. At the podium, you introduce yourself. An icon on the screen flashes, “Questions. Questions. Questions.” The panel members shoot. And, you field a dozen questions (seems like more!) about your 63-page application, your reports from last year and literally anything that pops into the minds of the panelists or staff and strikes them as relevant.

It’s the grant panel review. You want to help you organization to receive the funds. You want to help the panel and staff to understand the importance of your work. How can you excel in this setting? Here, are three of more than a dozen guidelines we offer to nonprofits with whom we consult, to help them shine in this potentially anxiety-causing situation.

1. Prepare. Review your materials—an obvious suggestion. Here is a new twist. As your review, note areas where you want to provide updates. Where has the situation changed since your wrote the grant, e.g., a staff member was added with outstanding credentials? In your materials, do you find any vague answers you can clarify? Finally, what questions would you have if you were a panel member? Prepare how to respond. Prioritize points to make.

2. The Messages. Identify up to three key messages. What do panel members need to know—and remember after you leave the room? While “#1 Prepare” is about supplying critical details, messages are main ideas that carry emotional content. How will you change lives? How does your proposal meet the donor’s goals? Why is it urgent to fund this proposal this cycle? During the panel review in as many answers as possible include key messages.

3. Use We. During your presentation think and use “we.” This embraces the audience (and those they represent) in your work. It helps you to remember that they truly are potential partners and not, despite their numbers and the room’s darkness, inquisitors. However, using “we” is more than just tossing it into the conversation. Use a “we” that views the meeting as an opportunity to engage the panel members and staff in a deeper relationship with your organization.

Karen Eber Davis Consulting helps nonprofit organizations and businesses that work with them create sustainable income and innovative to get them there. With her help, nonprofits have earned more than ten million dollars in strategic grants—resulting in new funds and more resilient nonprofits. Sign up for Added Value today for more articles about nonprofit funding and innovation.